Confession of an almost scam victim

Aneth Ng-Lim

Posted at Feb 18 2019 10:00 AM | Updated as of Feb 18 2019 10:03 AM

MANILA -- Nap (not his real name) came very close to being a victim of an investment scam, and he was not a newbie investor. In the last five years, he had been losing money in the stock market, while his mutual funds kept posting negative returns with no recovery in sight. He was also tired of earning interest that was much, much lower than inflation from his bank.

I guess you could say he was ripe for the "offer," and the fraudster who did her homework knew it. A mutual friend who was familiar with Nap’s increasing frustration as he complained of them often enough connected him with the fraudster. That friend had already invested money and boasted that he received a smart phone as a welcome gift plus the promise of 12 percent interest on his invested money. That’s easily twice what the Republic of the Philippines and leading corporates are offering clients who invest in their bonds for the next 3 to 7 years.

It seemed too good to be true and Nap had read about scams and knew some people that became victims that he was wary. But his friend was insistent so Nap agreed to at least consider the proposal.

A meeting was set and Nap was impressed at the well-dressed lady who made the presentation along with a male colleague. They talked briefly about their business model and then discussed their exclusive offer in great detail. They were giving tiered interest rates based on investment volume, so the more money you parked with them, the higher the interest they will give you. 

He didn’t look quite "sold" so the male colleague introduced himself as the supervisor of the woman who presented. Said supervisor wanted to help his employee meet her sales target so if Nap signed up on the same day, he will get a free smart phone. And because Nap was a much bigger fish than his friend, the fraudsters also dangled bonus interest but he has to decide in two days.

Nap was tempted, very tempted, but decided to consult his stock broker, his banker and another friend who is a fairly savvy investor. Not one of them have heard of this company or offer, and all told him to be very careful. They all gave him advice on what background checks to do, what questions to ask and how to protect himself and his money.

He spent the next two days following their advice and when he sat down again with the fraudster duo, Nap was more than ready. He asked to see the investment contract and noted in the fine print that it was actually a loan! If he gave them his money, he will be letting them borrow it at premium interest so they can in turn invest it in businesses of their choosing. Nap will not be consulted and he is not allowed to object either. But the most shocking discovery was that the loan is not callable, and they will pay Nap only when they are able. Plus, in the event that their businesses fold, Nap’s money is forfeit because of the premium interest payments.

Nap couldn’t leave the room fast enough, and called to warn his friend right away. He hadn’t given them any of his money but he still felt like throwing up because it was such a close call. Worse, he knew it was probably too late for his friend.

You don’t need to be rich to be targeted for scams. Many fraudsters made their millions (and billions) by focusing on families with little or no savings, preying on their desperation and dreams. When I asked Nap what was the one thing that helped him get away, his answer was quick: “It was my gut feeling. Something did not feel right, and that’s why I kept asking questions. I also approached other people, and made sure I do not talk only to the ones who have invested with them. They were name dropping so many people I know that I was worried whether they had me investigated, or they already had many victims.”

Like Nap, you can avoid being a victim of a scam with simple checks. The Securities and Exchange Commission is the government body tasked with protecting investor rights and a quick scan of their website offers helpful information including reports on recent scams. There’s also a section on Investor Education and Information, and it’s a great first-stop for individuals looking to start investing.

The site also provided a Do’s and Don’t’s for Investors and I leave you with some of them:

1. Ask for a prospectus, offering circular, financial statement, or other similar document before you even consider investing. Then read the small print carefully, particularly on refund, and make sure you understand the terms thoroughly before signing any kind of commitment.

2. When in doubt, make no promises or commitment, no matter how tentative. Remember, "if it sounds too good to be true, it usually is." It is far better to wait and lose an opportunity than to take the plunge and lose everything.

3. Before making a commitment, get an opinion from your lawyer, stockbroker, accountant, or the appropriate government office.

4. Be wary of unexpected telephone calls, letters, or even personal visits from people who offer quick ­profit schemes that require your immediate investment.

5. Be suspicious of "inside information," hot tips, and rumors that supposedly will give you a big advantage over other, less knowledgeable investors.

6. Turn down money request accompanied by high ­pressure warnings like "Tomorrow will be too late", "Positioning is important" or "Act now because there will soon be long waiting lists of others who want to take advantage of this golden opportunity."

7. Note that a Primary SEC Registration only grants juridical personality. It does not automatically give a company the authority to engage in all types of business activities such as lending, selling of securities and investment contracts, investment taking, etc. To confirm that the company or individual is properly licensed to conduct the business in question and has no history of violating the law, get in touch with the SEC.