Safe investment: How to avoid ponzi schemes like 'Double Shah' in Pakistan?

Ponzi Schemes Nov 02, 2020

"Double Shah is a good man, he helps the poor. The police have caught him under a conspiracy, he will come and overwhelm.
In 2007, when police arrested Sibtul Hassan alias Double Shah on charges of defrauding people of double the amount, a man who took part in protests against the arrest in Punjab cities, particularly Gujranwala and Wazirabad, told and had recorded this statement.
Sibt al-Hassan was in police custody, and an investigation by the National Accountability Bureau (NAB) made it clear that he had deceived the public, but it was the same people who opposed his arrest. Shah Be Kasur's slogans were chanted on the streets demanding his release.
But why was this happening?
According to NAB, Sibatul Hassan was a school teacher. Then he left his job and went to Dubai for a while and returned home after earning millions of rupees. He was respected in the society. It was rumored in the local media that they had doubled the money in a few weeks or months with 100% profit to the citizens who made initial investments in the scheme.

Probably a factor as to why they're doing so poorly - and why they're doing so poorly - and why they're doing so poorly.
Sibatul Hassan was later convicted of forgery and his plea bargain with the NAB was settled, so some people got their money back but some lost their entire life savings forever.
Fake 'ponzi schemes' in the name of investment
In Pakistan, as in the rest of the world, various fake schemes have come to light from time to time, offering loans, housing plots, insurance, big prizes or jobs in exchange for less money.
A ponzi scheme is an investment offer in which a company or individual deceives investors to grab their money.
These schemes are still known today as Charles Ponzi, a well-known American counterfeiter. Charles Ponzi had amassed thousands of people in the 1920s on the promise that he could make them 50% profit in 90 days.
In a type of ponzi scheme called 'pyramid scheme', counterfeiters collect money from new investors and distribute it to old or initial investors to give them the impression that they have made a profit. Instead of investing in this money, more investors are invited so that this trend can continue.

In a 'pyramid scheme', counterfeiters collect money from new investors and distribute it to old or early investors to give them the impression that they have made a profit
For example, in the 1990s, a bank called BCCI was accused of embezzling billions of dollars with no record of customer deposits, fraudulent payments and shares. Was illegally bought and sold.
Another example is the Taj Company in the 2000s, in which the government of Pakistan took steps to provide relief to its victims. The company was the publisher of the Qur'an and thousands of people trusted it and gave it to them for their life savings.
The Securities and Exchange Commission of Pakistan (SECP) is the body that oversees financial and business institutions. In the past, it has identified a number of companies, including Tines, Unico, BH Online Jobs, Corporate Automobiles, Best Day Solutions, where dubious investment activities take place and people are deceived through direct or indirect ponzi schemes. Is.
In a recent public awareness statement, the SECP said that people should be careful before participating in investment schemes and be aware that any scheme can be counterfeit, especially If it is promising big profits with less loss in return for receiving money from the people.
According to the SECP, various counterfeiting schemes have been observed in Pakistan, some of which are as follows:

Pyramid Schemes: In which early investors are given profits by new investors in order to trap as many people as possible.


1. Collect money from people in the name of online jobs

2. Demand for deposit of money from people on promise of car, motorcycle, home or other electronics items in installments

3. Opening a banking business without a valid license

4. Fake job advertisements involving some testing companies

5. Any scheme in which a company demands large sums of money from customers in advance

According to the SECP, many companies lure people into making huge profits and use local newspapers, social media and websites to promote them.
"According to the law, such schemes, activities and business are not allowed. No company other than (licensed) banks can ask people to deposit money.
"In the past, the SECP has initiated legal action against companies involved in suspicious activities."
But there is one more thing that needs to be said. If a company is registered with the SECP, it does not mean that it can charge people for a fake scheme. The watchdog says people should also be careful about their capital and avoid being misled by a company or individual.

How to make a safe investment

According to the SECP, there is risk in every investment opportunity. People should monitor their investments regularly to avoid counterfeiting. They should also take care of the ups and downs of its value to avoid damage.

The shareholder should be provided a copy of the annual business report, balance sheet, profit, loss and auditor's report.
They can participate in the annual general meetings of the business directly or through someone they are investing in.
They should be given timely profit after approval in general meetings and other benefits such as shares, bonuses etc.
Any investor can contact the SECP and ask them to investigate the company
In the case of a stock exchange, investors can see if their agent is affiliated with a SECP-registered broker company. Only registered brokers can invest in registered exchanges (such as Pakistan Stock Exchange) by receiving money from people
People can verify before investing whether the company is licensed. It can also be seen in which sector this company invests so that safe and transparent investment is possible with your money.

'Record of payment required instead of cash'
"Before investing anywhere, we need to see that it is a company, not an individual," said Maha Jaffar Butt, director of research at financial advisory firm Capital Stack.
"Whether someone is your relative, friend or co-worker in the office, you can ask them before investing where your money will be used."
"You can go to the company's office yourself, you can satisfy yourself here," she says. The SECP website has a list of registered companies. There is also information on whether there is an investigation against the company.
According to him, the second rule is, "You should never give cash to anyone." Always deposit the money in a bank account so that the payment can be traced.
She says people should have documentary evidence of payments during investments.


"It's a good idea to invest in a company you haven't heard of for the first time. Or in the case of a new company, it is run by experienced people.
She says that nowadays the annual financial report of any company can be obtained in which their performance can be reviewed and it can be ensured that it is not a fake scheme.
"If you are investing with a broker, you can deposit money into your CDC account. The CDC is a central watchdog that guarantees your money and shares.
"Using these facilities, you can keep track of your money and shares on a daily basis," says Maha.
According to him, if you give cash to someone, that is, the money has not been transferred to an account, then it is difficult to trace them.

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