|17 August, 2019

Don't fall prey to Ponzi scamsters in UAE

Number of people who end up losing all their hard-earned savings after investing in bogus schemes are increasing every day

Image used for illustrative purpose. Dubai, United Arab Emirates

Image used for illustrative purpose. Dubai, United Arab Emirates

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UAE - Despite authorities' continuous awareness efforts against bogus investment portfolios, several people still fall prey to Ponzi schemes.

The number of people who end up losing all their hard-earned savings after investing in bogus schemes - lured by high revenues over a short span of time - are increasing every day, according to reports.

In recent years, the UAE witnessed several such bogus portfolios involving hundreds, if not thousands, of victims. Some of them still have outstanding claims before the courts.

In one of the most recent Ponzi schemes that were seen by the Dubai Courts, over 500 complaints had been filed against two Indian executives, who were involved in a
$200-million fraud.

Hundreds of investors were lured into currency trading (Forex market) with promises of high monthly profits. At some point, the promoters stopped paying the investors, who then approached the court to recover their money.

The duo were sentenced to more than 500 years each in jail - one year for every criminal case.

Don't go after illegal projects

Emirati lawyer Abdul Moneim bin Suwaidan of Bin Suwaidan Firm for Advocates and Legal Counsels warned against such portfolios, saying they are illegal.

"It usually starts with people amassing funds from their friends who also tell their friends about it. A fictitious project would then start where people are promised a high percentage of monthly profits, which are far higher than what banks deliver. The investments are made without guarantees, except for the cheques that are issued as security deposits to tempt and invite more depositors.

"In the first few months, people would indeed get a percentage of profits. However, they are unaware that it is paid from their own money, while the remaining larger amount of the deposit would be the scamster's share."

Such financial dealings are prohibited by law, and only banks are authorised to engage in such a business, with an authorisation from the Central Bank.

"With the security cheque (issued against the amount invested), an investor can file a criminal complaint at a police station. For civil claims, they resort to the civil court. After the legal proceedings, the court may preemptively order sequestration of the property - real estate, cars, bank accounts and whatever assets the holder of the portfolio has locally and offshore.

"In some high-profile cases, special committees were formed by the Dubai Courts upon a royal decree. Those committees were assigned with assessing and liquidating the properties and freezing the funds and accounts of the individuals and businesses in question, for distribution among the depositors on 'investment quotas basis'," Bin Suwaidan explained.

If there is no such committee, the claimant, who filed a civil lawsuit, is compensated on the basis of 'first come first served', irrelevant of any other victim who did not file such claims.

"Victims should not hesitate to take legal action as the defendant might dispose of his property and the claimants could consequently lose their chance to get their money back. The execution judge may give the defendant a chance and (may) grant him bail for a month or two to arrange for a right way to settle his dues to the creditors," Bin Suwaidan pointed out.

The criminal side of the case has nothing to do with the civil claim. "Whoever issues a dud cheque in such investments will serve time in jail, unless the complainants relinquishes their right to pursue the legal proceedings following a settlement.

"Better be safe than sorry. Such investments should happen through banks only. With banks, everything happens by the book and people's funds and rights will be safeguarded," the lawyer advised.

Filipino advocate Barney Almazar - who took up many cases for the victims of the above-mentioned currency trading - told Khaleej Times that some of his clients received compensations.

"Some of them have received payments. Others did not get their money back yet because no more assets, owned by the other party, could be found in the UAE."

Almazar added that the claimants got payments of the same amounts they invested. "The execution for civil lawsuits is ongoing. There are claims which I filed on behalf of many clients. Some of them are still awaiting the execution of civil judgements that had been issued. All assets (of the sued party) in the UAE have been distributed. Now, authorities are looking for any bank accounts, properties and all kinds of possessions the defendants have outside the country," he added.

Tips to avoid a bogus scheme

1. Be skeptical

If someone tries to sell you on an investment that has huge and/or immediate returns for little or no risk, it could well involve some sort of fraud. Be extra-cautious if the returns are being generated by something you never heard of or in a way that's impossible to follow.

2. Be suspicious of unsolicited offers

Someone contacting you unexpectedly, perhaps inviting you to an investment seminar, is often a red flag.

3. Check out the seller

Verify that the professional is licensed and look for any negative information. Check the background of the promoter of the scheme.

4. Verify registration

Ponzi schemes often involve unregistered investments. Start by asking the person offering the investment if it is registered. Verify the answer with authorities before putting money.

5. Understand the investment

Never put money into an investment you don't fully understand. There are many online resources to help you learn how to invest and how to evaluate opportunities for risk and potential gain.

6. Report Wrongdoing

If you think an investment is a Ponzi scheme or any other type of scam, or you've been victimised, file a complaint with the authorities immediately. Source: Investopedia


Some of the bogus investment schemes in Dubai

Recently, two Indian executive managers, who were involved in a $200-million investment scam, were sentenced to more than 500 years each in jail by the Dubai Court of Misdemeanours.

Over 500 complaints were filed by investors against the company owner and a manager.

In July 2010, Egyptian tycoon Nabil Al Boushi, 55, was jailed for duping rich investors of Dh736 million. He was referred to trial after his cheques worth millions of dirhams bounced on submission.

The lavish lifestyle of the businessman, who holds US citizenship, has parallels to Bernard Madoff, the operator of the world's largest Ponzi scheme, who defrauded investors of billions.

Among the businessman's victims were celebrities and VIPs, who deposited funds with him for investments in the stock exchange.

In February 2011, 50-year-old Emirati billionaire Abed Al Boom, who owned a holding company investing in real estate, tourism and hospitality, was sentenced to 923 years in prison. He was accused of embezzling more than Dh900 million collected from about 3,700 depositors. The court ruling said the dividends were cut from the depositors' funds and were not the result of serious investments.

According to Article 91 of the Federal Penal Code, if the jail sentences for different counts exceed 20 years, the defendant's maximum imprisonment is for 10 years.

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