Crowds of angry investors gathered in cities across Spain on Wednesday, blocking traffic and demanding government action after two large postage stamp investment companies were accused of cheating up to 350,000 people.
As the scale of the alleged fraud began to emerge, Spanish Prime Minister Jose Luis Rodriguez Zapatero said he wanted to convey a "message of confidence and calm."
Investigators reportedly found a hidden stash of 10 million euros (US$12.7 million) in 500 euro notes at the home of one person involved with the two companies, named as Forum Filatelico and Afinsa, which allegedly ran the scam.
The notes were hidden behind a freshly built "false wall," detected by the smell of wet plaster. Luxury cars and works of art were also reported to have been found at the premises.
The two companies allegedly built a pyramid investment scheme, promising clients high-interest returns on vestments in collectable postage stamps.
"Forum Filatelico and Afinsa are suspected of running a fraudulent business of attracting mass savings in many Spanish towns, offering high returns and using collections of stamps of proven value and other items as guarantees," a police statement said. It added that the stamps were often either overvalued or fake.
With the offices of the stamp companies closed by the courts, clients gathered at their doors yesterday nervously waiting to hear what had happened to their money. "These are all the savings of myself and my wife," said Miguel Angel Garrido, a Madrid client. "I don't understand what is happening."
Although nine executives and directors of the firms had been arrested by yesterday, Afinsa published a full-page advert in the Spanish press promising clients it would meet its obligations. "We can meet all our commitments," it said, claiming that each investment was backed by real stamps held by the company.
Forum Filatelico said it had an insurance policy covering 85 percent of all payouts.
The two companies, with about 2,000 employees between them and branches or subsidiaries in several other countries, have been operating in Spain for 25 years.
Spain's consumer groups said on Wednesday they had long warned investors against giving money to the firms.
The government has warned that investments in stamps are not covered by state funds that protect clients of banks or other financial groups.
Experts said the hold exercised by the firms on parts of the worldwide market for stamps had become so strong they were effectively setting the global prices for those sectors.