Ponzi scheme fraudsters continue to have a field day in the UAE, extended from India and other markets, for want of well-defined regulation and early warning mechanisms to alert gullible investors, investment advisers say.
The latest ingenious scammer that NRI investors have fallen prey to is a ‘halal’ investment scheme operated by India-based I-Monetary Advisory Group (IMA).
Like other fraudsters, IMA also offered irresistibly high returns to broaden its investor base and suck in maximum funds.
Launched in 2006 as an Islamic banking and halal investment firm, IMA attracted substantial investments citing Shariah-compliance strength of its investment schemes sugar-coated as ‘halal’.
The lure was high returns, as high as 36% annually, and an even higher yield when the greedy subscribers ploughed back to the company the principal and interest components together.
The group thrived on the investors’ money, and diversified operations into jewellery, real estate, bullion trading and healthcare.
Unexpectedly a run on the ‘financial institution’ was triggered by a purportedly leaked audio clip that said the founder-owner of the company was on the verge of ending his life because of bureaucratic meddling.
As many as 40,000 panic investors lodged police complaints against the company in India, though most of them were UAE-based NRIs. As usual, the collapse of the company has left thousands of NRI investors in the lurch, with many losing their life’s savings.
Many more dubious schemes
The UAE has never had any dearth of dubious investment schemes.
Roughly AED3 billion ($817 million; £649 million; €719 million) just vanished into thin air in four years from the coffers of investors who put their hard earned money in schemes promoted by companies such as Heera Group, Sunfeast Infotech, Speak Asia, Ferryland Tourism, Extential Grouip, UT Markets, Ambidant and Morgenall.
Nearly 3,500 investors reportedly lost their money in Heera Group, 6,000 in Sunfeast Infotech, 4,000 in SpeakAsia, 1,500 in MMA Forex, 2,000 in Gold AE, 40 in Ferryland Tourism 5,000 in UT Markets 7,000 in Exential Group and 1,000 in Ambidant and Morgenall, according to a Gulf News report.
Then there are innumerable private schemes running in the living quarters of low-paid workers in the UAE.
Greed and ignorance
Investment advisers squarely blame it on the greed and ignorance of the investors who do not bother to take informed investment decisions or seek professional advice, only to panic and lose when the operators either vanish or go out of business.
“It’s simple and easy to identify a ponzi scheme. If you find a scheme too good to be true or too good to be missed, be alerted. In this internet age, it’s easy to check the background and history of any individual or organisation. Investors realise their folly only after they are taken for a ride and their life savings lost,” said Harilal Ramakrishnan, managing partner, Lal Quila Investor Services, Dubai-based consultancy.
He suggested that the regulators should take the lead in alerting the general public through awareness campaigns.
DFSA’s timely warning
The Dubai Financial Services Authority (DFSA) has done that recently when it issued a warning about scammers posing as representatives of the Cyprus Securities and Exchange Commission (CySEC).
The modus operandi was that investors have been asked to pay fees in exchange for ‘help’ to settle compensation claims against businesses under CySEC’s supervision.
The scheme involves individuals impersonating as CySEC officers and authorised representatives; or claiming to be from other Cypriot supervisory authorities.
False promises are made to assist them in claiming compensation for potential damages in connection with dealings they have had with firms, such as online trading platforms offering speculative investment products.
The DFSA has urged the public to remain vigilant with regard to receiving any unsolicited communication from anyone claiming to represent the CySEC.
“This example should be followed by other regulators and formulate clear guidelines for compliance by financial service providers so that scams are detected early enough to take remedial measures,” said Benoy Sasi, international lawyer at DIFC.
