There is no shortcut to investing, be wary of get rich quick investment schemes in Singapore
In recent years, it is not uncommon to chance upon a social media ad telling you how to get rich quickly and easily.
All over Tiktok, you’re 15 second clips on how to easily flip Non-Fugible Tokens (NFTs) to earn thousands of dollars within minutes. On YouTube, you can see short videos telling you how to earn five figures every month with no effort. However, all these get rich quick and apparently ‘life-changing hacks’ are most often than not overinflated benefits, or outright schemes.
Just by attending a short talk, or buying a trading tool, you are guaranteed to become a millionaire in a couple of months - or immediately, if you pump in enough money.
The rule of thumb is this: If it sounds too good to be true, it probably is.
Con artists
Investment schemes are not something new, but have been allowed to proliferate thanks to technology today.
Here are a few noteworthy scams in Singapore over the years.
Sunshine Empire
In 2008, Sunshine Empire became one of Singapore’s largest Ponzi schemes. 20,000 investors were cheated of almost $190 million. Only $21 million was ever recovered.
The investors had to pay to become a Sunshine merchant in order to buy and sell products. This membership also have them consumer rebate privileges of about 160% in returns in 15 months.
Little did they know that money from older investors came from fees paid by new investors.
The mastermind, James Phang Wah, is a self-styled entrepreneur raised on a farm in Lim Chu Kang to pay for night A-level classes. He pulled the scam off with managers donning expensive suits, accessories and luxury cars. He was hit with a $60,000 fine and a nine-year prison sentence. A day after his release, he faced fresh charges in Malaysia that could send him back behind bars for a second time.
Diamonds and wine
In 2016, 8,700 investors were left in limbo regarding their $160 million worth of investments in diamonds and wine.
The mastermind behind this scheme is Guillianno Mata. He promised investors a 15% return on rare coloured stones averaging $15,000 each. Despite not showing investors the physical assets of diamond and wines, investors assumed they were kept in storage by external vendors.
This is unsurprising given that Mr Mata seemed legitimate, with luxuriously decorated offices in prime locations such as Maybank Towers and One Raffles Quay. In addition, he was at some point a director and shareholder of four Singapore companies - Australian Wine Index (Singapore), The Bottled Wealth Holdings, Emily's Fine Wines and Asia Fine Diamonds - and a Malaysia company, Exquisite Bottle Index.
Envy Global Nickel
In 2021, hundreds of high-profile investors were cheated of at least $1.2 billion from high-profile scammers.
Investors were promised around 15% return every 3 months. These investors included Pek Siok Lan, general counsel for Temasek, Thio Shen Yi, joint managing partner of TSMP law corporations, criminal lawyer Sunil Sudneesan and Finian Tan, a technology start-up investor.
Ng Yu Zhi, the former director of Envy Global Trading, was charged. A high-profiler, he bought a Pagai Huayra hypercar worth over $8 million in 2019 and is said to have personal expenses of $2 million a month. He is also linked to about 16 entities, with businesses ranging from a veterinary clinic, interior design firm, a supercar dealership, technology consultancy and restaurants.
Agarwood
For scammers, money may indeed grow on trees. In particular, aquilaria tree that can be harvested for valuable agar wood or oud oil used in perfumes and spas.
Tropical Forestry Venture (TFV) sold about 70 investors saplings and young trees from $230 per sapling. Each investor gave between $5,000 to $60,000 and were promised returns of three to seven times when the saplings matured in six to seven years.
To make things worse, investors were told that another firm, Tropical Forestry Assets Management, had taken over after TFV folded. The scammers than proceeded to request for cash top-ups to maintain or upgrade their trees before they could be harvested for profits.
Despite the red flag, some investors still paid up in hopes of salvaging their investment. Eventually, both firms were unrelated. it appears that the two firms turned out to be unrelated.
Pump and dump
In August 2021, seven investors lost $1.45 million in a stock-buying scam. Essentially, the scammers convince investors to buy a stock with false insider news. Once the share prices are up, scammers offload their shares for a profit.
These seven victims bought over 49,000 shares in a US-listed company after heeding advice from supposed investment gurus. Within two days, the share price plunged by nearly 80%.
Due to advancements in technology, victims can be solicited from not just e-mails, but also online forums and group chats.
Typically, scammers use stocks coming from firms with a very low float, such as penny stocks, and high shareholder concentration which allows a couple thousand users to drive up share prices.
Crypto scams
The Singapore Police Force received 533 reports of crypto-related crimes with accumulated losses of $29 million. This is largely because of the lack of knowledge that investors have about this emerging asset class.
In July 2021, Torque, a multi-level marketing company marketed as a cryptocurrency trading platform founded by a Singaporean, folded. The founder faced a $12 million lawsuit.
Investing is not effortless, but it’s never too late to start.
There are a variety of investment scams but they all share one thing in common - it promises large and unrealistic rewards with minimal effort and a short time. Investors did not do their due diligence or follow up, and ended up falling for the scams.
These instances remind us that investing is not something that we can dive head first without knowledge.
Thankfully, it is never too late to start your investment journey. Reach out to us for a non-obligatory discussion on your financial future.
Seek advice from our wealth management experts
We do not guarantee unrealistically high returns in a short time. But what we can do is to educate and guide you in achieving your financial goals through appropriate investment means. We will communicate the risks, time horizon, and research done for assurance.
It can sound daunting to approach someone to manage your wealth. However, this may be a good step forward especially if you lack the skills or time to manage your wealth.
Investing is not going to be effortless, but we promise to make it comprehensive and worth your time.