A Guide To Detect An Investment Scam
Investment scams are often targeted to a specific group of people, usually ethnic communities comprising certain professionals or the elderly. Most fraudsters frequently pretend to be members of the community, often lauding or spouting respected leaders to falsely convey their endorsements for their investment scams. This helps with their intention to spread the word about the scheme and to convince people further that their investment scam is legitimate and valuable. Numerous times, people become unwitting victims of the fraudster’s deception.
Let’s look into one of the most recent case examples of an investment scam – the Venus FX syndicate that launched the forex sham. Around 23,000 people were conned, including 17,000 Malaysian Indians that were cheated out of their hard-earned money. A total of about RM78 million (USD 18.1 million) was swindled and all these victims were represented by a renowned social advocator against Ponzi Schemes, Datuk Ramanan Ramakrishnan.
The press secretary to the Senate President of Malaysia and former treasurer-general of MIC, Datuk Ramanan joined the victims in filing police reports against VenusFX and progressed to hold a press conference to expose the façade, unfolding the modus operandi of the scam and the chief perpetrators. Datuk Ramanan also shouldered the responsibility to legally fight for the victims to help them recover their losses.
This investment scam is a fine illustration of how fraudsters exploit prominent names in their schemes and manipulate trust and friendship among groups of people, intentionally causing difficulty for law enforcement or regulators to detect the scam. Usually, the victims don’t notify the authorities quickly or pursue legal procedures because they still hope that they can work it out with the fraudsters to recover their money.
These investment scams are similar to Ponzi or pyramid schemes, where money from new investors is used to make payments to earlier investors to provide a false impression that the investment is successful. This enables the fraudsters to convince new investors to pour money into the scheme while reassuring the existing investors that their investments are safe and sound.
The truth is, the fraudsters have already stolen the money for their own use. The inevitable occurs when the whole scheme collapses as soon as the supply of new investors runs out and all the current investors are left in the dry when they discover that all of their money is gone.
How To Detect A Scam
We all know that any investment will always involve some degree of risk. Before buying, try minimizing your investment risk by asking questions and obtaining information about any investment to avoid being scammed. What you need to look out for:
When you’re being approached with an investment opportunity
No matter how trustworthy that person introducing you to the investment is, you need to investigate everything thoroughly. Check that all information that you are told about the investment is true. Sometimes, the person telling you about the investment may have been fooled by the fraudsters themselves into believing that the investment scheme is genuine and legitimate.
When you’re being promised unbelievable income or guaranteed returns
If an investment sounds too good to be true, it probably is. You should be extremely suspicious when approached with investments that claim to have no risks because no investments are risk-free. The golden rule is, the higher the potential returns of an investment are said to be, the higher the risk of losing money. Therefore, the classic signs of a scam are promises of quick and high returns with minimal or no risk involved.
When you’re presented with an investment opportunity that’s not in writing
Legitimate investments are usually in writing, so be skeptical when you’re told that an investment does not have written particulars because fraudsters often avoid putting things in the script. You should also be on guard if you’re told to keep the investment opportunity a secret.
When you’re pressured or rushed into buying an investment
Don’t be hasty, give yourself a chance to think about it and investigate the investment. Don’t be misled with the knowledge that someone you know claimed to have made money because it doesn’t guarantee that you will too. Be extremely suspicious when ‘once-in-a-lifetime’ investments are pitched to you especially those with exclusive or confidential information.
When you receive email spams about ‘winning’ investments
If you receive an unsolicited e-mail from an unknown person or entity that contains a ‘great opportunity of a lifetime’ investment, it’s best to move on and pass up the ‘great opportunity’. Help others from getting scammed by reporting it to the Securities Commission Malaysia or Bank Negara Malaysia.