How can you spot a Singapore ponzi scheme? (photo by ArrrRTeDUarD)

Ponzi schemes are when funds from new investors are used to pay off existing investors in an expanding “pyramid-type” structure. They are named after Charles Ponzi, who promised a 50% return on $150 in 90 days ($225). These schemes have been around for nearly one hundred years. Today, with current deposit accounts earning very low interest rates, many Singaporeans are looking for “alternative investments” that guarantee huge returns. Thus in the past few years, ponzi schemes, many of which promise no-risk double digit returns, have been on the rise.

Who Makes Money in a Ponzi

There are definitely big profits to be made in ponzi schemes, and not just for the organisers/originators. Those who were the early investors and participants who had already exited with their money (their original principal plus any interest or dividend) will benefit from the scheme, so long as they exit before the scheme becomes unsustainable. Many ponzi schemes can go on for several years. So there’s certainly ample opportunity to cash out and exit before the scheme implodes.

Then What is the Problem with Investing in a Ponzi?

The short answer: Greed, and failure to recognise that it is a ponzi. Too many people will stay invested in them for way too long. Because it’s “easy money”, it becomes addictive. The other major problem is that those who benefit from ponzi schemes do so at someone else’s unknowing, nonconsensual expense. In these schemes, someone is always left “holding the bag” of empty promises at the end. And with the way these things are set up, more people will be devastated by ponzi schemes, than those who actually benefit from them.

The Telltale Signs of a Ponzi Scheme

My Personal Experience

In 2013,  I attended a dinner “investment seminar” by Shenton Wealth Holdings and Dolphin Capital.  They were selling some alternative real estate investments located in Michigan (US) and in Germany. I was interested in what they had to say because of an ad I saw that guaranteed 12% returns. At the time, I had 2 investment properties in the US already (owned in my own name). They were giving me a 6% and 8% net return (after all tax and expenses). Of course, neither of them were “guaranteed” returns and both were subject to tax and currency exchange fluctuations. Thus, this type of “guaranteed” investment, which the ad promised, that was not subject to tax or exchange risk was very new to me. I had never seen this sort of investment when I was in the US.

The seminar was at a 5 star hotel and came with a free buffet dinner, which also helped to reel me in. The higher returns initially did sound off some alarm bells, but I just thought that maybe this company was very good at negotiating the purchasing of distressed properties. However, half way through the seminar, the alarm bells went off again. The seminar was like a big “show”. And they were using a very common formula that I’ve seen used in all sorts of scams, MLM (multi-level marketing) schemes, get-rich-quick seminars, and the like. Here is the general formula of this well-orchestrated “show”:

  1. The Caucasian. A local emcee gives a raving introduction on the accomplishments of the company and of the speaker, who is usually a male foreigner. The emcee tells you that it is on this very special occasion that this foreigner is able to come speak to you. This makes you feel like you were one of the exclusive lucky few who were chosen to be part of the “in-crowd”.
  1. The Fake Cheque. The foreigner talks about all the money the company has paid out. To further prove this point, he might spend the next 10 to 15 minutes issuing fake cheques to early investors. These are those ridiculously big cheques you see whenever there is a jackpot winner.
  1. The Model Investor. A couple of early investors might give their testimonial. These also follow formulas. Some start with a story of doubt (e.g., “I was skeptical at first, but my agent assured me that there were no risk. So I put my money in, and now today I stand here richer than before. You, my friends, can be like me.”). Others talk about dreams (e.g., “I now can send my kids to uni”). Or they talk about how the money saved them from disaster (e.g., “Now I can pay for my mother’s nursing care”). My favourite stories are from housewives (e.g., I’m a stay-at-home mum and this has allowed me to make passive income and still be able to take care of my kids). They want you to see these early investors, and have you fantasise about being in their shoes. They will pick people who are relatable. But not too savvy and not too good looking (so it does not intimidate you). They want you to think, “If this ordinary guy can do it, I surely can do just as well. Or better!”. This is the bait they want you to take.
  1. The Random Accolades & Awards. Before the companies get into the details of the investments, they want to tell you how their company has a proven track record and they will show you a list of awards. When you carefully examine these awards, you’ll realise that many of them are unheard of. They are not backed by industry standards. Or they are simply bogus and are “bought” so they don’t mean a damn thing.
  1. The Presentation. After you become a bit envious that your name wasn’t on that fake cheque, they begin their sales pitch. They start by telling you that they’ve identified a new market and that they are letting you in on this once-in-a-lifetime opportunity, while your underprivileged peers remain unaware. They will then show you a slideshow or video of their projects. And explain in a very simplistic way on how they make money for their investors (but only if you act now). These slideshows always have lots of photos of smiling people. What they don’t have, however, are details. Details about exactly how these projects make money. This is not to say that the company doesn’t do anything and the photos are fake. The company may actually have real working projects. But what makes it a ponzi is that the bulk of the money they make is from the influx of new investors, and not the result of their real estate projects. And it is because of this that you will never see an audit report or cash flow statement. Instead, the numbers they will show you are your guaranteed rate of return, the minimum amount you need to invest, and the minimum investment period. Sometimes they will tell you how much others have invested in the company and how many investors there currently are. These numbers may be useful in telling you how far from the top of the pyramid you would be if you chose to invest.
  1. The Meal. Because the presentation lacks details, you might have questions at this point, but instead of taking questions, they immediate proceed to serving dinner. You know how we Singaporeans get when it’s makan time. Food is comforting to us; it can assuage and ease our doubts. We break bread with people we love and trust, so a meal is the perfect way to earn our trust. Plus, there is a sense of reciprocity when we are given a free meal, and we might feel the urge to give something back.
  1. The Special Offer. Someone will inevitably announce that there is a special limited-time offer for investing a minimum amount today. This usually comes in the form of additional returns. They might say, you get 12.5% if you invest $30,000 or 13% if you invest $50,000. They have to do this because funds in the ponzi need to grow almost exponentially in order to pay off the existing investors, whose numbers are also increasing.
  1. The Brainless Contracts. This occurs after we are well-fed and the blood flow is now to our gut and not our brains. The sales reps and agents go around with pre-filled contracts and all you have to do is sign. This seals the deal.

It was at this time that I decided to corner one of the sales agents and ask him all the questions that I jotted down during the presentation. Here were some of my questions:

  1. Do YOU invest in this? Why not?
  2. Does YOUR FAMILY invest in this?
  3. What happens if the company defaults, or the projects fails?
  4. Who audits your company? Can I see your annual report?
  5. What is your commission?
  6. Who pays the taxes, marketing fees, management fees, transaction costs, etc.?
  7. How do you protect against currency exchange risk?
  8. This is a very elaborate seminar. How much did this venue and dinner cost?  How is your company paying for these costs?
  9. If these investments are so good, why aren’t local people (i.e., people in Michigan and in Germany) investing in them? Why did your company come all the way to Singapore to find investors?

My agent could not answer most of these questions. He also confessed that neither he nor his family have invested in these projects. I looked at this hands, and they were shaking. So I thanked him and left.

Further Research

I discovered that there were several companies in the recent past that were busted for being ponzi schemes – Sunshine Empire, Profitable Plots, Geneva Gold, and SureWin4U. Many of these companies were listed on the MAS Investor Alert List, which provides a listing of unregulated companies, many of whom give the false impression that they are authorised and licensed by MAS. Both Shenton Wealth Holdings and Dolphin Capital are on that list. Other big players include Capital Asia Group, Walton International, and Wealsol.

Out of curiosity, I wanted to know what it takes to be a sale rep for these companies. What I found in my research was that these companies have very high turnover rate and the sales agents are under an extreme amount of pressure. One former employee said that the company was “not very transparent” and that he had to tell “white lies” to push sales. Another actually reported in Glassdoor that the company was “one step away from a real estate ponzi scheme” and “the worst career mistake” of his life.

There are plenty of posts that tell you to stay away from ponzi schemes. But this is not one of them. You can certainly make huge profits on them, so long as you are an early investor and you exit in a timely manner. However, investing in ponzi schemes do come with big risks (there are far more losers than winners) and also the knowledge that your gain is someone else’s nonconsensual loss. I personally am not comfortable with these so I tend to stay away from them. But now that you know what a ponzi scheme selling seminar is like, you can make a more informed decision on whether you want to take the risks. When I was at the seminar buffet queue, I heard this one lady say,

“This company is great: they will help me to earn more passive income and they even gave us a free meal.” I thought, “No lady, you just paid $10,000 for your meal! You can only call it a free meal once you’ve exited with all your money and your dignity intact.”

10 Comments on How to Invest in Ponzi Schemes

  1. How do you say it is a ponzi scheme? Many investors are waiting for their exits and this is not helping to keep their dreams alive!

    • Hi Helen, Thank you for your comment. In any investment, there is a tradeoff between risk and return. I didn’t intend to say that every fund/company listed on the MAS Investor Alert List is a ponzi. But if the fund/company requires the constant influx of new investors just to remain solvent, and cannot as a business stand on it’s own, then it may be a ponzi. And as I stated in the article, even a ponzi can be “an investment option”, as long as the investor exits in time. Ponzis do indeed have some “winners” but they also have many more “losers”.

    • Dreams? Dreams? More like nightmares!!…Defaults on US investments, on German investments and also Brazil investments. 3 out of 3. That is really evil and disgusting.

      By the way, are you the same Helen Chong who is a director of Shenton Holdings, Shenton International, Summit International, SMP Realty and SHB Property Advisors? Different company names but same characters wearing a different cloak.

      If you are, then save your soul by telling everyone about all your defaults and whose pockets grew bigger from investors’ funds.


        • YES! I have feedback from 3, so far, on the German “investment”… two whose exit dates were supposed to be Dec 2017 and another one whose exit date were Feb 2018. On Brazil, there are two on record whose exit dates were supposed to be Apr 2017 and Feb 2018. As for the USA crap, too many to count whose exit dates range from Sep 2016 to the most recent Apr 2018. There is only one word to describe this and you can best describe it to the Criminal Affairs Dept (CAD) fast. This whole thing smells rotten.

          • I invested in 2 Brazilian ones . So far maturity has been “delayed”. I contacted MAS and CAD . But seems like nothing can be done .

    • Hi all, for those of us who are affected by this scammers, we should band together to gather the evidence. May even be able to pool money to get a lawyer to sue for damages. Drop me an email at [email protected] and we can discuss further.

  2. I can confirm this is a scam. I only regretted that I didn’t find this info from here earlier. My exit was supposed in May 2018. Up till now, i been chasing for my money back and those fuckers has stopped responding to my email already. I figured out CAD will not be able to help. My only blessing is my greed was not great. I always keep the minimum for any investnents that looks great

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