Commercial Law, Investments

Ponzi Schemes

• This type of fraud is named after its creator—“Charles Ponzi” of Boston, Massachusetts
• In the early 1900s, Ponzi launched a scheme that guaranteed investors a 50 percent return on their investment in postal coupons. Although he was able to pay his initial backers, the scheme dissolved when he was unable to pay later investors.
• This scheme promises high financial returns in a form of dividends not available through a traditional form of investments.
• However, the operator, instead of investing the funds of victims, pays “dividends” to initial investors using the funds of subsequent new investors.
• This scheme usually falls apart when the operator flees with all of the proceeds or when a sufficient number of new investors cannot be found to allow the continued payment of “dividends.” 

Pyramid Schemes

• As in Ponzi schemes, the money collected from newer victims of pyramid schemes is paid to earlier victims to provide a veneer of legitimacy.
• In pyramid schemes, however, the victims themselves are induced to recruit further victims through the payment of recruitment commissions.
• More specifically, pyramid schemes—also referred to as “franchise fraud” or “chain referral schemes”—are marketing and investment frauds in which an individual is offered a distributorship or franchise to market a particular product.
• The real profit is earned, “not by the sale of the product, but by the sale of new distributorships”.
• This scheme’s emphasis on selling franchises rather than the product eventually leads to a point where the supply of potential investors is exhausted and the pyramid collapses.
• At the heart of each pyramid scheme is typically a representation that new participants can recoup their original investments by inducing two or more prospects to make the same investment. Promoters fail to tell prospective participants that this is mathematically impossible for everyone to do since some participants drop out, while others recoup their original investments and then drop out.

Bitcon Investment Scheme/ Cryptocurrencies

• Online investment scams in the Philippines prey on the public’s lack of understanding about cryptocurrencies such as Bitcoin.
• The rapid price increases of virtual currencies make them tempting to invest in, and scammers are quick to take advantage of it.
• Bangko Sentral ng Pilipinas (BSP) warns the public that cryptocurrency investments even with cryptocurrency investment strategy is high-risk and speculative investments that could lead to huge losses.
• Unlike stocks, virtual currencies aren’t backed by any company, goods, or services.

Online Paluwagan

• Also known as onpal, online paluwagan is widely used to scam Filipinos
• Onpal works like the traditional, offline paluwagan. Members pool their funds together and take turns receiving money based on their respective payout schedules. However, onpal uses Facebook heavily to lure investors and run the paluwagan. Sending and receiving of payments are made through cash deposits, wire transfers, or remittances.
• Onpal operates like the Ponzi scheme. Those who recruit people to join their online paluwagan promise large profits of 10% to 75% within a short period of one day to 90 days. A lot of onpal members reported never getting their investments back.

Fake Online Lending Companies

Investors are tricked into lending their money to a micro-financing or lending company to earn profits as high as 12% weekly or 48% monthly. Scammers make victims believe they’re running a legitimate online lending business.

Aside from offering unrealistic ROIs, online financing scammers pay the initial returns to investors but then they eventually disappear.

Paid-to-Click Programs

• Online advertising companies that offer a money-making opportunity through paid-to-click (PTC) programs.
• Some of these firms may be scams, according to the SEC.
• To date, the Commission has not yet released a list of illegal PTC programs operating in the Philippines.

A PTC program’s concept is simple—to get paid, you click on online ads, get referrals, or log in daily. Sounds easy, but of course, you’ll have to shell out money either by paying a membership fee or purchasing advertising products such as ad packs and clicking accounts. In return, you’re offered a share of the program’s profits.

Recruiters promise huge returns—to the tune of millions of pesos—with only a minimal investment of a few hundred pesos. However, losing money is just as quick as earning it. Rather than selling real products or services, online advertising firms make money from the upfront payments of their members. Working like a Ponzi scheme, this scam pays fake profits to earlier investors coming from funds paid by new investors.

Offshore Stock Trading Scams

Scammers make victims send money for stock investing in another country. Often operating via social media, they recruit investors and make them register for an online account to start offshore investment activities.

Companies that engage in such an investment scheme aren’t registered with the SEC, so their operations are illegal. They also entice investors with high ROIs in as quick as 15 days.

Investment Cold Calls

• A scammer claiming to be a stock broker or portfolio manager calls you and offers financial or investments advice.
• They will claim what they are offering is low-risk and will provide you with quick and high returns, or encourage you to invest in overseas companies. The scammer’s offer will sound legitimate and they may have resources to back up their claims.  
• They will be persistent, and may keep calling you back.
• The scammer may claim that they do not need an Australian Financial Services licence, or that that they are approved by a real government regulator or affiliated with a genuine company.
• The investments offered in these type of cold calls are usually share, mortgage, or real estate high-return schemes, options trading or foreign currency trading. The scammer is operating from overseas, and will not have an Australian Financial Services licence.

Share promotions and hot tips

• The scammer encourages you to buy shares in a company that they predict is about to increase in value.
•  You may be contacted by email or the message will be posted in a forum.
• The message will seem like an inside tip and stress that you need to act quickly.
• The scammer is trying to boost the price of stock so they can sell shares they have already bought, and make a huge profit. The share value will then go down dramatically.
• If you invest you will be left with large losses or shares that are virtually worthless.

Investment Seminars

1. Investment seminars are promoted by promising motivational speakers, investment experts, or self-made millionaires who will give you expert advice on investing. 
2.  They are designed to convince you into following high risk investment strategies such as borrowing large sums of money to buy property, or investments that involve lending money on a no security basis or other risky terms.
3. Promoters make money by charging you an attendance fee, selling overpriced reports or books, and by selling investments and property without letting you get independent advice.
4. The investments on offer are generally overvalued and you may end up having to pay fees and commissions that the promoters did not tell you about.
5. High pressure sales tactics or false and misleading claims are often used to pressure you into investing, such as guaranteed rent or discounts for buying off the plan.

Superannuation

• Offer to give you early access to your super fund, often through a self-managed super fund or for a fee.
• The offer may come from a financial adviser, or a scammer posing as one.
•  The scammer may ask you to agree to a story to ensure the early release of your money and then, acting as your financial adviser, they will deceive your superannuation company into paying out your super benefits directly to them. 
• Once they have your money, the scammer may take large ‘fees’ out of the released fund or leave you with nothing at all.

You cannot legally access the preserved part of your super until you are between 55 and 60, depending on what year you were born. There are certain exceptions such as severe financial hardship or compassionate grounds – but anyone who otherwise offers early access to your super is acting ill. Transactions are done through bank deposits, mobile wallets, remittance companies, or personal meet-ups with agents.