Gold Trading Schemes Warning

The recent raids by the authorities on Genneva Gold in Malaysia and Singapore have lead to an uproar, especially in Malaysia.

The Malaysian authorities have taken a step further and investigated a number of such gold investment companies. The effects are widespread as the investor base is huge.

From the number of articles that I have read, I sense that the Malaysian media is trying to portray the investors as victims, and blaming the government for their current situation.

eg. If there is no raid, the investors would have continued receiving their money.

However, this is what the Malaysian authorities have to say on their investigations:

These raids were conducted in the interest of protecting the investors as well as the public at large from falling victim to illegal schemes.
Based on surveillance and examination conducted on these companies, it has been discovered that these companies are operating schemes that are believed to be not sustainable to provide the promised high monthly returns, nor would they be able to provide the buy back guarantee of gold.
Such schemes are not sustainable because the returns promised are not funded through gold trading, but from the monies invested into such schemes. The investigations have also revealed that the amount of assets and monies held by these companies do not commensurate with the amount collected from their investors.

Full article here:

Update on joint raids conducted by enforcement agencies on companies suspected of conducting illegal investment schemes using gold

In Singapore, questions about such gold trading scheme have also been raised in Parliament. I quote part of the reply from Tharman:

Regulations cannot cover every type of investment. MAS has to judge where to draw the line on what it regulates, taking into account the scale of the investment activity, its role in financial markets and whether failure by a firm will pose broader risks to the system.
Like most other financial regulators around the world, MAS does not regulate schemes that involve investors acquiring direct ownership of physical assets, such as property, gold, art or wine.
However, regardless of whether these activities are regulated, it is an offence under the law to operate a fraudulent or deceptive scheme. As Members know, some of the operators offering gold buy-back schemes are currently under investigation by the Commercial Affairs Department (CAD). If there is evidence of fraud or other breaches of the law, CAD will take firm and appropriate action.
Schemes that claim to provide high returns with seemingly low risk will crop up from time to time. In the current low interest rate environment, people may indeed be more easily tempted to put their money into them. But there is a lot of sense in the old investment adage: if an investment looks too good to be true, it is probably not true.
I therefore urge Singaporeans to exercise great care and vigilance before committing themselves to any investment scheme that claims to give high returns.

Read the full reply here:

Reply to Parliamentary Question on Gold Trading Schemes

I agree that it is impossible to regulate everything. However, I feel that most of what CAD has done can be improved. Do they wait until a company collapses before investigating a company?

Much of what some of these companies do is already well known to many people a couple of years ago. They even advertise regularly on our Straits Times!

In fighting crime, prevention is always better than cure. This rule of thumb should apply to commercial crimes as well, especially when it involves members of the public.

And I read with amusement the recent statement from Genneva denying that they offered any investment schemes at all:

GENNEVA MALAYSIA is not an investment company. Our business model is not a “Ponzi” scheme.
We are dealing in straightforward buying and selling of Gold. We offer no buy-back guarantee. We offer no guaranteed returns. Simply because we have been buying-back the Gold and offering handsome ‘hibah’ payments do not make our operations illegal.

You can read the whole message here:

Message from Genneva Management

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6 comments

JoeP says 11 years ago

I remember profitable plots claiming towards the end on their website that they had never been an investment company they were a product company. This was despite the fact that they had run many Profitable Group adverts as a global investment company. These schemes do have a cycle of offering amazing returns and then denying such offers ever took place.

Annoying Me says 11 years ago

BNM replied to a question.

BNM FaceBook
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If SC is the regulatory body for unit trust, which authority regulates gold trading?

Bank Negara Malaysia | Central Bank of Malaysia (Official):

Dear Adly… There is no restriction of buying and selling gold or silver in Malaysia. However, if the gold/silver trading – investment scheme clearly offers investment opportunity by collecting deposits from the public and investors are promised investment returns/profits within a certain period of time, whereby the original investment will be refunded or in other words if a company appeared to be involving in illegal deposit taking by using gold/silver to camouflage its activities, it maybe contravene section 25(1) Banking And Financial Institutions Act 1989 (BAFIA).

We have investigated and charged numerous instances involving companies having illegal deposit-taking and trading in gold as their underlying products that might contravene Section 25(1), BAFIA such as Genneva Sdn Bhd, Bestino Group Berhad, Gold Label Sdn Bhd. For your information, we also monitor these activities very closely and we will not hesitate to conduct investigations should a company appears to be involved in illegal deposit-taking using gold to camouflage its activities.

Guardian says 11 years ago

In the event that these personal assets are found to be far in excess of reasonably obtainable income (or proof thereof), the SOURCE of these assets will be investigated.

Annoying Me says 11 years ago

I guess it is for tax evasion, money laundering, maybe even deposit taking.

KLbull says 11 years ago

The latest BNM update on 18.10.2012 is more revealing in that directors and key personnel of these raided gold companies in Malaysia have been ordered to declare their personal assets. False declaration is, of course, a criminal offense. Guess which direction the authorities are moving towards?

KLbull says 11 years ago

The gold company raids were a joint operation by BNM, Companies Commission, Domestic Trade Ministry and Police. Each authority has its laws and regulations to oversee. For example, BNM has oversight of illegal deposit taking and money laundering activities but has failed to successfully nail the four directors of GM1 in court, allowing them to continue a similar scheme with GM2. How embarrassing indeed for BNM and how to ensure there will be no GM3?

Enter the other 3 authorities, each with their enactments and regulations that they can throw at the gold company directors and key personnel. If these 3 authorities are involved, they have good reason to suspect numerous breaches of the relevant laws under their jurisdiction.This time, the Police are also involved, so elements of criminal malfeasance must be suspected. There’s a big black hole in the gold companies finances, as disclosed by BNM, just where did all the missing money and gold disappear to?

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