How to Avoid Falling Into Scams?

[Dennis Ng]

How to Avoid Falling Into Scams?

One of my friends invested his money into an “investment partnership” with a company and asked me for comments. I checked and realize that this company is on the “MAS Investors’ Alert List”

Please go to this url for the list of companies on MAS Investors’ Alert List (listed in alphabetical order from A to Z: http://www.moneysense.gov.sg/check_our_ ... l_IAL.html
He asked me what he can ask in order to be alerted to possible scams?

I share with him that one simple way for you to do that is to ask:"How exactly are you able to do that?"

So example, they say, we can pay you 2% per month or 24% per year.

You ask:"How exactly are you able to do that?"

The reply might be: we use a variety of investment strategies to get this sort of return.

Again you ask:"How exactly do you do that?"

Unless and until they can give you very clear answer, if they CANNOT, it is very clear this is a possible SCAM!

To be financially smart, one of the things to do is to have "common sense".

Most scams "play" on the emotions of "greed" in human being. They would tempt you by promising EXCEPTIONALLY high returns. They try to "lower your perception of risk" by telling you the minimum investment amount can be as low as $10,000 or even just $1,000.

They know that most people adopt "double standard" for their money. If they risk $10,000, they might think twice, if it's $1,000, they might just go ahead. That's why most scams try to use a low "investment amount" to "lure" people in.

However, common sense would make you ask that if they can deliver 24% returns per year, they don't need to go "down so low". They can go for minimum investment amount of $100,000 or even $1 million and there'll be "queues" of people queuing to invest.

So why do they bother to deal with the "small investor with $10,000 to spare?

Whatever I said also come from "street smartness". I grew up in the streets of China Town in Singapore, thus I've attained a certain level of "street smartness" that most people lack. Because they never had the "opportunity" like I did to witness with my eyes what happened in the streets.

This lack of "street smartness" is also one of the key "disadvantage" that most young S'poreans have vs their counterparts who grew up in developing countries such as China, India, Malaysia, Vietnam....and the list goes on.

That's why S'poreans are welcome in many countries. Becos many Singaporeans are very easy to "cheat".

What I said might not be nice to hear, but in my opinion, they are true.

[Dennis Ng]

I saw a posting that goes something like this in another internet forum, someone said:"

this is not a scam. I really receive money. Attached is the image of a cheque I received from this company.

End quote.

My comments:
just becos you receive money means it is NOT a scam.

How silly!

You must find out where your money comes from. If the money comes from people who put in money after you, it is still a Ponzi Scheme (scam).

It is NOT a scam only and only if the money you receive is from actual profits made by a GENUINE business, not a Scam Business.

Paying you some money is one tactic such scams typically USE. Becos they know that human is by nature skeptical. However, many people have this "silly logic" of "If I see it, it must be real."

How silly!

Then whatever you see magicians perform on the stage must be real then? Is it real? The fact is it is just an ILLUSION.

Similarly, many scams would employ this "show you the money tactic" in order to convince you that it is NOT a scam (even when it is). And once you're convinced, what would you likely do?

Firstly, you will invest more money. Perhaps "re-investing" this cheque you just received.

Not only that, you got so excited that this is a real deal that you go around telling your loved ones, your relatives, your friends, your colleagues or even strangers on internet forums that this is real and you DRAG other people into this cam by showing your "silly" cheque you received.

If people want to choose to be blinded by greed, whatever I say will not go into their heads.

I just hope I can save some innocent people from falling into scams. It is why I strongly believe that if people raise their Financial Literacy, they'll be in better position to judge and not easily fall into scams.

[Dennis Ng]

the Modus Operandi of a Scam is very Simple and Similar.

I really cannot believe that almost 100 years after Charles Ponzi used the same tactics to con people, thus the term "Ponzi Scheme" is coined, people are still falling into the same old scam.

Looks like after 100 years of evolution, nothing much change. People become really dumb when blinded by greed whether ths happened 100 years ago or now.

What I said may not be nice to hear but I speak the truth. Truth hurts sometimes.

Cheers!

Dennis Ng, http://www.HousingLoanSG.com

From wikipedia:
A Ponzi scheme is a fraudulent investment operation that involves paying abnormally high returns ("profits") to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business. It is named after Charles Ponzi.

A Ponzi scheme usually offers abnormally high short-term returns in order to entice new investors. The high returns that a Ponzi scheme advertises (and pays) require an ever-increasing flow of money from investors in order to keep the scheme going.

The system is doomed to collapse because there are little or no underlying earnings from the money received by the promoter. However, the scheme is often interrupted by legal authorities before it collapses, because a Ponzi scheme is suspected and/or because the promoter is selling unregistered securities. As more investors become involved, the likelihood of the scheme coming to the attention of authorities increases.

The scheme is named after Charles Ponzi, who became notorious for using the technique after emigrating from Italy to the United States in 1903. Ponzi was not the first to invent such a scheme, but his operation took in so much money that it was the first to become known throughout the United States. Today's schemes are often considerably more sophisticated than Ponzi's, although the underlying formula is quite similar and the principle behind every Ponzi scheme is to exploit lapses in judgment arising from investor naivete.

Hypothetical example

1920 mugshot of Charles PonziAn advertisement is placed promising extraordinary returns on an investment – for example 20% for a 30 day contract. The precise mechanism for this incredible return can be attributed to anything that sounds good but is not specific: "global currency arbitrage", "hedge futures trading", "High Yield Investment Programs" or something similar.

With no proven track record for the investors, only a few investors are tempted, usually for smaller sums. Sure enough, 30 days later, the investor receives the original capital plus the 20% return. At this point, the investor will have more incentive to put in additional money, and, as word begins to spread, other investors grab the "opportunity" to participate. More and more people invest, and see their investments return the promised large returns.

The reality of the scheme is that the "return" to the initial investors is being paid out of the new, incoming investment money, not out of profits. There is no "global currency arbitrage", "hedge futures trading", or "high yield investment program" actually taking place. Instead, when investor D puts in money, that money becomes available to pay out "profits" to investors A, B, and C. When investors X, Y, and Z put in money, that money is available to pay "profits" to investors A through W.

One reason that the scheme initially works so well is that early investors – those who actually got paid the large returns – quite commonly reinvest (keep) their money in the scheme (it does, after all, pay out much better than any alternative investment). Thus those running the scheme do not actually have to pay out very much (net) – they simply have to send statements to investors that show how much the investors have earned by keeping the money in what looks like a great place to get a high return.

The catch is that at some point one of three things will happen:

1. the promoters will vanish, taking all the investment money (less payouts) with them;

2. the scheme will collapse of its own weight, as investment slows and the promoters start having problems paying out the promised returns (and when they start having problems, the word spreads, and more people start asking for their money, similar to a bank run);

3. the scheme is exposed, because when legal authorities begin examining accounting records of the so-called enterprise, they find that much of the "assets" that should exist, do not.

[Dennis Ng]

I was approached by someone on this "investment" as well. I just told the person I'm not interested becos many things can go wrong and it can be a long path to IPO. I personally know of quite a number of companies that get "Pre-IPO" investors to prepare for IPO and then the co went bust.

How many such investment losses have I managed to avoid in the last 12 years becos of my Financial Knowledge? I think I almost lost count. Just some I can recall:

1. Ostrich Investing
2. Batam property investments
3. Lehman Brothers' mini-bonds
4. Accumulator and High Notes by DBS.
5. Sunshine Empire
6. Oil Pod
7. Profitable Plots
8. The Gold Label
9. Edgeworth Properties (Land Banking)
10. China Milk (I bought the shares but sold off becos I observed warning signal of rising Trade Receiveables.

Cheers!

Dennis Ng

The Straits Times
May 28, 2012
Investors cry foul over $10m start-up 'scam'
They claim they were tricked into thinking company was doing well

By Jalelah Abu Baker

THEY thought they were investing in the next Google or Yahoo!, but after sinking more than $10 million into a start-up fronted by an entrepreneur from Hong Kong, a group of Singaporean investors have now lodged a police report alleging the proposal was a scam.

More than 20 investors had put money into a website touted to be the first business-to-business portal for suppliers in the region to market their products in China. But they say the start-up has failed to take off.

Among the investors are a former MP, businessmen and lawyers who requested anonymity to avoid embarrassment. Aged 50 to 60, some are seasoned investors while others are first-timers.

Speaking to The Straits Times, eight of them claimed they were approached by a stockbroker, who used to be a trading representative at a securities firm here, in 2006 and 2007. They said they trusted him as he was senior and had several years of experience.

The Hong Kong businessman in question appeared to have a doctorate and has links with Chinese and Hong Kong officials, they said.

The company that would run the website was described as a professional IT firm specialising in e-business solutions and products. According to a presentation the investors attended here, it had invested millions of dollars over six years to develop the website.

The investors bought the company's pre-IPO shares and were told they would get back manifold returns but were not allowed to see its accounts. They were also offered Hong Kong carpark space as collateral.

While most of the investors knew the Hong Kong businessman through the former stockbroker, one of them, a 51-year-old owner of a materials supplier who invested $500,000, had met the businessman in Japan several years ago. He later attended a seminar the businessman had sponsored at a Singapore university. 'He had a way of talking, and making it seem like he knew many people.'

An independent valuation pegged the company's worth at HK$857 million (S$140 million). Several international advisory members were said to be part of the company.

The investors were also told Hong Kong and Macau entrepreneurs such as Mr Richard Li and Mr Stanley Ho were investors.

The businessman even appeared on the cover of a Hong Kong magazine. 'But we found out that it is really easy to get these kinds of magazines produced there,' said another investor, a 52-year-old marketing director who put in $300,000.

Late last year, the investors were told the company was not making money and they could invest in another of his firms. While some of them acknowledge that any investment carries a risk, they claimed the businessman had delayed telling them how the company was doing. They also allege he had tricked them into thinking it was doing well.

They started filing police reports from February. They added that they had been called up for interviews with the Commercial Affairs Department which deals with white-collar crime here.

The former stockbroker, who previously coordinated meetings and handled all administrative jobs here for the businessman, said he himself had made a police report against his former boss.

He claimed he was paid $10,000 per month. He is now working in Malaysia as he said he has suffered damage to his reputation and could not get a job here.

'He forced me to resign, saying the company was not doing well. He shouted vulgarities at meand scolded me,' the former stockbroker said. Attempts to reach the Hong Kong businessman failed.

jalmsab@sph.com.sg

[lop]

One should also be careful about wine investment. In this forum, it has been discussed as an alternative investment initially but was alerted later after bad experiences were reported by a few in this forum.

[Dennis Ng]

One should also be careful about wine investment. In this forum, it has been discussed as an alternative investment initially but was alerted later after bad experiences were reported by a few in this forum.

Fine Wine Investing is an alternative investment for the Rich for over 100 years, Private Banks such as Soc Gen provides such investments to their High Networth Clients.

http://sgpriv.cust.waycom.net/en/tailor ... ssion.html

yes, I managed to avoid one Wine Scam, the "Universal Wine" scam. This co promised a 10% return after 1 year, which from my knowledge of how wine investing work, it is clear that it does not work this way and likely a scam. I helped some of my clients and seminar graduates to avoid this scam as well when they asked me for my opinion.

But in the end, I also lost money investing with another company, Assetton. When the company went all the way to forge all the documents, including letters from warehouse showing that my wine is stored in France, there is really almost no way to avoid. So yes, I lost about S$50,000 investing into French Wine with 2 companies, Premium Liquid Assets and Assetton.

But becos of my Financial Knowledge, I would not put more than 10% of my wealth into Alternative Investment and my wine investment only constituted 5% of my total wealth when I had S$1 million, so I did ask myself "What if I'm wrong, will I be financially ok?" So even though I lost the money, I'm financially ok becos of the Prudent Financial Planning Principles I follow.

As you might realise, if you only invest when the upside is double downside, even if you lose money on 6 out of 10 investments, you will still get Richer. I'm a living example to demonstrate this in this forum. You would realise that some of my stock investments also lost money, but overall I make as I diligently follow this investment rule which I teach and Practise as well.

[Dennis Ng]

Some Seminar Speakers are NOT what they claimed to be. Here's a Real Life Example.

http://www.benmarcweescam.com/2009-chan ... -marc-wee/

Fabian Lim, who admitted that he wrongly endorsed Benjamin Marc Wee as an "ebay expert", used to focused on mainly conducting Internet Marketing Seminars, now he is conducting Stock Trading seminars and selling stock trading software.

Actually, I can also claim to be an internet marketing expert. My website HousingLoanSG.com has managed to generate millions of turnover over the last few years and over one million profits all through the Power of the internet (accounts are prepared and submitted to ACRA). Not sure whether how much revenue these guys really generate from Internet even though they claim to make millions from internet.

So before you learn from any person, first find out did this person achieve Millions from what he now teaches you OR is he making money by teaching you. There is a BIG difference between the 2.

[candy_chia]

"There's No Short answer on how to avoid fraud. But there are whole fields where there's TOO Much Fraud, so we avoid them," quoted Warren Buffett on how to avoid fraud.

hi,

NO...better stay away from alternative investments with no track records to show.....

Here, we learn about stocks and property investment, etc....Enough to make $$$$ liao..........why would u want to invest in Wood of Gods???? sounds fishy man....pls alert everyone, before someone becomes a victim.

Don't even go and listen...got pressure, hard-sell tactics...

cheers,
jason.

Hi, i was invited to a investment talk about xxxxxxxx investment.
http://www.asiaplantationsingapore.com/ ... tment.html

Would like to check whether have anyone came across such investment before?

[candy_chia]

Dennis managed to "avoid one Wine Scam, the "Universal Wine" scam, but fell prey to another scam by Assetton (forge all the documents)

Even though, he lost about S$50,000 investing into French Wine with 2 companies, Premium Liquid Assets and Assetton, his wine investment only constituted 5% of his total wealth when I had S$1 million

Unfortunately, I didn't possess prudent financial principle "What if I'm wrong, will I be financially ok?" and became a victim to ACCA (now name MDA) scam when I lost half my wealth of $40k then.

One elderly who queue in front of me to fill in the lists of CLOB holdings, (all shares in CLOB accounts to be transferred to accounts in the MCD for eventual trading on the KLSE) during the CLOB saga (Malaysian shares via Singapore's Central Limit Order Book system were under suspension in trading in September 1998), invested with his life saving of about $500,000.

http://business.asiaone.com/Business/Ne ... 86890.html


The Dutch Tulip Mania (or “Tulipomania”)

Could a mere tulip bulb be worth $76,000? It is if people are willing to pay for it. It may sound preposterous, but this is exactly what happened during the Dutch Tulip Mania or Tulipomania of the 1630′s.

tulip mania.png (56.1 KiB) Viewed 55066 times

How the Tulip Mania Began

Initially, only true connoisseurs bought tulip bulbs, but the rapidly rising price quickly attracted speculators looking to profit. It didn’t take long before tulip bulbs were traded on local market exchanges, which were similar to modern stock exchanges. By 1634, tulip mania had spread to the Dutch middle classes and soon practically everybody was trading tulip bulbs, looking to make a quick fortune. The majority of tulip bulb buyers had no intention of planting these bulbs – the name of the game was to buy low and sell high, just like in any other financial market.

The entire nation was caught in a sweeping mania and some people even traded in their land, livestock, farms and life savings to acquire a single tulip bulb.

Dutch Tulip Mania Chart

At the peak of the mania, the price of tulip bulbs went up twenty-fold in just one month.To put that into perspective, a person who had invested $1,000 in tulip bulbs would have seen their investment balloon to $20,000.


With gains such as these, it is not hard to understand the mad rush to buy tulip bulbs at any cost. Tulip bulb mania affected the public psyche to an extreme.

One drunk man in a bar started peeling and eating what he thought was an onion, while it was actually the bar owner’s tulip bulb on display. The infuriated bar owner had this man jailed for many months.

All common sense and logic was thrown to the wind

and practically scoffed at – this is exemplified by how many useful items it cost to buy one single tulip bulb:

• four tons of wheat, • eight tons of rye, • one bed, • four oxen, • eight pigs, • 12 sheep, • one suit of clothes, • two casks of wine, • four tons of beer, • two tons of butter, • 1,000 pounds of cheese, • one silver drinking cup.

The modern day value of these items is over $40,000.

By 1636, tulips were trading on the Amsterdam Stock Exchange as well as on exchanges in Rotterdam, Harlem, Levytown, Horne and many others in other nearby European countries.

These exchanges started to offer option contracts, which allowed speculators to trade in the tulip bulb market for a fraction of the price of a real tulip bulb.

Despite how impressive that sounds, a buyer of tulip bulb options would have seen their investment of $1,000 balloon to an incredible $100,000. Unfortunately, leverage is a double-edged sword – if tulip bulb prices moved lower by even a small amount, the option buyer’s investment could have been completely lost.

An even larger adverse move in tulip prices could have caused traders to lose more than their initial investment. Despite these obvious risks, Dutch traders aggresively speculated in tulip bulb options due to the common belief that the tulip market was immune to falling and that it would “always go up”.

How the Tulip Mania Ended

After some time, the Dutch government started to develop regulations to help control the tulip mania. It was at this point that a few informed speculators started to liquidate their tulips bulbs and contracts to lock-in their profits. In addition, more tulip bulbs were added to the supply due to increasingly large tulip bulb harvests. Tulip Mania Image - Tulip BulbSuddenly, tulip bulbs weren’t quite as rare as they were before. Tulip prices began to ease, gently at first, and then started to plummet at a much faster rate than prices rose. Suddenly, the market experienced a widespread panic as traders rapidly began to realize that tulips were not worth the prices people were paying for them.

In less than 6 weeks, tulip prices crashed by over 90%, causing vast fortunes to be lost.

Dutch Tulip Price.png (7.26 KiB) Viewed 55066 times

As tulip bulb prices crashed, wealthy tulip traders became paupers virtually overnight. Many tulip bulb option traders became bankrupt after they lost far more than their initial investments.

The Dutch government avoided intervening in the tulip bulb crash and only advised tulip speculators to form a council to attempt to stabilize prices and bolster public confidence. Every one of these plans failed miserably as tulip prices plummeted even lower than before.

Eventually, Amsterdam’s assembled deputies nullified all of the contracts purchased at the height of the tulip mania and city’s supreme judges declared all tulip speculation to be a form of gambling and refused to honor these contracts. As a result, payments on tulip bulb contracts were no longer enforced by any of Holland’s courts, which caused the tulip bulb market to crash even harder.

market crash.png (74.6 KiB) Viewed 55066 times

The tulip bulb crash threw the Dutch economy into a mild economic depression that lasted for many years.

http://www.stock-market-crash.net/tulip-mania/

[mort]

If the deal is too good to be true, then it is probably not.

I will ask myself - if it is such a great deal, why is this person inviting me to invest instead of investing himelf.

Do not invest out of greed or even kindness (because it is a close friend who is recommending the product).

And never put all your eggs into one basket. Maximum 5% of your wealth in one product. Exception will be property since it will involve more $$.

[candy_chia]

Agree with mort,

Now, I am more prudent in allocating my investment, diversification is a crucial ingredient for generating enormous return. At the same time, minimise the boat from sinking even if one becomes a victim of scam.

If the deal is too good to be true, then it is probably not.

I will ask myself - if it is such a great deal, why is this person inviting me to invest instead of investing himelf.

Do not invest out of greed or even kindness (because it is a close friend who is recommending the product).

And never put all your eggs into one basket. Maximum 5% of your wealth in one product. Exception will be property since it will involve more $$.

[lootster]

Hi everyone!

Just like to bring your attention to this company. I attended their seminar recently at "The Majestic" (Beside People's Park Complex)

What is it?
Basically they are selling travel membership at price of $199 (Joining fees)
Thereafter, you need to pay a on-going monthly fees of $50 unless you refer 4 more people. This 4 more people have to get another 4 more people each so as to waive their fees as well.
(Now you get the picture?)

What's the benefit?
You will get to travel to different parts of the world paying 2-3 stars price for 5 stars level accommodation which they claimed (Something like timeshares)
Of course, you will get monetary rewards if you have more downlines under you. (Just look at the fees above so you can roughly guess how much is the earnings)

What's the catch?
In order to avoid paying the monthly fees, you need to find 4 person to pay for you and this 4 person cannot quit!
If you follow me so far, you would have guess that the people "below" is paying for those "above"! (Chinese saying...... 羊毛出在羊身上)

Some of you may have seen post on FB with people travelling to beautiful places, taking pictures and holding blue banners that says "You should be here!"

See their professionally done website http://www.worldventures.com/blog

Just to pre-warn you all in case should any of your friends would like to invite you down to their seminar. At least, you are mentally prepared beforehand.
End of the day, I leave it to you guys to conclude and just in case you are wondering........ I never joined lah

[ngtfook]

Thanks Lootster for the sharing.

[Brian Chan]

There is a ex-masteryourfinance member - Anna L... who is in FB too. Always flagging "You should be here".