Japanese firm which is collapsed at present, recently convinced hundreds of salarymen to invest almost $1bn in ultra-dime “shared house” developments for single women in Tokyo. These events led to a probe into lending practices at one of Japan’s most prosperous regional banks.
Suruga became famous by lending to individuals who cannot borrow elsewhere in the banking sector and boasts interest margins more than twice that of other regional banks in Japan. The bank is also well-known known in a crypto sphere - as one of the partners of the blockchain company Ripple (California, USA).
On Tuesday shares in Suruga sank more than on 19 per cent. The drop deepened an investigation into the bank and an associated property company. A lawyer representing a group of investors devastated by the fiasco of one of the housing schemes also confirmed that one man had made suicide. The Suruga crisis focuses on the recent phenomenon of “share house” loans. Investors were drawn in by suggestions of constant rental income by the property company.
One of the operators who suggested those inducements, Smart Days, launched a flow of women-only share houses called Kabocha no Basha (Pumpkin Carriage), which managed to trap about 750 investors putting in about $1bn. The FSA, claimed people close to the agency, was investigating whether Smart Days and Suruga let less creditworthy investors to participate in the scheme by heavily exaggerating the size of their bank balances.
Smart Days said it was running its own probe about those statements. Suruga said they were informed of the fact that documents had been forged and that they were having their own investigation into the matter. In January, Smart Days told many investors that it was not able to pay at all. In early April, in order to seek bankruptcy protection, it made a situation in which many investors were unable to make loan payments to Suruga.
So, Suruga does not only face regulatory sanctions from the FSA following its investigation, but also may soon confront the equivalent of a class action brought by investors who demand their loans should be written off. The bank did not mention on the prospect of legal action.