Bernard Madoff operated a Ponzi scheme by creating fake transactions and false profits. He used money from new investors to pay earlier investors. The payments convinced investors that the profits shown in their statements were real.
Khalid Ahmad, former president of the ACCA Malaysia Advisory Committee, described the financial practices uncovered at Lembaga Tabung Haji as a “massive and diabolical Ponzi scheme”.
This was his professional assessment. The Royal Commission of Inquiry did not legally classify Tabung Haji as a Ponzi scheme. However, the RCI findings show why such a serious comparison was made.
The first similarity was paper profit that did not reflect the true financial position.
Paragraph 3.13.11 found that if the Malaysian Financial Reporting Standards had been fully applied in 2017, Tabung Haji should have reported a net loss of RM1.4 billion. Instead, it recorded a profit of RM3.4 billion. That was a difference of RM4.8 billion.
Depositors were told that Tabung Haji had made billions in profit when the RCI’s analysis showed that it had suffered a major loss.
The second similarity was the payment of high returns despite a deteriorating financial position.
Tabung Haji distributed RM12.652 billion in hibah between 2014 and 2017. By 2016 and 2017, its liabilities already exceeded its assets before hibah was paid.
Paragraph 3.9.16 found that the method used to distribute hibah did not comply with the statutory safeguards intended to ensure that distributions came from genuine profits and not depositors’ money.
If actual profits were insufficient to support these distributions, those responsible must explain how the payments were funded and why they were approved.
The third similarity was the manipulation of loss recognition. Paragraph 3.9.8 records that the impairment threshold for investments was changed from 70 per cent to 85 per cent and then to 90 per cent within a single day.
The former chief financial officer told the RCI that the policy was changed to allow profit distributions to meet depositors’ expectations, not to present the fair value of the investments.
This was not a minor technical adjustment. The method used to measure losses was changed to produce the result that management wanted.
The RCI also found that political pressure played a direct role. Paragraph 3.17.13 states that political pressure in facing an election drove decisions that became the principal cause of Tabung Haji’s 2017 financial crisis.
No one can now claim that questioning political responsibility amounts to politicising Tabung Haji. Politics had already entered Tabung Haji when electoral considerations influenced its financial decisions.
Bank Negara repeatedly warned the chairman and responsible minister between 2014 and 2017 about liquidity, reserves and major depositors. The matter was eventually brought to prime minister Najib Razak. The Roland Berger report also warned that Tabung Haji’s model was risky and unsustainable, but the RCI found no record that it was presented to the board before the 2017 hibah decision.
The former chairman, board members, management and responsible minister must explain what they knew and what actions they took. If they were not given the correct information, they must explain why they failed to demand it. If they knew the true position, they must explain why the distributions continued.
The RCI also recommended forensic audits into 14 problematic investments. These included RM257 million invested in Deru Semangat, which fell to around RM32 million; RM364.31 million in Trurich that was fully impaired; and an unrealised loss exceeding RM1 billion involving FGV.
The financial problem was later transferred to Urusharta Jamaah. Assets with a market value of RM9.7 billion were transferred at RM19.9 billion. This stabilised Tabung Haji’s accounts, but shifted the burden to a government-owned company and ultimately the public.
The recovery remains incomplete. When UJSB’s RM12.5 billion sukuk matured in May 2026, only RM965 million was settled through assets. The remaining RM11.5125 billion was replaced with a new sukuk maturing in 2036. The new sukuk provides annual cash income, but more than 92 per cent of the principal has been postponed for another ten years.
The government must immediately publish the status of the forensic audits, police and MACC investigations, and all 25 RCI recommendations. It must also explain the UJSB allocations and provide clear repayment plans for the sukuk maturing in 2029 and 2036.
Active politicians must be prohibited from serving on the Tabung Haji board. Future hibah must be based on audited accounts and genuine profits.
The central issue is not whether Tabung Haji legally meets the definition of a Ponzi scheme. The issue is that the RCI found paper profits, delayed recognition of losses, distributions unsupported by financial strength and political pressure to maintain public confidence.
Those responsible must be identified, investigated and prosecuted if any law was broken.