Remember Profitable Plots? It was a huge Ponzi scheme and money paid by Singaporean investors were used to pay investors in the U.K.
|Timothy Nicholas Goldring, 60, was sentenced to seven years.|
"Investors lost some $3.1 million in the Boron bonds scheme between November 2008 and August 2010. The two directors of land banking firm Profitable Plots promised 12.5 per cent in returns within six months. Most of the money ended up being used for unrelated purposes, including paying off debts to investors from the firm's UK business."
Source: AsiaOne, June 2014.
EcoHouse Group was international too and there were investors who gave money to EcoHouse in the USA as well:
|Click to enlarge|
Source: Alternative investments.
The blogger and investor has woken up to the fact that it is a scam, I believe.
I share this because I think it is useful to see what an average and reasonably intelligent investor's thought process might look like before he plonked down not an insignificant amount of money in an investment proposed by EcoHouse.
In summary? The investor
1. Liked the promise of very much higher returns.
2. Liked the relatively short investment horizon.
3. Noted a booming economy.
4. Noted the purported track record.
5. Noted the purported backing by the government.
6. Noted the purported 100% security of the investment.
EcoHouse Group was an elaborate scam and they knew how to push all the right buttons to get people to part with their money.
Most investors sucked in by the scam are probably swayed by points 1 and 2 above and were just nudged into the cooking pot by points 3 to 6. They probably didn't even bother verifying the truthfulness of points 4 to 6.
To me, all the justifications made to invest in projects by EcoHouse should have taken a back seat because the most important question to ask should have been:
"How in the world is your company able to pay me XX% per annum when the properties are still being built and not generating any income?"
Now, if we should be approached by salespeople or "advisors" promoting similar investments and I dare say that there are still quite a few around, what should we do?
"Seek as much transparency as possible. If they do not understand exactly how a manager is making money, do not invest. If there is a secret process that cannot be explained, run."
Samuel Israel, hedge fund manager of a Ponzi scheme.
EcoHouse: Questions we must ask and people I detest.