For years, the now disgraced Texas financier, Robert Allen Stanford, led a glamorous jet-setting lifestyle in the Caribbean. He received a knighthood from Antigua in 2006, funded a cricket league, and ran airlines, newspapers and banks. His wealth ran into the billions.
Once known as one of the richest men in the United States, Stanford is currently on trial in Houston, Texas for allegedly masterminding a 7 billion US dollar fraud and one of the largest Ponzi schemes ever orchestrated.
In a Ponzi scheme, potential investors are wooed with promises of unusually large returns, usually attributed to the investment manager’s savvy, skill or some other secret sauce.
The returns are repaid, at least for a time, out of new investors’ principal, not from profits. This can continue as long as new investors line up with cash, and old investors don’t try to withdraw too much of their money at once.
Ponzi schemes are also known as pyramid schemes, from the shape of any chart that reflects their basic premise — that ever-growing layers of new recruits are needed to provide gains to the smaller, earlier cohorts.
Even in our peaceful corner of the globe, our community has not been spared from this type of fraudulent activity. What is distressing is that for a small community such as ours, we seem to be subjected to instances of this type of phenomena much too regularly. It is almost as if we never learn.
About 11 years ago, I can recall a big fuss over an outfit in Jerudong, which promised high returns on capital, but which allegedly siphoned out these funds, leaving many “investors” high and dry.
In 2010, the directors of “Pan Phoenix Dina” were successfully prosecuted, the first of its kind under the Banking Order 2006, of illegal deposit taking. That case involved 5.7 million Brunei dollars from 269 people. Their activities lasted for 7 months in Brunei, meaning that almost a million dollars a month was collected and channeled back to investors, with the “managers” skimming off the top. There was also a Malaysian side to this organization, who where also charged in Malaysia.
In my consultation with The Google, I came across a Wordpress blog that in 2007 posed the simple question about “Dina”, “Anybody knows about this Investment?”. This elicited 565 responses ranging from, “hold on to your wallet”, to passionate defenses of their credibility. The last forlorn response dated February 2010, bids salam to all and states that the poster is “still waiting for my money to be refunded.”
The saddest thing in these types of scheme is when the people who can least afford to lose their money get involved. Usually, they are also those who come in later, and are more likely to lose out, as early “investors” have been paid off. It is perhaps important that these schemes are stopped before they get too big: the larger the pyramid, the greater the fallout. Unfortunately, action tends to only get taken if a complaint is made, by which time it is too late.
What is it with get rich quick schemes? Obviously it is human nature to hope to receive plenty with the least effort. Perhaps we do not do enough to encourage or appreciate that the only guarantee for the creation of wealth at the end of the day is prudence and hard work.
@emmagoodegg
Illustration by Cuboi Art.
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