Malaysian Central Bank Raided “Gold Investment” Company
Updated 15 October 2012: Scam featured in the Gold Standard Institute Journal
Updated: 7 October 2012
As you’ve been cautioned regarding the 87 companies on BNM’s watch list in my earlier post, a joint raid was conducted on another three companies (Pageantry Gold Bhd, Caesar Gold Sdn Bhd and Worldwide Far East Bhd) in that list on Friday. Here’s the statement from BNM.
Joint Raids on Pageantry Gold Bhd, Caesar Gold Sdn Bhd and Worldwide Far East BhdJoint raids were carried out today on Pageantry Gold Bhd, Caesar Gold Sdn Bhd and Worldwide Far East Bhd by the Royal Malaysian Police, Bank Negara Malaysia and the Ministry of Domestic Trade, Cooperatives and Consumerism for suspected offences among which could include illegal deposit taking, money laundering, tax evasion and avoidance, false description including misrepresentations and appointment of agents without licence. > Full Statement.
Bank Negara Malaysia just issued a press statement regarding their recent raid on Genneva Malaysia Sdn Bhd, a company “dealing in buying and selling gold products”.
Bank Negara Malaysia
05 October 2012
The Royal Malaysian Police
Bank Negara Malaysia
Ministry of Domestic Trade, Cooperative and Consumerism
Companies Commission of Malaysia
Update on the Joint Raids on Genneva Malaysia Sdn BhdOn 1 October 2012, joint raids were carried out on several premises of Genneva Malaysia Sdn Bhd as well as on the residences of the Directors of the company by the Royal Malaysian Police, Bank Negara Malaysia, Ministry of Domestic Trade, Cooperatives and Consumerism and the Companies Commission of Malaysia.-Genneva Malaysia Sdn Bhd and its related companies are being investigated by the relevant enforcement agencies for suspected offences which include illegal deposit taking, money laundering, tax evasion and avoidance, false description including misrepresentations, appointment of agents without licence and failure to lodge statutory documents. > Full statement.
Please be aware of this list published by Bank Negara Malaysia containing 87 companies, many of them purportedly dealing in “gold investments”, which are not authorised nor approved under the relevant laws and regulations administered by BNM. Genneva Malaysia Sdn Bhd has been in this watch list since 13th July 2012.
By Douglas Demchy | The Gold Standard Institute
Get-Rich-Quick Gold Scheme Busted in South East Asia
On the 1st Oct 2012, Bank Negara (Central Bank of Malaysia), the police, the company commission of Malaysia, and the Ministry of Domestic Trade, Cooperatives and Consumerism jointly raided a local gold investment scheme company and its branches in the country. Documents and gold stock were carted away and bank accounts frozen by the Malaysian authorities. On the same day, Singapore’s Commercial Affairs Department also conducted a similar operation against the same company in the Republic.
Get-Rich-Quick Ponzi Schemes
Over the decades, there have been many firms offering high returns on a monthly or regular basis if buyers purchase products such as volcanic stones, herbs, water filters, cyber shares (imaginary), diamond, watches and even donations (gifting). These schemes were Ponzi schemes whereby the money collected from later buyers/”investors” were used to pay off the earlier “investors”. Thousands of people have lost millions of dollars over the years, and the authorities have shut down many such firms, and the operators of such schemes were charged for breaking the laws. Most of the gullible investors do not suspect these were Ponzi schemes. They were attracted by the high returns and in the end almost all of them lost their “investment”. They then filed police reports and complained to the authorities. A few months ago, a firm selling volcanic stones operating under a Ponzi scheme run away with RM1.2 billion.
Gold Investment Schemes
In recent years, these operators seemed to notice the rise in the gold price and consequently offered gold bullion in their new schemes. There are now more than twenty firms offering gold investment schemes whereby the purchasers of gold bullion receive a monthly gift of 2% to 2.5% for 6 months. The physical gold bullion is delivered two weeks after payment. Upon maturity, the investors can sign new contracts based on current “company gold price”, and continue to enjoy the gift of 2% to 2.5% per month or alternatively, the investors could return the gold bullion upon maturity and receive the original sum of money used to purchase the gold. Most investors continue the schemes upon maturity of the contract. The catch is that the selling prices of gold bullion of these firms are 30% higher than the market.
The authorities have suspected that these schemes are Ponzi types and raided a few firms in 2009 with their gold taken away, and bank account frozen by Bank Negara. But new firms sprung up and investors again participated in the “high return” schemes and again have lost their money after the firms are shut down by authorities. It is reported in the newspapers (front page) these investors are in shock over the raid by the authorities. Anxious and confused over the raid, hundreds of them converged at the company’s offices, demanding answer. As reported in the local paper Bank Negara Malaysia spokesperson said a statement would only be issued after investigations had concluded. She said, “there is nothing wrong with gold trading but we want investors to be careful against those promising high returns”.
In Malaysia, physical gold bullion trading has been deregulated and no license is required to buy or sell physical gold bullion. However, all investment schemes are regulated and any firm offering regular interest or yield are subject to licensing as these schemes are considered “deposit taking” schemes.
Many investors obviously do not understand what a Ponzi scheme is. The Star, a local newspaper, reported that one investor had said that the money earned from the “investment” had helped his son through college. “There has never been any complaint by the clients. The company has helped the livelihood of thousands of people. Why are the authorities interfering in a legitimate business?”
Another investor said the money from the scheme had helped paid for her mother’s weekly dialysis treatment. These investors are blaming the authorities, instead of themselves or the Ponzi operators who may still have cash and gold of undreds of million (2 weeks lead time in delivery of stock, for a monthly sales of 1 billion – that means 500 million in stock & cash in transit when the authorities raided them). Those investors who have taken delivery of the bullion may try to sell them in the local gold shops.
Uncompetitive Gold Price Spread
Unfortunately the price spread of gold in Malaysia is highly uncompetitive at the moment. Typically, a gold shop will discount 25% – 30% on the products of other firms. These investors have already paid 30% higher than market price when they purchased the gold bullion from the Ponzi scheme operators. Hence, on average, they may lose half of their investment, some may wait for the rise in gold price to recover their losses but many small investors need cash to pay their bills and are likely to liquidate their stock. The price spread is high in Malaysia because many gold shops worry about fake gold, and will cut open the bullion, and hence the brand premium of the hallmark bars is lost.
A quick survey of several wealthy individuals who have not bought gold bullion before, said they are not likely to buy gold because of the scam of these gold schemes. Those surveyed do not know much about gold as money, the gold standard, or gold trade (premium, and spread). From the warning given by Bank Negara in its full page advertisement on Ponzi gold schemes, many in the public now got the impression gold investments may involves “scams”. It is unfortunate that many do not have much knowledge about gold.
Because of the outcry of the public over the loss of money over their gold investment schemes, the authorities are likely to regulate the gold trade again. If it happens, the losers are the local traders who are likely to face a more restrictive gold trade and the public who have not protected their savings in the era of quantitative easing (to infinity) The winners will be the authorities who will gain more power to control the gold.
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