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3 Biggest Ponzi Schemes in Singapore

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Biggest Ponzi Schemes in Singapore

Ever since Charles Ponzi strung along tens of thousands of people in his elaborate scheme involving postal reply coupons back in the 1920s, there have been numerous get-rich-quick scams in Singapore that have fleeced thousands before collapsing. We reveal three of the biggest Ponzi schemes in Singapore.

Last updated 26 May 2015

Sunshine Empire

What happens when you blend a smooth-talking, self-styled legend a la Warren Buffett with a large population that chases financial success with blinkers on? You get Sunshine Empire, a cautionary tale of excess and greed, the largest Ponzi scheme in Singapore, and the perfect example of the adage “if something is too good to be true, it probably is”.

Started by James Phang in 2006, Sunshine Empire was a Ponzi scheme, masquerading as a multi-level marketing business selling tiered lifestyle packages. In a nutshell, members who bought these packages were given points that could be exchanged for returns or used on an e-commerce platform to purchase products. They were also promised incredible returns of up to 10 percent a month. It was an intentional convoluted process to mask the real source of the financial returns – the money from new members – and it worked extremely well.

When Sunshine Empire was finally shut down by the authorities three years later, Phang and his cronies had managed to swindle a whopping S$180 million from retired folks, students and everyone else in between. S$115 million was paid out as “investment returns” while the remaining went into the pockets of Phang, his wife and their business associates. They were hauled to court and officially charged for fraud.

In 2010, Phang was found guilty and sentenced to nine years in jail. He was also fined S$60,000. Of the S$180 million, only an estimated S$21 million was recovered.

Profitable Group

Before the farce that was EcoHouse, there was Profitable Group, a glitzy investment entity that was most famous for two things – boron bonds and land banking. For both, the group promised an amazing guaranteed return of 25 percent a year for every investor. The company went on a huge marketing drive, purchasing advertisement spots on sports channel ESPN, recruiting football icons such as Bryan Robson and Shebby Singh, and even launched a ridiculous bid for football club Newcastle United that was splashed all over the newspapers.

The company’s strategy worked. People in Singapore handed money hand over fist to them without understanding the energy market or flying to the United Kingdom to take a look at the land they were investing in. They broke the cardinal rule of investing – if you don’t understand a product, you shouldn’t invest in it. The gleaming green from the dollar signs blinded their vision and clouded their judgement.

Biggest Ponzi Schemes in Singapore

If the investors had done their due diligence, they would have seen the warning signs – the three directors of Profitable Group had previously headed a British-based land banking company that winded up after just a year and the land parcels that the Singapore reincarnation purportedly bought in the UK were designated as a green belt area, which meant that any chance of developing them were close to zero.

Most importantly, the one question that the investors (or anyone who is considering an investment opportunity) should have asked themselves was: “If the investment is that great to begin with, why would the people want me to share it with me when they can keep it for themselves?”

Two of the masterminds behind the Profitable Group scam have been sent to jail. The investors collectively lost a total of S$8 million.

The Gold Guarantee

Everything seemed well. The company had a certificate from the police to deal in gold. Early investors were getting the promised returns. The owner Lee Song Teck even appeared in a profile piece published in our national broadsheet The Straits Times. In any typical Ponzi scheme though, once the bottom falls out, everything else collapses in a pile of bricks and dust.

For The Gold Guarantee, Lee vanished at the beginning of 2013, taking with him a huge pile of monies that was used to prop up the unsustainable pyramid. Hundreds of investors were left in the lurch.

The Gold Guarantee was a ludicrous gold buyback scheme that had all the trappings of an untenable investment vehicle – high guaranteed returns, a CEO with a shady past, zero hedging in the event of a downturn in the gold market, etc. It was also extremely similar to other failed schemes such as Genneva Gold and Asia Pacific Bullion. The premise of TGG’s insidious scheme was simple.

  1. The Gold Guarantee buys gold at market price.
  2. TGG then sells the purchased gold to investors at an exorbitant mark-up, usually in the region of 25 percent. For the purpose of illustration, the market price of gold is S$100 and TGG sells the gold to investors at S$125.
  3. TGG tells the investor that he or she will be enjoying 1.7 percent discount off the already marked-up price. The plan is that TGG will buy back the gold from the investor at the price of S$125 after three months, and gets to keep the discount.

The problem with this though is that it only works if the gold market continues trending upwards and that TGG continues getting more investors to put their money in than investors who cash out. If the market crashes (as it always will) and a glut of investors ask for their money back, the company collapses.

Furthermore, in the case of TGG, investors never actually physically owned the gold nugget. Rather, they were given a printed piece of paper. Whether TGG actually purchased any gold bars in the first place is still shrouded in mystery and will probably remain so until the Commercial Affairs Department Singapore completes its investigations.

How much has been burned? Estimates are unclear but it’s definitely in the millions. Lee’s whereabouts are still unknown.

Similarly, a gold buyback scheme run by local firm Suisse International has mysteriously disappeared with about S$7 million of investors’ money. The company’s investment scheme was incredibly convoluted and just like any other Ponzi scheme, promised ludicrous guaranteed returns. All the typical signs of a Ponzi scheme finally bursting were there too – “cashflow problems”, an up- and down-line system that gave you better rates if you invited friends, etc.

Update:

Imagine a sweet, virtually “no-risk” deal promising around 30% returns, simply by buying and selling properties in Singapore’s choicest districts. Add on to that a jovial friend who jokes with you, hangs out with you, and even goes on vacations together. Is it any wonder why investors fell for the allegedly multi-million dollar Ponzi scheme run by Ms Leong Lai Yee?

The premise was a catchy one: using insider “advice” from a banker, Ms Leong would purchase distressed properties in Orchard, Tanglin and Newton on the verge of being repossessed by banks, then sell them to buyers in China for a profit. Investors who pumped in money to fund the purchase would get returns ranging from 10-48% over a period of four to eight months. Even if the buyers backed out, they would have already paid a 40% downpayment on the property, meaning that the investors’ expected returns were still “guaranteed”.

For some 15 years, the scheme ran smoothly. But the house of cards started collapsing over the last few years, when Ms Leong started attempting to lure in fresh funds from new investors to pay earlier investors — a classic sign of a Ponzi scheme at work. Payments to existing investors were also repeatedly delayed, dragging from September last year to May this year.

Things came to a head a few days before 18 May, which was supposed to be the latest deadline for payment. Instead of payment invoices, investors received a dramatic letter from Ms Leong, saying that the money was gone and that she was going to take her life. Since then, she and her husband have gone AWOL, leaving investors high and dry — especially those who had withdrawn their CPF savings, borrowed from their insurance policies, or even taken a second mortgage on their house to free up cash to invest.

Moral of the story? Even if there are glowing testimonials from prior investors, it is always best to exercise due caution and constantly keep track of how well your investments are doing. And be prudent about how you manage your money. Investing, Ponzi scheme or not, shouldn’t be done at the expense of your retirement savings.

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