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Tea with Matthew Seah: Investment scams.

Friday, May 15, 2015

This is another contribution from one of ASSI's most prolific guest bloggers, Matthew Seah:

Recently I got to know of a likely fraudulent company selling US distressed properties in a declining city. Thought I could clear some air about how fraudulent investment operations work.

After doing some quick search, I found an easy to understand video from the Financial Industry Regulatory Authority, Inc.

How to Spot Investment Fraud?

Here are some other warnings signs which I think are also easily recognisable:

Promises of high, guaranteed investment returns with little or no risk.

“If it sounds too good to be true, it probably is.” Many fraudsters claim 12 – 24% or even higher returns. Unless their names are Warren Buffett, Peter Lynch, or George Soros, most investments can’t generate 12% returns consistently. Furthermore, all investments carry some degree of risk, so a 12% guaranteed return sounds amusing to me.

Unlicensed or “exempt” sellers or dealers.

If the investment company is unlicensed or “exempted” from registration, chances are they are not regulated by MAS. MAS has an Investor Alert List for anyone with internet access to do a quick check on the spot.

Secretive or complex strategies.

Oftentimes, fraudulent investments comes with complex and secretive strategies. Ask them how the investment generates its returns and to provide supporting documentation. Sometimes, my friends who are already in such schemes would answer “I cannot tell you because it is a trade secret/proprietary/non-disclosure” or “Others might copy our business model if I tell you.” With no transparency, it is highly doubtful that the investment would be legitimate, don’t you think?

Scams come in many shapes and sizes. If you do not know if it is a scam, but are in doubt, best to stay away. =D

Related posts:
1. Advice from a fraudster.
2. Thought process of a scam victim.
3. (See the 3rd point I made at a conference).
4. Invest in real estate for high returns.


SMK said...

This is passe. The new rage is in financial education scam.

Lizardo said...

Detroit distressed property?


It looks like a scene from Walking Dead in the evenings.

And 22 gunshot cases in the one weekend that I was there.

AK71 said...


Care to share some examples for our benefit here? Kamsiah you. ;)

AK71 said...

Hi Lizardo,

Always good to hear from someone who has had first hand experience on the ground. ;)

AK71 said...

I will say that high risk does not always mean the existence of a potential of high returns. Scams are very high risk and the potential of high returns is an illusion. ;p
(Outside of scams, in an efficient market, higher risk should be accompanied by the potential of higher returns, of course.)

angel* said...

Financial education scams are soooooo.... passe. Also don't forget about Internet Marketing Scams :)

AK71 said...

"A self-proclaimed investment guru will host real estate educational seminars that they promote online or with infomercials or published books. You come across their pitch and sign up for an initial course that may cost little to no money. You arrive to the seminar, veiled in mystery and ambiguous tips, and the sales pitch continues. The guru promises to bestow upon you a torrent of information -- maybe even actual properties to invest in -- if you shell out tens of thousands of dollars for an advanced course that promises the opportunity to become a millionaire.

"You fork over your hard-earned cash for the advanced course and it turns out those dollar sign-inducing promises of double-digit returns and fast money are never realized. You feel taken advantage of, but here's the catch: when you enrolled in the courses you signed a release form that prevents or limits your ability to take legal action. And that's the reason many of these workshop gurus continue to operate -- despite complaints -- and make millions in the process themselves."

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