Gold Scam : The Golden Goose

Posted by Kris | Tuesday, March 02, 2010 | | 29 comments »



I read this from MoneyMagnet . I cannot help it but to write a post on this to warn readers on this POTENTIAL high risk Get Rich Scheme. Below is the posting from MoneyMagnet2 that I would like to share. Since, if it were true, i don't want to stop people from making alot of money. I will personally shun this type of "investment"

Will You Take Part In Gold Investment Which Promise High Return Within Short Period Of Time?

Recently, a friend introduced me to a gold investment scheme where I can purchased the gold coin @ gold bar and I will get a certificate and at the same time, monthly interest will be deposited to my saving account (as long as I still keep the gold). Yes, on monthly basis. And the interest rate is much much higher if compare to the current bank interest rates.
She had been approaching me a few times. Everytime, she will bring along her gold investment certificates and also those of her clients to show me how much she is earning by just taking part in the gold investment scheme. The deal sounds to be too good. So, I do not take part in this gold investment scheme. More, the minimum purchase is 50g. If the gold price is RM130/g, so 50g will cost me RM6500. May be to some of us, RM6500 is a small amount. But for me, at this moment, RM6500 is still a huge amount.
I just had some feeling not to trust this quick money scheme. Do you invest in such scheme? You are free to share your opinions.

My flawed opinion on this.

It looks like the gold scheme has moved to East Malaysia. I have been approached with this investment idea also before. The only difference is that my investment would total up to around RM15K due to the high gold price now. The scheme promises return of around ~15% per 6 month if you don't need to hold the gold yourself as collateral.

So this is how the scheme works, I deliver RM15K to "buy" the gold which supposedly bought at a cheaper price, then in 6 months resell the gold back to the company for a profit of ~15%. (you don't hold the gold but instead a paper contract of your gold investments) The duration of the contract varies, with longer duration yielding larger interests. The reason given why the company is stupid enough to buy back at a higher cost to give you a profit of 15% is that gold prices always increasing. And buying at 15% is still profitable for them since the gold was "bought" at a special discount at the first place due to "special" connections.

To make this sound real, supposedly the gold has a valid certificate. But holding the gold as collateral will yield less interest (<15%)

This is a classical mind trick.

1st. The gold you hold as collateral may not worth as much as your investment even though the gold might be real. Worst still if the gold turned out to be a fake/high impurity. (Literally a Fool's Gold)

2nd. Knowing how greed works, you surely would not want to hold the physical gold as collateral since you will get less interest. Thus, the syndicate earns more later on.

3rd. In both scenario, you end up losing and arm and leg when the company run away.You may have a return of like 30% in a year, but once they accumulated enough. They will run. Then you lose 100-30%=~70% of your money. The point is that you still lose some significant of dough.

Just tell your friends that is involved in this scheme to quit while ahead. If things are so profitable and rosy, I don't think the investment company would like to share their money printing strategy to everyone else. There is no way (low probability) for a company to be consistently making 15% profit each 6 months to cover the cost of buying back the gold.

Note that you friend is not tricking you. He/She is blinded with greed and the real bastards are laughing all the way to the bank.

Btw, for an institution to take money deposits from the public, it requires a special licences from Bank Negara Malaysia. Google on this and you can see there is a lot of cases where BNM or the SEC raided/suspended/blacklisted companies for doing so. See here -> http://www.bnm.gov.my/index.php?ch=103&pg=456&ac=550


29 comments

  1. kampunginvestor // 2:26 PM  

    I was also introduced about this scheme less then a week ago. People asked me what do i think about this?

    I say it's scam but they tell me it's real gold that you are holding and they have taken the gold for inspection bla bla..

    Trust me, this company will go down in no time. Any idea what is the name of the company dealing with this?

  2. Kris // 9:13 PM  

    I cannot remember the name of the company. But i remember that i went to google it but could not find a thing.

    It is a manner of time, remember swiss cash.? :P

    It is a trick they employ..these schemers are getting clever by the years!! or people are getting increasingly foolish!!

  3. kampunginvestor // 4:12 PM  

    That's the danger lo. They have nothing online. At times i just couldn't understand how people can get cheated again and again and again.

    I thought people used to say, once beaten twice shy? No short cut to financial freedom. Trust me.. No easy way out..

    If banks can give only 2.5% to 3% per year, this people after giving that rate per month!!

    So i hope Malaysians at large will start to wake up from their slumber.

    Why all these scammers won't go away? Because there is demand. Wake up people!!

  4. Kris // 6:12 PM  

    KampungInvestor,

    I guess everyone is rushing to become a millionaire without considering the risks.

    I think becoming a millionaire requires hard work instead of pursuing a quick and dangerous path to riches.

  5. madmax // 1:27 PM  

    name of that company is Samudra-gv sdn bhd

  6. William // 11:50 PM  

    Not an agent here, minimal investment for this presumed high risk scam
    Touch wood... Invested 20k for 7 months till now, still getting my golden goose and little eggs...
    Dunno wat to advise, but if my goose/eggs were to get burnt, definitely i'll post it up
    Wish me luck...

  7. Kris // 1:08 AM  

    Good luck William :P

    In any ponzi scheme, the last to get out usually gets the sh** on their hand

  8. horse // 10:23 PM  

    one of my friend also into this.
    have turn him down when he approachs me for investment.
    hv asked him to withdraw while he is still in profit but his recent one still need to tight down with 6 months.
    when the gold price crash, that is where these companies will be in deep shit.

  9. Kris // 10:30 PM  

    Haha..i turned down this also. I guess there is alot of bogus investmnet out there. If not careful, it looks too good to be true.

    I think you don't need to wait for the gold prices to fall. If the company thinks that it has enough depositor's money, it is time to close shop and run away with all the money. Especially alot of people go for the non-physical gold contract for higher returns.

  10. Anonymous // 11:44 AM  

    Think on the other side, the company simply playing the game like the bank, "leasing". All I know is the company making A lot money just like the bank. When you put your money into the bank, ask banker whether this is your money or is their money. Answer: Of course is banker money. It use the money for lending and using "Your" money to increase their asset in banker portfolio.
    Come back to here, when you buying a gold and the company giving you rebate and you say it is to good to be true. Simply because they can do it, company are doing a good business. See, when you buy a gold, and the company make profit, and the company use the profit to buy more stock and sell it and make more profit.This is just a nature of business. We as a buyer and also an investor, that increase the capital of the company. Now i ask you all, why we the investor cannot get that amount of ROI if the company has large capital on their hand and going expand their capital in exponentially? And as a buyer, i have my gold and not they have money. Remember, this is their capital already.

    If you are not in the game, please don't tell us how bad it is the company, because you see and learn nothing from outside.

    Tell you guys, i was like you all before. But now i learned and see what is happening around the world, how is the bank doing their good business. Not just an gold investment. See it as an profitable business, when people start give money to you, then you are doing an great business, just like the bank.

  11. Anonymous // 12:17 AM  

    I agree with anonymous. I confirm the companies have a good profit generating scheme that is able to consistently make high return so can able to cover the cost of the rebates. Borrow money from bank is more expensive than getting money from investor, so giving rebates is a cheaper method to make alot of money from the business model. Btw, the business model is a secret to avoid competition from people.

    From,
    IamRight

  12. Kris // 11:24 PM  

    @All,

    I have more updated news on this scheme. Stay tuned..

  13. Anonymous // 9:10 PM  

    if it's so good and genuine, I guess they don't need any sales n marketing people to promote the scheme.. all they need to do is set up a shop and there will be investors queuing up for the scheme. am I right? or they could advertise through newspaper, radio etc.. why is this scheme promoted through consultants???? weird isn't it?!?

  14. Kris // 9:22 PM  

    @Anonymous,

    You are correct. Another reason why employing consultant is advantageous.Consultant usually will spread/push the product to their family members, friends, relative. So there is a element of trust for people to plunge in their hard earned money into this scheme.

    Rgds,
    KnowThyMoney

  15. Anonymous // 1:36 PM  

    I believe there are some company doing this just exactly like ponzi scheme like bestino. However, there are some company running gold business quite well too,while paying a reasonable discount they are actually earning money. Its all depends on the boss whether he/she are sincere and honest in doin the business, whether is want to aim for long term customer relationship or just wan to close down the company after they have earn enough. They are running the goldsmith just like other goldsmith like poh kong but they are doing different concept by paying discount. They have different profit margin compared to bank which do gold investment and other goldsmith. If you ask why they are employed sales team to run the business, you probably are not in marketing line. Big communication company like maxis and digi also need sales team even they are oligopoly business in Malaysia! Talk about bank, do they need sales team to promote their loan, credit card? Of course the answer is yes because every business have their own strategies, some business suitable to put their business into advertising, some use sales team, some use both. Why a very good mlm product does not advertise but use word of mouth? Because this is a very good and fast method to sales your product in market instead of advertising where mostly do to create awareness! Anyway, This is my personal opinion, no offense tq.

    From
    Terry

  16. Kris // 9:43 PM  

    Terry,

    Thanks for your opinion.

    I am not against people from marketing, heck i think they are in a good lucrative field if one is hardworking enough. Marketing surely make more money than any salaried worker due to commission. :P

    "Its all depends on the boss whether he/she are sincere and honest in doin the business, whether is want to aim for long term customer relationship or just wan to close down the company after they have earn enough. " --> I 100% agree with you on this.

    KnowThyMoney

  17. Linlin // 11:54 AM  

    What about Genneva Gold company? Pls advise?

  18. Kris // 9:57 PM  

    LinLin,

    I think you must have did your detail analysis and googling of genneva gold to arrive at this website :P

    If you don't mind the risk (you must be prepared to lose 100% if this don't turn out rosy in this kind of scheme).

    There is no free lunch in this world. However there are other ways to invest in the soaring price of gold. I already stated that in my blogs postings aka ETF, local bank gold investments, etc :P

    Rgds,
    KnowThyMoney

  19. Jobless Girl // 11:43 AM  

    Lin, I will opt to buy from reputable company like bank. At least, you know that your investment is safe and secured.

  20. Anonymous // 5:22 PM  

    Looks like a lot of people not yet learn from the Bestino Group fiasco.

  21. Anonymous // 11:16 AM  

    East Cape Mining Corporation? Virgin Gold Mining Corporation?

    How about Public Gold? I saw its branch office in Satok that day...

  22. chriss // 2:29 PM  

    Yeah i was wondering about East Cape Mining Corporation too. My parents-in-law just got into it very recently and had introduce me to it... With alot of scams running around involving gold, i was very very sceptical. Anyone did research into this corporation yet?

  23. Kris // 9:48 PM  

    Chriss,

    If in doubt, just back away from it. There is a lot of scams nowadays promising "too generous" returns.

  24. chris // 1:48 PM  

    i thought the investment cost only RM3675 and u have dividend of 2gram paper golds every month ?

  25. Edward Lim // 12:33 PM  

    sometimes the company collects so much cash, like in the case of genneva, i believe the operators get BNM to close it down, this way no need to honor contracts. their nominees face the music. boss in genneva makes RM5B!!!!

  26. maveric // 7:59 PM  

    @ Kris

    ''Spot Gold Price falls lowest since Jan,2011....to USD1,314 per ounce due to fall in commodities & equities on the US Fed Reserve comments & weak Chinese data''

    What do you think..? Thinking of making some 'beer' money lar & this is figurative speaking too.

  27. Kris // 8:33 PM  

    @maveric,

    Within this 3 months, my opinion that it will continue to fall. Commodities prices is still weak. Malaysia's own palm oil prices also disappointing.

  28. maveric // 10:41 PM  

    @ Kris,

    Gold is below USD1,290/ounce....& still dropping...?!
    KL Bursa is also having a severe case of diarrhoea (down 17 points today )

    What does it mean..?? Is there going to be some serious economic dislocations with local financial hiccups ? What opportunities are there then..?
    If you are flush with cash,what would you do...?

  29. Kris // 12:32 PM  

    @maveric,

    1) Buy some good value stocks and sit tight. Surely more opportunities to come.

    2) Since you are a retiree (alot of free time), scout for good properties, renovate it and rent it out to get passive income. :D

    That what I do if I have alot of free time,which unfortunately I don't.