Avoiding investment scams
Question: I have been seeing a lot of investment offers online promising guaranteed returns. I have been offered an investment where my P35,000 can grow to P360,000 in a few weeks. The investment is about gold trading and they are giving a guarantee for my investment. Is this a good investment or is it a scam? – Name withheld for security reasons
Answer: I believe you are referring to the very controversial investment scheme circulating among many Filipinos today, Emgoldex. My answer is that it is a classic Ponzi scheme, in other words it is a scam.
Salve Duplito, the host ANC’s “On The Money” says “basically, Emgoldex is a pyramid scheme disguised as a product-based MLM.” She further says that “Emgoldex promises to make its investors rich, not because of the gold, but through its commission plan. It offers returns of at least 1,105 percent, fast, easy, and without any risk.”
The prospects of getting such a big yield on your money is what lures a lot of people into investment scams such as the Emgoldex which is actually an old scheme with new twists. The combination of greed and ignorance makes investment scams proliferate and many forego common sense and join the bandwagon. If you read the marketing materials of Emgoldex, your first reaction should be “it’s too good to be true!” because it really is.
There are investments that can give you fantastic returns and these are speculative investments in nature—but to put guarantees on such returns is what makes it a farce. Further, pyramiding scams will require you to recruit people into the scheme. The problem with all pyramiding schemes is that it will end at some point because it will not be able to sustain its payouts, and those who will enter the scheme later will not be paid anymore.
As the scheme continues to pay its investors, more people come in and there is a frenzy of new people being duped into the scam—more people means more payout and this is where people will forego logic and even entice more people to jump in.
A pyramiding scheme will have a breaking point and the payments will stop instantly and the investors left in the scheme would have lost a lot of money, some their life time savings. It is also not uncommon for many Filipinos to borrow money to enter into the scheme thinking they will be able to pay quickly anyway.
There are many other issues with the Emgoldex to conclude that it is a scam. It is not duly registered in the Philippines. Ms Duplito’s research revealed that there is an Emgoldex company registered in this country but it is a poultry farm in Iloilo. The reported office in Seychelles is just a mailing address.
While there is an Emgoldex registered in the DMCC Free zone in Dubai, my OFW contacts have verified that their marketing and investment scheme is not approved. For a multi-million dollar company, looking for their corporate domicile is like looking for a needle in a haystack, another red flag that one should see.
Any business that operates in the Philippines and that involves selling, investing or any form of solicitation whether for profit or not must be duly registered with the Bureau of Internal Revenue, Securities Exchange Commission or Department of Trade and Industry; and since Emgoldex deals with gold as it claims, it should also be registered with the Bangko Sentral ng Pilipinas.
Emgoldex and its many representations have been banned in many countries such as the United States, Finland, Estonia, Colombia and Panama.
As of this writing, Emgoldex is still paying those who took part of the scheme so their supporters are very rabid in their defense of their scheme but pyramiding schemes never last and the question pervades—how much money will be lost with this scam? We fear that this can even be bigger than Ahman Futures.
There are many other things that will make it easy to conclude that Emgoldex is indeed a scam but the risk and return rule says it all—high risk, high returns; low risks, low returns. High risks with low returns is only an illusion and that at the end of the day, guarantees are only as good as the guarantor.
Stick with legitimate investments and there are no short cuts to wealth. The bible says it best—“Wealth from get-rich-quick schemes quickly disappears; wealth from hard work grows over time.” (Proverbs 13:11, NLT).
Randell Tiongson, RFP is an author, trainer and columnist on personal finance. To read his personal finance blogs, visit www.randelltiongson.com Learn value investing and become certified at 2nd Accredited Financial Analyst (AFA) program on Feb 21-Mar 28. To inquire, e-mail email@example.com or text <name><email><AFA> at 0917-3464126.
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