Beware of Ponzi Schemes

Datuk R. Ramanan Warns the Public on Ponzi Scheme

Power, greed, and the love of money are the root of all evil and the downfall of humanity. Once we allow ourselves to slide down that slippery slope, our judgment becomes distorted, ethics compromised, and our style of management blinded by ambition.

Dato’ Ramanan Ramakrishnan Teaches How To Verify The Signs Of An Investment That May Be A Ponzi Scheme

In a recent scandal that shook the nation in Malaysia, a large group of investors fell into a snare of an alleged forex scam that was uncovered by Dato’ Ramanan Ramakrishnan, a renowned social advocator against Ponzi Schemes.

Dato' Ramanan Ramakrishnan MIC
Dato’ Ramanan Ramakrishnan

The fraudulent operation was run by a pair of notorious masterminds, Dato’ Seri and his wife who operate a dubious foreign exchange company and make wild promises to their investors. All victims claimed that they were promised daily returns which they have yet to receive. The victims began to realize they were tricked into a Ponzi Scheme when they did not see the promised returns, after handing over their savings in good faith to the wrong hands. Some even reported that they had received some initial returns which enticed them to part with more of their money since they thought that it would create more wealth for them.


Since late last year in 2016, the press secretary to the Senate President of Malaysia and former treasurer-general of MIC, Dato’ Ramanan started a movement to bring justice and confidence for these unfortunate victims. Dato’ Rama appealed for victims to come forward to enable him to push for the fraudsters to face the law.

What is a Ponzi Scheme?

A Ponzi scheme relies on new money coming in to pay existing investors, but with one exception – the investors do not know about it. They’re being lied to, led to believe it’s a legitimate investment. This is what Bernie Madoff, a former chairman of NASDAQ got away with for decades. He convinced people he generated returns by trade when in fact he was simply using money from new members to pay existing ones.

History Of Ponzi Scheme

The most notorious fraudulent investment scheme in history began in Boston, America, where Charles Ponzi broke the record and became the poster child of America’s most infamous financial scam in 1919. His scam was so big that schemes like his still bear his name today. Charles Ponzi caused a mountain of trouble in nine short months between December 1919 and August 1920. Ponzi promised investors a 50% return in just 90 days. People were so eager to invest and capitalize on this promise that they would wait for hours in front of his office in a long queue stretching to the street next door. In total, Ponzi stole between 15 and 20 million dollars worth of money from his investors, which in today’s value would be worth about 200 million dollars!

Ponzi Schemes In Other Countries


In the early 2000s, the head of a Japanese bedding firm, Kazutsugi Nami was responsible for the biggest scam in Japanese history. He defrauded more than USD1.4bn from an estimated 37,000 people. The victims were promised 36% annual return on investment. He also collected funds in exchange for the firm’s currency called ‘Enten’, which was an invention of his own digital currency. ‘Enten’ was written with Japanese characters for yen in heaven. When he was arrested in 2009, he was sentenced to 18 years in jail in 2010.


On December 11, 1935, con artist Victor Lustig was involved in one of the most ingenious con jobs ever imagined. He sold the Eiffel Tower not once, but twice. Back in the 1920s, the Eiffel Tower was badly in need of repair. There was some discussion in the government about ripping the structure down rather than repairing it. Lustig saw the opportunity and printed up phony credentials claiming that he was a government official in charge of selling the rights to tear down the tower and all the way to scrap. He invited a group of scrap iron dealers to discuss the issue and told them that the government had already made the decision to tear down the tower and wanted to keep it quiet for fear of public outcry. The dealers bought Lustig’s story and promptly submitted bids to buy the landmark. During negotiations, Lustig accepted a handsome cash bribe from one of the dealers to secure that deal and then he went off to Austria. While in Austria, Lustig read the papers closely for reports of his scam. As time passed, nothing ever appeared. Lustig realized that they must’ve been too embarrassed to report the incident. So Lustig packed his bag and headed back to Paris, where he pulled the exact same scheme and sold the Eiffel Tower a second time. This time he wasn’t so lucky. He got reported to the police and had to flee to the United States.

What Are The Signs Of An Investment That May Be A Ponzi Scheme & How To Verify Them?

Embodying the idea that if it seems too good to be true, it probably is. Almost every investment carry carries some degree of risk. Generally, the greater the potential return, the greater the risk; whereas promises to the opposite raise huge red flags. It is natural for the value of an investment to fluctuate. Be wary of any investment that has a pattern of consistent returns.

In Malaysia, Bank Negara has a website with a list of companies and websites that are neither authorized nor approved by the relevant laws and regulations administered by the central bank. Basically, many unregistered companies that are not approved by Bank Negara laws are involved in gold trading, forex trading and what it calls unlicensed activities. So be aware of unregistered companies and salespeople, which you can verify through Bank Negara website.

Nevertheless, avoid investments you do not understand or can’t get complete information on. This is an obvious sign of fraud. Aside from that, statement errors, inconsistencies, and excuses for lack of written information on the investment are also red flags. Trouble receiving a payment or withdrawing your investment should worry you as well.

As with all investments, doing your own research is essential in helping you avoid Ponzi schemes. Consult an independent third-party such as a registered advisor, lawyer or accountant and you can avoid investing in a Ponzi scheme.