Central Bank Governor Nandalal Weerasinghe has described the plantation and forestry investment schemes now under enforcement as pyramid schemes, saying the roughly 40% annual returns they promised could not have been generated by farming.
The Central Bank has initiated legal enforcement and frozen the bank accounts of six institutions that accepted unauthorised deposits under the guise of plantation and forestry cultivation projects, Weerasinghe said, EconomyNext reported.
Under Sri Lankan law, institutions not registered with the Central Bank may not accept deposits from the public.
The arithmetic the Governor put to them
“To pay an annual return of around 40% and return the entire capital, such a business cannot function without continuously collecting money from someone else. That makes it a pyramid scheme,” Weerasinghe said.
He compared the operations to Golden Key and Sakvithi, the collapsed schemes that cost Sri Lankan depositors heavily in the late 2000s, saying the only difference is that this time the money was solicited under the pretext of farming.
The pattern he described follows the same sequence: once Central Bank warnings and public awareness slowed new deposits, the companies could no longer maintain repayments, and the crisis escalated.
Where the money went
Weerasinghe said depositors’ funds were not used solely for cultivation. They were diverted into:
- launching supermarkets
- starting newspapers
- tourism ventures
- payments to artists and social media commentators
Suppliers to those auxiliary businesses were also left unpaid, he said, with sales proceeds routed back into the scheme to service pyramid payouts.
The Governor’s answer to the companies’ defence
The operators have argued publicly that regulatory action is what stopped them repaying investors. Weerasinghe rejected that, and turned it around.
“We have placed no ban on farming. If they claim they cannot pay because of Central Bank actions, that admission itself proves the returns were never generated through agriculture,” he said.
He added that the Central Bank had frozen only a small fraction of the total illegal deposits, and had placed no restrictions on legitimate cultivation.
What happens to depositors’ money
The regulator’s stated priorities are halting the operations and preserving assets for eventual court-supervised distribution, to minimise losses.
Weerasinghe urged depositors to give evidence to the authorities rather than defend the companies, warning that in schemes of this structure it is the late entrants who historically lose everything. He appealed to media houses not to promote the schemes, and called on operators to stop and submit to the courts before collapsing entirely.
Investigations are continuing beyond the initial six institutions as fresh complaints arrive.
The case so far
The action follows a sequence the Central Bank has been building for months. In June it publicly rejected a plantation company’s televised claim that it operated under CBSL oversight. In July the Governor warned the public against plantation and forestry schemes promising a monthly payout plus a lump sum at the end of a cultivation cycle.
On 22 September the regulator froze the assets of six named companies and their directors under Section 44 of the Finance Business Act, orders the Colombo High Court subsequently confirmed and extended.
Not reported
EconomyNext does not name the six institutions in this report, give the total value of deposits involved, say how many depositors are affected, or state how much has been recovered or frozen.