Last Updated on 8, June 2016
It was reported that $60 million worth of investors’ money was lost in a property ponzi scam right in Singapore ("Investors caught in $60m ponzi scam", Straits Times 24 May 2015). Ms Leong Lai Yee was alleged to have run an elaborate scheme of getting investors to invest with her and promising a guaranteed return between 10 to 48% over a period of 4 to 8 months. Investors whom she targeted included those who were withdrawing their CPF at 55, retirees and housewives. Ms Leong Lai Yee was also alleged to have urged investors to borrow from their insurance policies or take a second mortgage on their properties to free up cash to invest. It seems the scam was in operation for a whopping 15 years!
Many investors who was targeted are likely those who are risk adverse. Retirees and housewives who have no income to make up for their losses are generally conservative in terms of their ability to take risk. All retirees have already “exhausted” their human capital (i.e. no longer economically working) and what they have are their financial assets accumulated over many years of working. Losing their nest egg is like saying all their work in the past was for nothing.
That is why it is important for those approaching retirement to seek advice from regulated and qualified financial advisers. I do not think Ms Leong Lai Yee was regulated nor qualified to give any form of investment advice to these investors. She appeared to exercise discretionary power to pool and invest investors’ money. This would require a capital market license and a license to operate a collective investment scheme. I doubt she had any of these licenses.
Make sure you do not engage anyone who is unregulated.
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I think a ponzi can happen, regulated or unregulated. Madoff was an ex Chairman of a reputable listed Exchange. Many rich and famous clients followed and invested with him because of his reputation. I think the key to avoid “investing” in a ponzi or any kind of scams is always to ask : Why is the return so mind-boggling with little or no risk? Can it be true? And not to let greed let down our guards.