CHAPTER I

INTRODUCTION

A. Background

Globalization changes everything we thought we knew. In a world where

humans are more advanced than ever, innovation, creativity, make humans the most

gifted and the most advanced creature on earth. Humans have the ability to decide

what is right and what is wrong, the ability to think rationally, basically, all the

abilities needed to make changes. Changes for the better, or worse.

One of the aspects to be highlighted in the globalization process is the changes

in information, technology and innovations in financial aspect that have created a

highly complex, dynamic, and interconnected financial system between financial

sub-sectors, both in terms of financial institution products and services. In addition,

the presence of a financial services company that has ownership relationships in

various financial sub-sectors has added to the complexity of transactions among

financial services institutions within the financial system1.

Dimensions of law governing the running wheels of the economy, binds

business activities with certain rules. Good economic activity always indicates

maximizing profit, but it does not justify any means to gain more profit. Therefore,

1
Hermansyah, “Hukum Perbankan Nasional Indonesia” (Jakarta: Kencana
Prenada Media Group, cet-1 mei 2005) p. 25

1
the law provides clear and definite boundaries with respect to what is and should

not be done in business activities. With legal certainty, business activities make the

conditions comfortable for conducting economic activities2.

Failure in limiting company’s rights and authority, or even worse, failure to

identify what one company’s scope of activity and lack of supervision could and

would result in fatalities. We can take Koperasi Simpan Pinjam (KSP) Pandawa

Group’s illegal investment case. They are a saving and loan cooperative. The story

began around the year 2009. At that time, Dumeri, as known as Salman Nuryanto,

who feeds his family daily by selling chicken porridge with a cart that reads

“Pandawa” borrowed money to Haji Ridwan for Rp 10 million. Dumeri promised

there would be 10% overpayment of the debt.

He used the money to develop chicken porridge business. The business he

owns kept growing. Since 2010, Dumeri began lending money to other small traders

but by asking for 20% interest. Of the interest, as much as 10% he gave to Haji

Ridwan as much as 10% the rest for himself. As the scheme develops, not only Haji

Ridwan that was interested. Dumeri, H. Ridwan and his friends also established

KSP Pandawa Group but not yet licensed. New permits are filed in 2011 while

recruiting members with the lure of 10% interest per month for one year.

2
Yosephus L. Sinuor, “Etika Bisnis” (Jakarta: Yayasan Pustaka Obor Indonesia,
2010) p. 26

2
 To attract more clients, Dumeri assign leaders with a pyramid pattern of the

Multi Level Marketing business he was once a part of. The leaders are divided into

several levels with the term “One Star Leader” to “Diamond Leader” As a result,

more and more people are successfully recruited. Judge noted, there are 569,000

people who got recruited successfully with the total funds collected approximately

Rp 2 trillion. While the Letter of Work Agreement (SPK) which has been made

approximately 1 million pieces.

Chaos started to happen because the deposit of new client capital is difficult

to channel. Leaders are also authorized to manage new clients’ money. Distribution

of the benefits of old clients was also taken from the initial capital deposit of new

clients. On the other hand, the KSP Pandawa Group administrators did not conduct

administrative care.

By Nuryanto and his cronies, this clients’ money is used for personal use,

buying houses, land, vehicles and other economic value items. Later, these items

will be confiscated for inclusion in the state treasury.

The Assembly argues that investors should know or at least expected that the

Pandawa Group’s fund raising scheme will violate the law. This is apparent from

the promise of profits well above the interest set by Bank Indonesia. Investors

should also check the business license to raise funds by the competent authority,

namely Financial Services Authority (OJK).

3
 The judge then sentenced him to 15 years and fined Rp200 billion to

Nuryanto. While 26 other defendants were sentenced to 8 years in prison and a fine

of Rp50 billion and 5 months imprisonment.

On this verdict, Nuryanto's lawyer, Ramjahif Pahisagorya declared that he

would appeal. He regretted the consideration of evidence in the form of assets and

economic value goods that are confiscated for the state. "We respect the verdict of

the assembly, but this is not a case of corruption, the assets should be returned,"

Rama said.

While other lawyers said Nuryanto and 26 other defendants are not going to

be punished with maximum sentence because KSP Pandawa Group have received

permission from the Indonesian Ministry of Cooperatives and SMEs (Kementerian

Koperasi dan Usaha Kecil dan Menengah Indonesia). Although, after issuing

permits, the ministry should have supervised their activities3.

3
Domina, Teodosius and Winarto, Yudho (2017). “Begini Fakta Hukum Kasus
Pandawa Group” [Online]. Available at
https://nasional.kontan.co.id/news/begini-fakta-hukum-kasus-pandawa-
group?page=2 Accessed on May 10th 2018

4
 B. Research Questions

1. What are the procedures that were incomplete or violated in the investment

scheme by KSP Pandawa Group that made them illegal?

2. At one long period of time, why was the fund raising activities by Pandawa

Group in the form of investment kept growing, even without a permit from

Financial Services Authority? How did they manage to keep the ‘Ponzi’

scheme alive?

3. To what extent shall the state institutions that has the authority take part and

execute their role in conducting legal protection to the clients of Pandawa

Group?

C. Research Objectives

1. To analyze what were supposed to be done in order to have an established

fundraising-based investment company and analyze what procedures that KSP

Pandawa Group did not complete to the point that their investment scheme got

illegal.

2. To analyze the reasons why the investment scheme kept growing even without

a permit from Financial Services Authority

3. To describe the role of state institution in limiting a company’s scope of

activity and the legal protection of the clients

5
D. Originality of Research

The researcher had found one thesis with similar topic but with different case,

after researching the aforementioned corresponding topic in the form of accessible

online documents. The e following is the said thesis:

1.) An undergraduate thesis as titled “KEDUDUKAN OTORITAS JASA

KEUANGAN DALAM PERLINDUNGAN HUKUM BAGI

MASYARAKAT TERHADAP KEGIATAN INVESTASI ILLEGAL DI

TASIKMALAYA” which was written by a law undergraduate student of

Universitas Islam Negeri Syarif Hidayatullah Jakarta, Rizky Arisandi

(Student Number: 11110480000555) on 2015. The research questions of the

said thesis are:

a. Does the role and duty of the Financial Services Authority include

the handling of illegal investments that engage public funds?

b. Why was the accumulation of public funds in the form of illegal

investment in the decision of MA 196/ PID.SUS/2013 run smoothly

without the permission of the Financial Services Authority?

E. The Benefits of Research

The researcher sincerely aspire this paper would be able to contribute to

development of law in the future, business law to be exact, in terms of keeping the

society aware of the existence of state institutions that has the authority of limiting

a company’s scope of activity and giving permits to those company. Business

companies, to be more specific. This awareness will be really useful because the

6
victims of the company the researcher talked about in this research paper did not

know whether or not the activity of the company they invest in was illegal.

Therefore, in the future, the society will be able to be critical and think rationally if

the company they’re going to invest in has done unusual activities and the society

will be able to distinguish companies that actually has a permit and legal recognition

from the state.

CHAPTER II

THEORETICAL REVIEW

Business activities in financial services are closely related to the collection of

funds from the community as provided for in Article 16 of Law No. 10 of 1998

regarding Banking, it is explained that "Any party engaging in fund raising

activities from the public in the form of savings shall first obtain a business license

as a Bank General or Rural Bank of the Management of Bank Indonesia, unless the

activities of collecting funds from such public are governed by law itself "4.

With regard to the clause it is clear that collecting funds from the public in

the form of savings can only be done by the bank, in other words financial service

companies that do fund raising from the community can be in the form of a bank or

have licensed authorized institution to the business undertaken. The business

license to establish a bank described in that article shall transfer the authority of

4
Hermansyah, Loc. Cit.

7
Bank Indonesia to the Financial Services Authority in accordance with Article 55

paragraph (2) of Law No. 21 of 2011 regarding the Financial Services Authority

regarding the licensing of the bank.

The collection of funds from the community is channeled to the community

in the form of credit or other forms in order to improve the standard of living of the

community, and has also developed in other functions such as improving payment

traffic, in the field of foreign exchange trading, guarantee institutions, and other

functions5. The collection of funds from the public is controlled by the state,

through the authority possessed by the Financial Services Authority to protect the

interests of the community as users of financial services by education and protection

of the public as consumers of financial services, protection is provided to safeguard

the public from things that may harm the community itself.

Economic activity is based on the economic development of a country to

manage the existing resources of the community. For that financial institutions of

banks and non-bank financial institutions to manage the economic potential of

existing communities in order to be efficient for the community itself. One form of

growing practice in business activity on financial services is an investment scheme

with a promising high profit or interest6. Given the prospect of a large fund-raising

effort to make a profit, a growing investment in society is basically an activity to

5
Djumhana, Muhammad. “Hukum Perbankan di Indonesia” (Bandung: Citra
Aditya Bakti 2003) p. 79
6
E. A Koetin, “Analisis Pasar Modal” (Jakarta: Sinar Harapan, 1993) p. 16

8
raise funds from society. Unlike saving that is used for the equality of money by

earning interest on a financial institution, investments are used to invest in a

business object that gives results, the profit earned from dividend difference7. With

a relatively high profit, Along with the growing investment business in the field of

financial services, the rise of Illegal Investment.

Illegal Investment Practices are often referred to as “bodong” investment,

people are promised to get a fixed profit or interest on every month even though the

company is losing money. It shows that this form of investment is clearly unusual,

the fund is very speculative, and seeks to avoid banking rules in collecting funds

from the public in the form of savings8. Without prior permission by the Financial

Services Authority as the highest institution in regulating and overseeing the

financial services sector.

Illegal investment activities are conducted by making public fund raising by

deviating and even avoiding banking rules, is an activity that uses public facilities

to run its business activities. Thus it is necessary to see the authority of the Financial

Services Authority in providing protection for the community against illegal

investment activities, moral hazard practices on Illegal Investment activities occur

due to the weakness of the financial institution supervision system caused by

7
Arsil, “Menjerat Investasi Bodong dengan Tindak Pidana Perbankan
“(Lembaga Kajian & Advokasi untuk Indenpedensi Peradilan, 2013) p. 4

8
Ibid.

9
several factors, namely: (a) weak system of financial supervision architecture in

Indonesia; (b) the absence of information exchange among financial oversight

institutions; (c) still high egocentricity among institutions that supervise financial

institutions9.

The success of KSP Pandawa Group raises public funds because it adopts

multi-level marketing system (MLM). Parties who coordinate a number of people

given the term leader with the level of silver, gold and diamond. Other terms are

also called 7 stars, 8 stars and so on. In addition to the leader, there are also some

other people who become administrative staff. Leader in charge of raising funds

from investors to be submitted to Nuryanto (Chairman KSP Pandawa). In return,

the leader gets a fee of about 20% according to the level. While the lure for investors

is a profit of 10% every month. The funds collected are then loaned to small traders

or micro, small and medium entrepreneurs in various markets spread in

Jabodetabek. These merchants will be asked to pay 20% interest on the amount

borrowed.

The Pandawa case adds to a row of cooperative cases under the guise of

MLM. Firstly, Pandawa Group, with around 28,000 customers or investors with a

turnover of Rp 3 trillion provide returns to investors 10% per month. But that is the

beginning of disaster for investors because it does not consider the merits of the

9
Hermansyah, Op. Cit. p. 215

10
yield. Compare the yield offered 10% per month or 120% per year with a deposit

rate of only about 6% per year or 0.5% per month. It’s even more than the rate limit

by Bank Indonesia.

Second, the fund raising permit from the public should be under one roof.

When there is an investment case in the cooperative, a losing investor often reports

the case to the Financial Services Authority (OJK). Whereas the permit for the

establishment of cooperatives is in the Ministry of Cooperatives and SMEs10.

In his indictment, the prosecutor demanded all defendants, including Salman

Nuryanto and the leaders of KSP Pandawa Group, with Article 46 Paragraph (1)

Law (Law) Number 10/1998 on Amendment to Law Number 7/1992 regarding

Banking, jo Article 69 of Law Number 21/2011 on Financial Services Authority, jo

article 55 paragraph (1) to 1 jo Article 64 Paragraph (1) of the Criminal Code. Then,

article 378 of the Criminal Code on Fraud, in conjunction with Article 55 paragraph

(1) jo Article 64 paragraph (1) of the Criminal Code.

In accordance with Law Number 10/1998 regarding Banking, the defendant is

subject to imprisonment of at least five years and a maximum of 15 years and a fine

of at least Rp10 billion and a maximum of Rp20 billion. Responding to the

prosecutor's indictment, attorney of 10 other defendants of KSP Pandawa case,

10
[Online]. Available at http://analisis.kontan.co.id/news/belajar-dari-kasus-
koperasi-pandawa?page=2 Accessed on May 10th 2018

11
Muklis, said that he will try to prevent his client from being charged with the

banking law11.

CHAPTER III

THE METHODS OF RESEARCH

1. Types of Legal Research

The legal research that is being used in this paper is normative-empirical legal

research; in the view that this paper focuses on factors causing a fact, strategies

and policy, and impact on the community, which are the characteristics of

empirical legal research. This research also calls for interview for the lesson

learnt behind the case of illegal investment by Pandawa Group—including

ways to avoid the aforementioned circumstances in Indonesia, and that

information could be obtained from Bank Indonesia, Ministry of Cooperatives

and SMEs, and Financial Services Authority. Aside from empirical, this paper

also fulsills the characteristic of normative legal research where the researcher

is obliged to read from books, online news source, journals, and compilation

of Indonesian laws.

11
Purnama, R. Ratna (2017). [Online] Available at:

https://metro.sindonews.com/read/1228427/170/jalani-sidang-perdana-bos-ksp-

pandawa-didakwa-pasal-berlapis-1502198660 Accessed on May 10 2018

12
2. Types of Data

a. Primary Data

The primary data are obtained through field research with non-probability

sampling techniques, which uses experts as the informant; in which this

paper interviews The Indonesian Ministry of Cooperatives and SMEs, Bank

Indonesia, Financial Services Authority, and former clients of Pandawa

Group.

b. Secondary Data

1) Primary Legal Materials

This paper also applies secondary data meaning that the data are

obtained through primary legal materials and secondary legal materials.

Primary legal materials in this paper includes documentary study and

related laws and regulations which will be cited.

2) Secondary Legal Materials

This paper also uses secondary legal materials consisting of research

results, undergraduate thesis, law journals, court decisions, which all

four will be cited and used to elaborate further explanation on this

paper.

3. Data Collection Methods

There are two methods that are going to be used in this paper, which are

interview and documentary study. The interview as the two aforementioned

sub research methods has elucidated, shall be aimed to the Indonesian Ministry

13
 of Cooperatives and SMEs, Financial Services Authority, in order to find out

the underlying lesson learnt behind this case—including ways to avoid the

aforementioned circumstances in Indonesia. Also the former clients of

Pandawa Group, to learn the insights, to find out about ways a company like

Pandawa Group recruit people and further explanation about what actually

happened in that period of investment.

4. Data Analysis

This paper applies qualitative data as the main resource of the paper in

order to concern with the understanding of business companies, state

institutions, and the community that got recruited by Pandawa Group as the

main interest of this paper. However, quantitative data which are analyzed

through statistical references, could support the aforementioned qualitative

data as the main resources, in the form of statistics and such.

14
 OUTLINE

CHAPTER I: Introduction

A. Background

B. Research Questions

C. Research Objectives

D. Originality of Research

E. The Benefits of Research

CHAPTER II: Theoretical Review

CHAPTER III: Methods of Research

CHAPTER IV: Research Result and Analysis

 Analysis on the legality of Pandawa Group

 Analysis on the reasons behind their on-going scheme that ran without a

permit from Financial Services Authority

 Analysis on the role of state institutions in conducting legal protection to

the clients of Pandawa Group

CHAPTER V: Closure

 Conclusion

 Recommendation

Bibliography

Appendices

15