The Estonia Development Savings and Loan Association has filed for bankruptcy, with 1,000 customers poised to lose their investments. Some €16 million has vanished from the association. Customers include former Foreign Minister Urmas Paet who invested €50,000, weekly Eesti Ekspress reports.
"Temporary trustee in bankruptcy Martin Krupp calculated that the savings and loan association is due €18,219,884 from (founder Martin) Sorokin's companies. The sum includes interest," the paper reports (link in Estonian).
The paper's information suggests Sorokin borrowed from the association at a lower interest rate than what the latter paid its depositors.
During a time when banks offered depositors near-zero interest rates, the Estonia Development Savings and Loan Association (Eesti Arengu Hoiu- ja laenuühistu) offered 10 percent and more, the paper reports.
Martin Krupp writes in his report that the association could constitute a pyramid scheme, meaning that depositors were paid interest at the expense of new deposits. The association's loans were issued without surety to suggest that recovery is unlikely.
Ekspress admits that former Foreign Minister Urmas Part (Reform) asked not to be mentioned in the article, which the paper considered but eventually declined. "Former Minister of Foreign Affairs Urmas Paet is known as a well-informed person with a good analytical mind. That he also decided to trust the Estonia Development Savings and Loan Association reflects the ingenuity of the possible pyramid scheme," the article reads.
Eesti Ekspress reported last year that MEP and member of the board of the Reform Party Urmas Paet is hoping to get back €100,000 from savings and loan association Erial that can no longer guarantee depositors timely payments in full.
Editor: Marcus Turovski