HempAmericana Inc (HMPQ)

[JohnnyRotton]

ways companies siphon funds

How funds are siphoned

Bank funds route
Working Capital Funds Method:
Inflate stock in trade & receivables bills

Term Loan
Inflate the value of fixed assets

Project Loan
Inflate cost by conniving with suppliers and vendors

Issues debentures against assets
Revalue assets arbitrarily

Normal business route

Pump capital into subsidiaries & group companies
This may seem noble, but not when there’s zero expectation of returns

Buy fixed assets like plant & machinery and other equipment
Again, a perfectly sincere intention on the surface, but not when the value of assets as well as bills is inflated

Loans & advances to relatives and related parties
Of course, there won’t be any recourse to get it back

Inflate outsourcing, sales & distribution, consultancy & advisory payments
It’s a well-tested ‘expenses’ route

Investment route

Buy a company or a business at an unreasonable valuation
Without doing an independent valuation, of course

Invest in equity/debentures of a large number of unlisted companies
These firms would be invariably connected to the promoters, directly or indirectly