Dessert shop scam: Hong Kong and mainland Chinese investors allegedly cheated of more than HK$10 million
Company claiming to be sole agent of local chain The Dessert Kitchen collected capital to open mainland shops, which closed down months later
A group of investors from Hong Kong and the mainland were allegedly cheated of more than HK$10 million in a suspected cross-border scam, a Hong Kong legislator said on Wednesday.
According to Democratic Party lawmaker James To Kun-sun, a company in mainland China claiming to be the sole agent of Hong Kong chain The Dessert Kitchen began in 2014 to invite investors to become shareholders to open franchised dessert shops across the border.
Those interested were then persuaded to hand over large sums of money, 1.4 million yuan (HK$1.65 million) in one case, as start-up capital for the shops, which closed down after just months of operation.
The affected investors claimed they were misled by company representatives into signing contracts that gave them no control over the management of the shops, which they later found out to have issues such as being poorly run, not having operating permits, and failing to pay rent or wages.
The investors raised the issues with the representatives, but were soon unable to contact them, as well as being unable to recover the money they had put into the shops.
After several months of hopeless operation, rent was not paid, salaries were not paid to the staff, and they closed down without any financial accounts surrendered to [the investors].
Lawmaker James To, who is now assisting four of the affected investors, said this was not a conventional case of a company fallen into bad management, but was potentially financial fraud.
At least five Hongkongers and more than 10 people from the mainland are believed to have invested in the franchise.
“The whole contract was very one-sided. The other side has all the control,” To said.
“After several months of hopeless operation, rent was not paid, salaries were not paid to the staff, and they closed down without any financial accounts surrendered to [the investors].
“Without any winding-up procedures, the headquarters in Shanghai closed down. Nobody answered any calls ... the showpiece shop in Shanghai [also] closed down despite [doing well].
“We have every reason to suspect this was a scam and not a normal operating loss.”
In response, The Dessert Kitchen in Hong Kong issued a statement on Wednesday confirming that a company in mainland China was once the sole agent of its brand in some provinces. But in October last year, because of breaches of contract, it had issued a legal letter to terminate the company’s agency rights.
The Dessert Kitchen added it was not aware of any alleged illegal actions committed by the mainland company or its associates.
To said it would be difficult for Hong Kong law enforcement agents to investigate the cases on their own because the bulk of the suspected fraudulent activities took place on the mainland.
The legislator said he was trying to see if the affected Hong Kong investors could seek help from Hong Kong police as the financial loss would originate from money they had transferred out from bank accounts in the city.
He added that he would try to contact the State Council’s Hong Kong and Macau Affairs Office.
One of the affected investors in Hong Kong, who gave his name only as Mr Wong, said he was persuaded to hand over 1.4 million yuan to open a dessert shop in Shanghai in 2014. But the shop soon closed in early 2015.
“Looking back, [the mainland company] was doing the minimum to get the most money out of us,” Wong said.
He said he was first introduced to the company by “a friend”.
The other affected investors To was assisting were from Beijing, Shanghai and Hangzhou. One of them, who gave her name as Ms Dong, said she had tried to seek help from police in Shanghai, but to no avail.
