Letter: Investment Scams Are Still Rife: Even I Am A “Victim” Of Investment Fraud
BY NEOH SOON KEAN
PREAMBLE
About a year ago, I wrote my first article on investment for this publication. In it, I stressed the importance of not to be taken in by fraudulent investment scammers. I emphasized that the best thing investors could do for themselves was to invest in carefully selected assets which provide steady returns over the long term. By relying on the power of compounding (which I termed as “the Eighth Wonder of The World”); one can get a decent return over the long term. Unfortunately, this advice does not seem to be widely known or accepted. From my readings of the latest reports from the Police and Securities Commission, investments scams are still extremely common. Losses totaling hundreds of millions (billions even) are still being incurred every year. Even educated, intelligent and well-off people (e.g. senior civil servants, bank officers and teachers) have been cheated out of hundreds of thousands of their savings. Although I have long been aware of this type of scams happening; I never thought that I myself and my company, Dynaquest Sdn Bhd, could be dragged into one of these. Let me explain the modus operandi of this particular scammer with the hope that my readers will not fall victims to such schemes.
HOW I AND MY COMPANY BECAME “VICTIMS” OF INVESTMENT SCAMS
Let me first say that by the word “victims”, I do not mean we actually lost money to the scammer. Our names were used by a scammer, quite unbeknownst to us, to cheat a huge sum of money from a couple and then the scammer (a she) disappeared without trace. So, what actually happened?
It was the day before a long festival weekend and many of Dynaquest’s staff had already taken leave and the office was quite empty. As I was one of the few persons left in the office; I was manning the reception desk. A young couple whom I have never met before, came in and asked if this was the office of Dynaquest. I answered in the affirmative and asked how could I help them. They (lets us refer to them as Couple X) requested to meet a person whom they said was one of our staff. Her name was (disguised by me) ABC. I replied that there was no such person in our employment. They insisted that they had been so informed and she had collected money from them for investing our products. Again, I told them that we employed no such person and that nobody was allowed to collect money from anyone on our behalf. More importantly I told them that we were licensed investment advisors, we only provided investment advice: we do not collect money from our clients or invest it on their behalf. They then informed me that ABC had asked them to deposit cheques into various bank accounts totaling nearly RM200,000 in order to invest in schemes under our name.
I was totally shocked by how they could have entrusted ABC with such a huge amount of money and asked how did they get to know ABC? Was she an old friend? Or introduced to them by an old friend? The answer was “No” in both cases. They came across ABC through her postings on a social medium. Apparently, ABC claimed to be a representative of Dynaquest and she posted various articles taken from other social media, extolling the success Dynaquest had in investing in the stock market. They were also shown various postings which gave the impression that I, the founder of Dynaquest, was a well-known investment “guru”. They were promised very high returns if they invested with Dynaquest. Incredibly, they had never actually met this “ABC” in person.
After multiple conversations over WhatsApp with ABC, they agreed to invest in various “Investment Plans” suggested by the latter. They paid in the aforesaid cheques into EIGHT separate personal bank accounts, none of which was in name of ABC or in our name. Not surprisingly, in the many months since their last remittance, they had not received a sen of return and ABC seemed to have disappeared without trace too. She no longer answered their phone calls or even opened their WhatsApp messages. In desperation, they traced our address and paid us a visit. I told them, however sympathetic I may be to their plight; there was nothing we can do since ABC was definitely not a member of our staff and no money of theirs was ever received by us.
They were quite unconvinced by my explanation and left in a huff. A few days later, we received a “Letter of Clarification” from a law firm. The letter outlined the situation as I have described and requested that we confirm the following: –
- Whether Couple X were clients of our; and
- Whether we had appointed ABC as our agent to collect money from Couple X.
As you can imagine, this matter, if not properly handled, can cast us in a rather bad light. In addition to answer the two above questions in the negatives to the law firm; we immediately filed a full report to both the Police as well as the Securities Commission (SC). Fortunately, scams like these are so common that both the Police and the SC accepted that we were the innocent bystanders of a scam and we were totally absolved of any wrongdoing. It has been many months since this incidence and to our best knowledge: Couple X have not got their money back and it is likely that they ever will.
So, where did Couple X go wrong in their attempt to make investment?
IMPORTANT RULES TO LIVE BY WHEN MAKING INVESTMENTS
- DO NOT MAKE INVESTMENTS THROUGH SOCIAL MEDIA The most insidious feature of social media is their anonymity and their freedom from any control or regulation from any party in authority. Anyone can create web pages which are completely false and their viewers would be no wiser. With the emergence of artificial intelligence tools, a posting can be made to be hyper-realistic. I have seen videos purportedly of ministers, central bank governors and tycoons extolling the virtue of certain investment schemes and they were all false. I have even seen videos of myself promoting investment schemes which have nothing to do with me. The only ‘giveaway’ is that the contact information is totally different. Once a victim is ‘hooked’ and money changed hand, the scammer can just disappear without a trace. The first thing you ought to do is to pay the named company a visit in person. In the vast majority of cases of this type, you will not be able to actually find the ‘office’.
- CHECK ON THE LEGITIMACY OF THE INVESTMENT REPRESENTATIVE AND INVESTMENT COMPANY Because good investment management is difficult and the possibility of fraud is so great, countries usually have very tight regulations on the sale of investment products and services and Malaysia is no exception. In Malaysia, the SC very strictly controls the persons and companies which are permitted to offer investment products and services for sale. The regulatory requirements for obtaining a capital market license are very strict. For example, the Guidelines for Investment Advisor (the license held by Dynaquest) run to 19 pages. There are therefore not many license holders. Once you have decided to look into making investments through an intermediary; the first thing you have to do is to check whether that person and/or company involved are indeed licensed. I provide the link below for you to check on whether a person or company is indeed legitimate as well as providing the results of searches conducted in my name and Dynaquest’s.
https://www.sc.com.my/regulation/licensing/licensed-and-registered-persons
- DO NOT SEND MONEY TO PERSONAL OR UNKNOWN BANK ACCOUNTS If you finally decide to put some money into an investment product after doing the above; make absolutely sure that your payments go directly to the investment company’s bank account. There are very strong regulations regarding how an investment company must segregate your money and how it would be ‘ring-fenced’ against possible losses. Even if an investment company goes bankrupt, your money would still be safe as it would be held in trust by a trust company on your behalf.
- LAST BUT NOT LEAST: DO NOT BELIEVE THE PROMISES OF SPECTACULAR RETURNS The major ‘bait’ dangled by investment scammers to ‘hook’ their victims is the promise of extremely high return. Promises of returns of 10% or 20% per month are often offered. As I wrote in one of my earlier articles; if Warren Buffet, universally acknowledged to be the best investor of the modern era, could only manage to obtain returns averaging just above 10% per year; how could anyone obtain returns 12 times greater?
© NEOH SOON KEAN
===========================
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of Ipoh Echo
