Nueva Rumasa warning: the 10% promissory notes that smelled like fraud

Nueva Rumasa's 10% was too good to be true

What should you do when a company offers you 10% a year on your money, backed by flan and brandy? First, be suspicious. In early 2011, the Nueva Rumasa group was selling corporate promissory notes at 8% and then 10%, a return the banking sector could not match. Spain's CNMV (securities regulator) did not supervise the issuance, and banks were denying the company credit. Even so, it raised 250 million euros in two months.

The warning signs nobody wanted to see

The product was simple: you lent 100,000 euros and a year later got back 110,000. The problem was the counterparty. Nueva Rumasa was turning to retail investors because financial institutions had cut off its funding, a detail that on its own should have deterred any investor. Some analysts even proposed an absurd arbitrage: take out a 2.5% mortgage, invest the money in the promissory notes and pocket the difference. The calculation, itemized line by line, promised a gain of 6,300 euros a year. What it did not account for was the risk of default.

The ghost of 1983: the old Rumasa had already set the script

The story had an uncomfortable precedent. Decades earlier, the original Rumasa had been taken over by the Spanish state after it emerged that the holding company was financing its businesses with money from its own banks. The hole was gigantic, and the subsequent reprivatization left a trail of suspicion. Now the Ruiz-Mateos family was repeating the scheme without intermediaries: the promissory notes went straight into the group's pocket. Memory was short, but the warnings were not lacking.

The CNMV warned, but greed won out

The ads said, quickly and under their breath, that the investment was not supervised by the CNMV. The regulator issued statements to that effect: no oversight, no protection. Investing there was like lending money to your brother-in-law's business. Even so, the 250 million raised in two months showed that the promise of 10% weighed more than the fine print. Greed, as always, found a shortcut to the abyss.

Decades later, the story repeated itself with the same family, the same style and the same investor faith that this time would be different. It was not. Those who warned had reasons for skepticism; those who thought twice, too.