OCT112012
Charles Ponzi was a genius, without realizing it himself. Born in Italy, he became famous in the early 1920s. He promised clients a 50% profit within 45 days, or 100% profit within 90 days, by buying discounted postal reply coupons in other countries and redeeming them at face value in the United States as a form of arbitrage. But in actual fact, Ponzi was paying early investors using the investments of later investors, plain and simple. Ponzi started his own company – Securities Exchange Company – to promote the scheme (which ultimately known as Ponzi scheme) and from Feb 1920 to July 1920, he made impressive millions of dollars. At one time, Ponzi was making a staggering $250,000 a day – that was back in the 1920s, mind you.
Financial analyst was asked to examine Ponzi’s scheme and it was found that based on Ponzi’s investments, there should be at least 160 million postal reply coupons in circulation. However, there were only about 27,000. It was later found that Ponzi scheme was merely a plan of robbing Piggie to pay Doggie. Charles Ponzi’s surrender to federal authorities brought down 5 banks together with him. His once loyal investors were wiped out, receiving less than 30 cents to a dollar. In total, his investors lost about $20 million in 1920 (about $225 million in 2011 dollars). Using the same scheme 88 years later, Bernie Madoff brought down about $13 billion in investors’ money.
So, was Genneva Malaysia, a company dealing in buying and selling gold products another Ponzi company waiting to collapse? Actually directors of Genneva – Marcus Yee Yuen Seng, Ng Poh Weng and Chin Wai Leong – can use MLM (Multi-level marketing) Pyramid system to do this business. While MLM is more profitable, it’s more cumbersome since the regulatory control is much tighter. Of course you still can get away by appointing UMNO-linked Datuk-Datuk as your company chairman to facilitate license renewal and to close many enforcers’ eyes when irregularities occur.
Genneva brilliantly plays in a grey unregulated area – gold trading. Interestingly, according to the gold exemption order 1986, any Tom, Dick and his pussy cat can hold, borrow, lend, buy, sell or export gold without contravening any laws. In short, it’s easier to move around gold than hold a rally in this country. Genneva was careful not to collect deposits from investors as this action can be seen as crossing into BAFIA’s (Banking and Financial Institutions Act) territory which requires a license from the Central Bank (Bank Negara). Without a need for a license (and renewal) means one less problem in doing business for Genneva.
How the Genneva Gold Investment Scheme works is quite simple. You purchase the physical gold which comes with a S&P (Sales ad Purchase Agreement), a Certificate of Ownership and a Letter of Hibah. The juice of the orgasm was in the form of “Hibah” (or monthly gift) – ranging from 1.8% (50g – 95g of gold purchase) to 2.5% (3kg and above of gold purchase) in cash return every month. That’s a whopping 21.6% – 30% annual return rate, mind you. Warren Buffett must be super idiot not to join Genneva, no? In addition, your initial capital is 100% protected because according to die-hard investors, you can sell back your gold to Genneva at the same price you bought initially.
Who could resist such a proposal – it’s like when you buy sofa sets from IKEA, not only you get the sofa but also 30 cups of Starbucks free latte vouchers every month. And if you don’t like the sofa thereafter, its money back guarantee, no question asked. Gosh, IKEA (in this case) must be really stupid. So far, everything seems to be too good to be true. However, according to Genneva website, the company “does not” gives any undertaking or guarantee the repurchase of the gold products sold to its purchaser. Now, what did mom said about there ain’t no such thing as a free lunch. How could there be golden goose hopping around on the street?
First of all, this gold trading is a mega project. Genneva claims to have about 50,000 satisfied clients (or investors) in Malaysia alone. Let’s assume each investor poured in RM100,000 for this once-in-a-lifetime investment – that’s a mind-boggling RM5,000,000,000 (RM5 billion) hot money. Knowing how greedy Malaysians are, the RM100,000 of investment quoted here is a super conservative figure. And here comes the magic. Genneva actually sells its gold to customers at a staggering premium of 20-30 percent. For example, while UOB was selling gold at $74,500 per kilobar, Genneva sells $96,000 per kilobar, on the same date.
And why wouldn’t Genneva laugh all its way to the bank with RM1 billion to RM1.5 billion in profit (20-30%) from these so-called 50,000 “expert” gold investors (*tongue-in-cheek*). Now, do you understand why I call this scheme a mega project? It’s because everything was designed to be gigantic. If you want to fleece others’ money, do it big and systematically. As the Chinese saying – giant chicken does not eat small feeds (*grin*). Adding spices to instil artificial confidence would be to invite heavyweights such as mighty former premier Mahathir (on behalf of the King) for Genneva products’ launching and Prime Minister’s wife, Rosmah Mansor for its Consultants Appreciation Night 2012. Heck, Genneva even has Tengku Muhaini Sultan Ahmad Shah, the Sultan of Pahang’s daughter, as its chairman.
Do you really need to be a rocket scientist for a scheme that gives you 1.8% – 2.5% of cash when the banker already made 20% – 30% in profit upfront? If you think taking 30 bucks from your pocket and return 2 bucks and 50 cents to you every month is the best invention since sliced bread, then you deserve to be scammed. But there’re many great testimonies – not only they’re still keeping the physical gold, they’re also making 30% annual return rate. Of course they do otherwise this scheme won’t work, would they? You need some testimonies for this musical chair game to continue playing. And due to greed, some investors would sell every inch of cloth increasing their investment, which keep the money rolling.
How do you know the gold you’re hugging every night is as pure as it claims?How do you know it’s not tungsten-filled gold bars? Yes dude, jewelry stores on 47th Street and Fifth Avenue in Manhattan discovered a 10-ounce 999.9 gold bar costing nearly $18,000 turned out to be a counterfeit. The bar was filled with tungsten, which weighs nearly the same as gold but costs just over a dollar an ounce. Heck, the gold bar even had stamp of the reputable Swiss Produits Artistiques Métaux Précieux and a serial number. Apparently the victim, Ibrahim Fadl, a dealer himself bought the gold bars from a merchant who has sold him real gold before (watch video below). Previously such fake gold bars case happened in England but now had spread to New York.
If you challenge Genneva investors with questions, they may put a gun to your head. Besides, who cares as long as they continue receiving their Hibah. To the investors, Hibah was the main juice of orgasm but to Genneva, Hibah may be their biggest bait. Frankly, the whole system works as long as the gold price doesn’t crash, people continues to buy gold bars, Genneva continues to generate positive income from their billions of dollars of profit elsewhere, no power struggle within the company and whatnot. For every single Ringgit of your hard-earned money, Genneva can pay you the Hibah for 10-months and still make profit – with not a single cent coming out from the company’s own pocket. It’s your original money that they’re rolling and playing, as simple as that.
Genneva also knows all the 50,000 “happy” investors will not redeem their gold at the same time. If they do, the company will simply go bust simply because they don’t have RM5 billion (based on example above) to take back all the gold bullions (*grin*). With billions of dollars war chest, Genneva was like a mini bank. Perhaps it then uses the money trading Call / Put Option in equities, currency or even gold itself. Worst still, the ultimate objective could be to clean dirty money obtained by illicit means – money laundering. Now, that would be really interesting. What – just because Mahathir launched the company’s products, the company can’t possibly involve in money laundering?
If you do not already know, money laundering is an extreme lucrative business whereby the operator charges 60% or more – meaning for every dollar of your dirty money, you’ll get 40 cents of “clean money” in return. The operator takes the remaining 60 cents due to obvious reason – cost of dynamo detergent, washing machine, electricity and whatnot (*tongue-in-cheek*). When even Casino King, Stanley Ho, used his casinos for money laundering, who are you to say Genneva is not another money laundering vehicle, since the company is not regulated by anyone?
Back in Oct 2010, the directors of Genneva Sdn Bhd – Ng Poh Weng, 60, face 263 charges involving RM185mil while Marcus Yee Yuen Seng, 58, faces 234 charges amounting to RM153mil and Chin Wai Leong, 34, face 210 charges involving RM212mil. Earlier in July 2009, Bank Negara (Central Bank) had frozen their personal and company bank accounts and their asset of gold bars. Later, Genneva Pte Ltd, also a gold trading company in Singapore, with the same directors from Malaysia’s Genneva, lost a lawsuit from one of its investors claiming $190,000 with a second writ of summons for a total sum of $86,000 in the pipeline. If everyone was enjoying 21.6% – 30% annual return with option to sell back the gold bars to Genneva, why would investors sue the company?
Another burning question – if the company’s account and asset were seized and frozen since 2009, how can the directors and company allowed to operate until the latest raid early this month, more than 3-years later? Was Bank Negara sleeping on the job? Were there too many (greedy) hands in the cookie jar, hence the power struggle (or rather money struggle), considering the gigantic amount of money in the coffer (if there’s any left). Or was it purely SOP (standard operating procedure) by any ponzi scheme operator to call it the day by asking the authorities to raid the company itself so that they can stop paying investors, knowing very well nobody would go to jail?
There’re people who makes good money from Genneva gold trading scheme but not everybody makes it to the finish line. But now that the company is raided, what’s next? Maybe Mahathir can help by declaring Genneva is an honest company that is incapable of cheating the people, the same way he told the High Court that he believed Ling Liong Sik was not capable of cheating the government since Ling is an honest person. As usual, early bird catches the worm and as for the latecomers – remember to join the party early next time, will ya?
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