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Profitable Plots, EcoHouse, A2A and Macro Realty (The thought process of EcoHouse scam victims.)

Saturday, August 16, 2014

UPDATE (3 AUG 17):
Macro Realty Developments Pte Ltd promised returns as high as 18 per cent yearly.

Singaporean police are investigating a property company believed to be involved in a ponzi scheme that conned hundreds of Malaysians investors out of millions.

According to an ABC report, the company is controlled by Australian Veronica Macpherson and received over A$110 million (S$119 million), mostly from Singaporean and Malaysian investors.

Although based in Singapore, Macro Realty Developments Pte Ltd offered investments to fund property developments in Pilbara, Western Australia.

Investors were promised returns as high as 18 per cent yearly.

The investment scheme was reported to have been heavily promoted in Singapore and Malaysia since 2014.

However, KPMG liquidator Hayden White told ABC that the scheme collapsed last year with creditors owed more than A$200 million.

...the alleged Ponzi scheme raised almost A$110 million from its 1,700-plus investors who were told their funds were being used for property developments but were instead used to pay the company's expenses, including the interest payments to early investors.

Source: http://www.asiaone.com/singapore/hundreds-singapore-and-malaysia-investors-duped-millions-property-company

Remember what is the question we must ask?
"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?"

UPDATE (6 APRIL 17):

Profitable Plots, EcoHouse and now A2A. Why do people keep falling for these?



Lesson:
Marketing presentation plus a well decorated office is enough to make some people part with their hard earned money.



Lesson:
This is tragic. In our golden years, don't be too adventurous with money. It could turn out to be a case of misadventure.

-----------------
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."

Read:
Samuel Israel, hedge fund manager of a Ponzi scheme.

Related post:
EcoHouse: Questions we must ask and people I detest.

16 comments:

AK71 said...

I like this comment on my FB wall by Kelvin Tan:

"From the Roy Ngerng's saga, I realized there are many Singaporeans who do not understand the term "risk premium".

"When I hear Roy say that "Temasek earns 16% interest but CPF only gives us 2.5% interest", I get amused at the way the term "interest" is abused.

"In that blog, the writer also stated that Eco-House is paying 20% interest rate in a year and I also wonder whether he knows the difference between expected return and risk free rate.

"In this aspect, maybe a short time playing poker online would benefit them. They will realized that, "Hey my expected win-rate is supposed to be 2 Big Blinds per 100 hands, but man, I cannot take the huge downswings in the first million hands that I play"."

dorshii korshii said...

Hi Ak71

These fraudsters are small players compared to the too-big-to-fail banks who rigged LIBOR, forex, and cheated billions of $$$ without much impunity. These banks are walking away from their criminal activities by paying fines in place of prosecution. Shame on them, YES and it seems these much bigger fraudsters have not educated greedy investors a teeny weeny bit. To them, their share of angst.

AK71 said...

Hi dorshii,

A reader recently shared this with me:

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." Henry Ford.

-.-"

pf said...

I shall share another quote....not sure from who but heard from my senior during first years at work.

People die either from ignorance or stupidity.

Lol.

Actually, this is why i don't really believe that investing for income without working. U can nv be sure what happens to the investments. And the markets out there, stocks, money, commodities, etc are rigged or "managed" by the financial institutions in one way or another. Traders work together to keep each other in the job. Politicians steer public policies one way or the other with economic considerations (including bribery). US, Europe or China economy affect SG market. Too many factors that could affect retail investors.

Anyway, 天生我才必有用, 千金散尽还复来 - 李白。Money comes, money goes....don't get too attached to it. Hee hee... :)

AK71 said...

Hi pf,

You are making me extremely worried about retiring earlier from work. I hope I won't get sleepless nights after reading your comment. -.-"

pf said...

Seriously AK...i think we all can take it easier when we r growing older. Perhaps, we can take on adjunct lecturer roles in polytechnics, drive taxi, work as security guard, sell ice cream in Swensens (my special skill from sec sch holiday job - scoop a round round ice cream)...keep ourselves active....

If you apply investment principle of not putting all eggs in 1 basket, how can your cash flow be just from investments whose value is dependent on so many factors beyond your control? :)

Anyway...i think ultimately its our attitude abt money that drives us to the way we position ourselves in money matters.

So, again I say, we shld erase the concept of retirement. Then we won't beat ourselves up over losing money, how to get the bestest return, etc....having said that, i think we shld learn to manage money, but take it easy lah....

Lol...

AK71 said...

Hi pf,

After reading this comment from you, I become even more worried. LOL. ;p

I am transitioning to part time work and I might even do a bit of teaching in future. It is more to do things I enjoy in retirement than not working altogether.

My motivation to do some work during retirement is not for money. It is just to keep me moving physically. Otherwise, I might just sit in front of my PC the whole day. Not good. -.-"

pf said...

Hehehhe...just make sure the things u do and enjoy comes with some cash flow that is sustainable lor. :))

AK71 said...

From a comment I made on my FB wall:

"... ask why would such good deals descend themselves to the realms of the masses? Wouldn't some of the big boys back these deals to the hilt? Ah! Again, ask the questions that must be asked and see if the answers are forthcoming.

"With crowd funding gaining popularity, perhaps, we have to be more alert than ever."

AK71 said...

Hi pf,

Nah, in my retirement, I wouldn't want that to be a consideration anymore. I could be doing some pro bono work like giving free tuition to the poor which was something I did before. :)

To be able to do stuff because I enjoy them and not because of the income they might generate for me is one major driving force behind my efforts to build a strong passive income stream. :)

"Like Warren, I had a considerable passion to get rich, not because I wanted Ferraris – I wanted the independence. I desperately wanted it."
Charlie Munger.

pf said...

Aiyah...every quotable quote has a counter quote.

If money is your hope for independence you will never have it. The only real security that a man will have in this world is a reserve of knowledge, experience, and ability.
Henry Ford

Anyways, thats why I'm now beginning to explore 中庸之道。

AK71 said...

Hi pf,

Oh, everything in moderation is always sensible, I believe. Not easy but 中庸之道 as a philosophy in life is a good idea. Till today, I feel that it remains an ideal. Not many can truly adhere to the middle. :)

d. said...

My father nearly committed 90k to another similar property investment proposition going by the company Blue Dolphin Capital, based in Germany but has an office in Singapore. They offer 12% return annually. The word is that so far they have paid their investors since 2010 and that they do purchase the properties in Germany, although a search (in German since nothing much can be found in English) revealed that they are also in some legal tussle with some states in Germany for purchasing the property but not redeveloping it in time. They also offer a contract (option to buy the property) to the investor. AK, I know your predictable response is that money can't buy a piece of mind, so you probably wouldn't invest in this, but how would you advise someone who is somewhat interested?

AK71 said...

Hi d,

12% per annum is relatively high.

When offered any investment for income, always ask how are the investments generating cash flow to pay investors? Then, we have to decide if it is bona fide and if it is sustainable.

It has to make sense.

apex property investment said...

It's like a case of never pleasing the scepticle investor. 12-18% too high and risk free return below 3% too low... haiz. AK, where shall we cut this LINE? I dabbled in such products and lost money. Did some research and found 12% seems to be the emotional barrier where people will risk it. A returns of 250% would also be enough to make people part with their money.

I think end of the day, investment is a full time job. If you think you used 1 year to save for the money, wouldn't you spend 1 year to educate yourself and learn before parting with your money ?

AK71 said...

Hi apex,

Greed and ignorance make a dangerous pair.

Unfortunately, it is quite a common combination in many people.

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