Gold trading firm Genneva Gold was raided by the authorities in both Singapore and Malaysia in a simultaneous operation yesterday.
In Singapore, the Commercial Affairs Department (CAD) moved in to seize documents and computers for investigations.
In Malaysia, multiple agencies which included officers from the police, Bank Negara, the Companies Commission of Malaysia and the Ministry of Domestic Trade, Cooperatives and Consumerism jointly raided Genneva Malaysia Sdn Bhd and its affiliates.
The reporting from Malaysia newspaper The Star seems to be more negative towards the raid as it contained interviews from a few customers who were against the raid. These customers clearly have the misconception that the payments stopped or will stop as a result of the raid.
It is important to understand cause and effect.
Typically, when most ponzi scams finally default on their payments, the company will always blame it on the authorities for shutting them down.
But whether the authorities raid or not, such schemes will have to stop one day.
For Genneva’s case, the payments were in fact stopping before the authorities moved in.
The payments stopped because they were unsustainable.
Genneva sells you gold at 20% markup. Give you 2% every month.
Buy the gold back from you at the price you paid them (So they actually make 0 profit).
Now, where is the 2% per month going to come from? Yet, there are still people who are insisting that the 2% come from the 20% markup made by the company.
I quote here the last paragraph of the Straits Times article:[warning]Genneva is not regulated by the Monetary Authority of Singapore and has been placed on its investor alert list of unlicensed entities. Consumers deal with these companies at their own risk.[/warning]