How 'Shark' Thuy operated Egroup before being arrested

"Shark" Thuy's Egroup operated for many years relying on financial leverage, raising trillions of dong, but ultimately continuously owed money to investors, delayed employee salaries, and failed to pay tuition fees.

Mr. Nguyen Ngoc Thuy, Chairman of the Board of Directors of Egroup Education Group Joint Stock Company, has been arrested on charges of fraud and misappropriation of assets. Previously, many investors accused Mr. Thuy of fraud through the transfer of Egroup shares.

Egroup was founded in 2008 by "Shark" Thuy. The group's ecosystem spans many sectors, from education and training to healthcare and food. Most notably, Apax Holdings (IBC) stands out – behind the Apax Leaders English language center chain, the only listed company, and the entity behind numerous large investment deals. Egame and Ecapital are also entities through which Egroup raises capital.

Delaying interest payments to investors.

Since 2017, Egame and Ecapital have been soliciting investors through "strategic cooperation agreements" in exchange for shares in their parent company, Egroup. According to the agreement, investors must hold these shares for a certain period (usually one year). On the settlement date, Egroup commits to finding a partner or directly buying back the shares at a higher price than the initial sale, or offering a certain number of additional shares in exchange for a new agreement.

Initially, based on the difference in share prices, investors could earn a profit of 20-25% (2017-2018), which gradually decreased to 17-18% in 2019-2020. By 2021, this profit margin had dropped to only 14-15% per year.

Prior to 2020, Egroup paid interest in full. However, from the beginning of 2020, "Shark" Thuy's company started delaying interest payments to investors, citing business difficulties due to the Covid-19 pandemic. Afterward, the company went silent.

The delay in interest payments also occurred similarly with bondholders in companies within Mr. Thuy's ecosystem.

When asked, Egroup's leaders repeatedly refused to disclose to VnExpress the total amount of debt and the investors involved in the cooperation agreement and bonds. The reason given was that "we have limited personnel, so we haven't been able to finalize the debt figures yet."

Mr. Nguyen Ngoc Thuy - Chairman of Egroup Corporation, during an online meeting with shareholders and investors, August 2023. Screenshot .

According to data from the Hanoi Stock Exchange (HNX), Mr. Thuy's ecosystem issued 6 tranches of bonds, totaling over 1.34 trillion VND, with interest rates of 12-15% during the period 2018-2021.

Unable to repay investors on time, Egroup's management is requesting an extension of 3-5 years, up to a maximum of 2028, under the most optimistic scenario. They also hope for a reduction in past interest payments and a suspension of new interest until the debt is repaid. For investors who cannot wait, Egroup is proposing offsetting options, including real estate, investment packages for "franchise" English language centers and English learning programs, and household appliances.

Failed to repay tuition fees

In addition to delaying repayments to investors, "Shark" Thuy's company also failed to fulfill its promise to refund tuition fees at Apax Leaders English centers - a key link in the Egroup ecosystem.

Since late 2019, the Apax Leaders chain of English language centers has faced numerous complaints from parents in Ho Chi Minh City, Hanoi, Dak Lak, and Da Nang , demanding the refund of billions of VND in tuition fees due to substandard teaching quality, alleged abandonment of customers with the money, and cessation of operations.

After requesting debt deferral from investors, Egroup proceeded with the restructuring of Apax Leaders and announced the completion of the first phase at the end of March 2023. At that time, the chain had 38 centers, mainly in the North.

But the reopened centers are closing down one after another. The management explained that this was due to low revenue, mainly relying on re-enrolling former students who had paid fees previously, and limited new funding. Regarding centers in Ho Chi Minh City, Mr. Thuy said they faced "particular difficulties" because parents refused to let their children continue attending, "besieging" them and demanding tuition fees.

After numerous negotiations, in March last year, the company divided parents into two groups with different repayment schedules. Many parents in Group 1 received their full refund in three installments, spanning from June to August 2023. The second group was promised a refund in five installments, each of 20%, expected from October 2023 to April 2024. However, Apax Leaders subsequently failed to fulfill its commitment and proposed a new schedule, extending until the end of 2025.

In late 2023, this chain of English language centers announced its insolvency. According to data from the Ho Chi Minh City Department of Education and Training, Apax owed parents over 108 billion VND, of which 14.2 billion VND had been repaid, leaving nearly 94 billion VND outstanding. The company proposed a repayment plan starting in 2025, paying each parent 4.5 million VND per quarter until the debt is fully settled.

Today, Apax Leaders announced the suspension of refunds for parents whose payments were halted, following the arrest of "Shark" Thủy on charges of fraud and misappropriation of assets.

Why did Egroup fall into crisis?

In reality, the Egroup ecosystem is unstable because the operating model of its companies relies heavily on financial leverage. With Apax Leaders as its backbone, Egroup relies on capital raised from investors to expand its educational chains and schools, then branch out into healthcare, food and beverage, and financial investment.

Prior to 2019, the Apax Leaders chain continuously expanded its network from North to South, reaching 130 teaching locations at its peak. By the end of 2019, the company behind it, Apax Holdings, had total liabilities of approximately VND 1,974 billion, 2.1 times its equity.

In an interview with VnExpress at the end of 2022, Mr. Nguyen Ngoc Thuy acknowledged that the ecosystem "faced difficulties and disadvantages in many aspects," the biggest being cash flow. However, in an investor meeting in early August 2023, the Chairman of Egroup argued that the core reason for the crisis was the business model of "rapid growth through borrowing."

However, many investors have a different opinion. They suspect that Egroup and Mr. Nguyen Ngoc Thuy are using the raised capital to invest in securities, cryptocurrencies, real estate, etc., instead of their core business activities.

Regarding this matter, Mr. Thuy has previously denied it, stating that he has never invested in stocks or cryptocurrencies. However, according to the 2022 financial report of its subsidiary, Apax Holdings – the most recent disclosure – the company held 100 billion VND in securities. This amount was explained as shares of its subsidiary, Ecapital.

Regarding real estate, Apax Holdings had planned to invest 300 billion VND in the Hong Quang - Long Hai tourist area (Ba Ria - Vung Tau) in 2022. Prior to that, in 2020, the company also collaborated on the construction, operation, and development of the Vung Ang multi-functional housing and service area project (Ha Tinh).

According to Mr. Thuy, this company collaborated to establish an educational infrastructure company, purchased multi-level schools, and acquired land to build educational-related experiential and recreational areas... In essence, it was real estate investment serving education.

However, the consequences of a company developing through financial leverage include the inability to repay investors and failure to repay tuition fees. Egroup also delayed paying salaries and social insurance to employees for the past five years. A large number of employees chose to resign, including many foreign teachers.

According to data from the Hanoi Social Insurance agency, as of the end of February, Apax Leaders owed over 62.5 billion VND in social insurance, health insurance, and accident insurance contributions for both domestic and foreign workers. Overall, the entire ecosystem, including CMS, Igarten, Egroup, Egame, and English Now, owed nearly 104 billion VND in insurance contributions.

In previous investor meetings, Apax Leaders' leadership repeatedly promised to repay outstanding salaries and wages to employees. They also promised a stock bonus program to "compensate" for the losses after a successful restructuring. However, to date, many employees, including those who have left the company, say they have not yet received their outstanding salaries and insurance payments and do not know when they will be reimbursed.

Mr. Pham The (Hanoi) and three family members invested over 3 billion VND in Egroup through various strategic cooperation agreements since 2017. When "Shark" Thuy's company stopped paying interest from the beginning of 2020 until now, his family lost about 40% of their monthly income. But according to him, many others are suffering even more because they mortgaged their houses and assets or borrowed from banks to invest in Egroup. At that time, the interest rate offered by the company was 5-7% higher per year than bank deposits. These people are now in a dilemma as banks are foreclosing on their loans.

"Now I just hope the authorities will help my family get back our original investment; I'm not concerned about the interest anymore," Mr. The expressed his wish after hearing the news of Mr. Thuy's arrest.

Tat Dat

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