Truong My Lan's world-renowned bank fraud: a full story

Truong My Lan is a notorious property tycoon and one of the richest businesswomen in Vietnam’s history. She is also known for orchestrating one of the largest bank frauds in the world, with total embezzled funds estimated at more than 1 quadrillion VND ($44 billion), a figure that dwarfs even some sovereign bailout packages.

Trương Mỹ Lan controlled a vast portfolio of luxury hotels, restaurants, commercial real estate, and financial subsidiaries. Her career began with a modest hair accessories business in Ho Chi Minh City, before pivoting to real estate during the country’s rapid urbanisation and property boom in the 1990s and 2000s. Connections to government officials and her family’s inherited wealth facilitated VTP’s expansion. 

Van Thinh Phat Group opened a wide range of subsidiaries with an unprecedented amount of capital for VTP Group Holding, VTP Investment Group, and several other large-scale property development ventures. However, doing business in the luxury hotel & restaurant is a complex story in Vietnam. After decades of war and economic hardship, household demand for high-end hotels and restaurants lagged behind regional peers such as Thailand or Singapore. Thus, there were certain points in time when Truong My Lan’s businesses struggled financially, especially with liquidity pressures and raising capital, and Lan was determined to change that. 

Loaning cash is one of the easiest ways; however, banks are not willing to loan out a large amount of money for one single entity, unless Truong My Lan is the one owning the bank. Vietnam’s banking sector in the aftermath of the 2008 Global Financial Crisis presented both risks and opportunities. Like many emerging economies, Vietnam experienced a credit boom during the 2000s, with loose lending standards and heavy exposure to real estate. By 2011–2012, the system faced severe non-performing loan (NPL) problems, with estimates suggesting NPLs reached up to 17% of total credit when including shadow debt. 

At the time, various banks in Vietnam were on the verge of bankruptcy. Unlike in the U.S. or Europe, however, Vietnam’s government adopted a “no-bankruptcy” policy - meaning that no commercial bank would be allowed to collapse. Instead, troubled institutions were restructured under the State Bank of Vietnam (SBV) through mergers and forced recapitalisation. Under these conditions, many shareholders were forced to short their assets. This is the exact opportunity for Truong My Lan to turn banks into her puppets. 

Between 2011 and 2012, Truong My Lan secretly acquired controlling stakes in three of the weakest institutions: Saigon Commercial Bank (SCB), Tín Nghĩa Bank, and Đệ Nhất Bank. By law (Article 63, Law on Credit Institutions), no individual shareholder may own more than 5% of a bank’s equity, and no institutional shareholder more than 10%. To circumvent these limits, Lan employed dozens of proxy shareholders. Truong My Lan used 32 other investors’ names to buy 81% of shares in SCB, 36 to buy 98% of Saigon Joint Stock Commercial Bank, and 24 to buy 80% of De Nhat Bank. Following the merger of the three banks into a single entity named SCB, Lan’s de facto control gave her unrestricted access to Vietnam’s deposit base. In other words, these 80 investors are middlemen for Truong My Lan to own 91.5% of SCB. 

With resources from this puppet bank, Van Thinh Phat aggressively diversified its portfolio, which can be divided into 4 categories. The first is the financial category - responsible for raising any amount of capital for Van Thinh Phat group. SCB Mobilised deposits with unusually high interest rates to attract savers. At first this may seem beneficial to the people, but in Vietnam, the central bank does not let any bank declare bankruptcy, meaning that people’s deposited money is almost guaranteed when trusting banks. Because when trust collapses, the entire financial system and the economy would collapse. Taking advantage of this characteristic, SCB under Lan’s management does everything to attract money from the people. 

The second category is domestic corporations, particularly the hotel & restaurant businesses which Van Thinh Phat originally focused on. However, these companies now have one more usage - which is to create projects attracting investors and again, to raise capital. The third group is shell companies which are created to legally borrow from banks and transfer the money to other companies needing it in the Van Thinh Phat ecosystem. And lastly, the fourth group is companies abroad using the label of foreign direct investment (FDI) into Vietnam. 

The question then is, how does the entire ecosystem know when Truong My Lan needs money, and how much? The answer is a secret meeting on the 39th floor Times Square Building in Ho Chi Minh City, with participants being the most important people of each of the 4 categories. On the SCB system, these loans appeared as “priority” distinct from ordinary loans. These priority loans when coming to SCB must be subjected to the 3 rules: no collateral appraisal, no customer appraisal, and no loan appraisal. Of course, none of these rules are true for a bank’s standard risk control. However, because the customer is Truong My Lan, SCB leaders immediately start the disbursement process as soon as possible - or even reverse the process: disbursement first, then legalising loan documents later. 

With this formula, Lan’s group pulled out over 2,500 loans from SCB, with total disbursement reaching 1,066,000 billion VND (~USD 44 billion) - the vast majority of which became irrecoverable debts. 

In banking theory, this reflects the “too big to fail” dynamic, where the collapse of one institution triggers contagion across the sector. Vietnam’s explicit policy of guaranteeing deposit safety while preventing bank bankruptcies has historically reduced the likelihood of bank runs (i.e. customers simultaneously withdraw their money from a bank due to a belief or fear that the bank may become insolvent and unable to repay their deposits). However, the SCB case exposed the risk of this policy approach - where depositors assumed their funds were risk-free, allowing SCB to attract excessive deposits without corresponding scrutiny. 

The opportunity cost of resolving the case’s aftermath was profound. Although Vietnam successfully avoided outright collapse, the State Bank of Vietnam’s balance sheet has been strained from stabilising SCB, diverting resources that could have been used to stimulate broader credit growth. This scandal affected Vietnam’s ambition to upgrade its stock market to “emerging market” status under MSCI and FTSE Russell indices, a reform crucial for attracting institutional capital flows. Transparency and governance standards are key metrics in such evaluations, and the Lan case underscores deficiencies in both. 

In the wake of the Truong My Lan scandal, Vietnamese authorities have intensified efforts to strengthen legal and regulatory oversight of the financial sector. The State Bank of Vietnam (SBV) has moved to tighten shareholding transparency rules, requiring disclosure of beneficial ownership to prevent hidden control through proxy shareholders. In parallel, revisions to the Law on Credit Institutions (2024 amendment) expanded supervisory powers of the SBV, enabling closer monitoring of bank lending practices, especially to real estate firms. However, regulatory tightening carries a trade-off: while it reduces systemic risk, it may also constrain credit supply, slowing growth in an economy still heavily reliant on bank financing (over 60% of capital formation in Vietnam comes from banks rather than equity or bond markets).

In April 2024, after a historic trial, Truong My Lan was sentenced to death by lethal injection for embezzlement and bribery. The case of Truong My Lan illustrates both the opportunities and vulnerabilities embedded in Vietnam’s rapid, credit-driven development model. Whether the reforms from SBV and the National Assembly succeed in preventing future crises will determine if her downfall becomes a singular scandal or a catalyst for lasting institutional change.