In the scheme, clients pay Dh3,000 to reportedly get 15 grams of 22k gold bullion. Image Credit: Facebook

Dubai: Authorities in the UAE and the Philippines have cautioned Filipino residents here from investing in gold in an online store that claims to have a base here.

Hundreds of residents have been inviting other residents to invest in Emgoldex, or ‘Emirates Gold Exchange’, allegedly an online store for gold, for months now. Here, clients can buy and sell gold bars weighing one to 100 grams.

Through its Goldex programme, clients pay Dh3,000 to reportedly get 15 grams of 24k gold bullion that can be “delivered” in the UAE or stored in Germany.

To receive a “credit bonus” of Dh15,000, a client needs to refer two more clients and fill a table with 14 clients under him.

In the scheme, clients pay Dh3,000 to reportedly get 15 grams of 22k gold bullion. It is a client-referring system where if a client wants to receive “credit bonuses” in as little as two weeks, he can follow the ‘1 + 2 formula’. This means he needs to invite two people to invest in gold and pay Dh3,000 each, and the process continues. Once a client completes a “table of order” with four levels and 14 people under him, he can exit and receive a pay-out of Dh15,000.

Pyramid scheme?

It resembles a multi-level marketing or pyramid schemes, only the terms are different and the investor can “exit” once he reaches the top and start a new table again.

But the way to earn monetary rewards is just the same — by inviting other investors or clients. There is no clarity about where this so-called credit bonus of Dh15,000 awarded to clients is coming from.

A YouTube video explaining the scheme and shared by some “Emgoldex clients and team leaders” on social media claims that Emgoldex’s parent company, the Germany-based Gold and Silver Physical Metals KG, registered an online store in Dubai with the Dubai Multi Commodities Centre (DMCC) in 2010.

The video showed a trade licence, certificate of incorporation, and certificate of registration of Emgoldex.

No license in Dubai

When contacted by Gulf News, a DMCC spokesperson denied that the companies [Emgoldex and Gold and Silver Physical Metals KG] are registered with the government regulator of commodities trading.

“Emgoldex is not a DMCC-licensed company. DMCC has taken steps to prevent further misuse of our name.”

The video also claimed it is the online portal of a big Dubai-based gold manufacturing company duly licensed by the DMCC. Gulf News called the company and an official requested that its name not be mentioned in this article as “we are not having any ties with Emgoldex. It’s all a lie”.

Gulf News also contacted the Dubai Gold and Commodities Exchange (DGCX). Gaurang Desai, Interim CEO of DGCX, said: “Emgoldex or its German parent company. Gold & Silver Physical Metals KG, are not registered broker members or partners of the Dubai Gold and Commodities Exchange (DGCX).”

“DGCX is regulated by the Securities and Commodities Authority (SCA) in the UAE. All the broker members of DGCX are licensed by SCA and are required to maintain strict compliance with SCA-approved DGCX by-laws.”

SCA’s list of registered gold traders or brokers does not include either of the companies as well.

Mohammad Rashid Ali Lootah, Executive Director of Commercial Compliance and Consumer Protection (CCCP) sector in the Department of Economic Development (DED), Dubai, said neither of the companies is registered with DED.

He said no online store, especially those that sell or trade gold, can operate in Dubai without a licence. The penalty for doing so varies but starts from Dh5,000.

Gulf News found that the purported office of Emgoldex in Jumeirah Lakes Towers belongs to a consulting company. The receptionist of the company said Emgoldex used to rent that space but they “left for Russia some time ago”.

Gulf News repeatedly tried to contact a team leader in Dubai who claimed to be from Emgoldex to get a comment. He said he would meet all the team leaders of Emgoldex here and is just “waiting for approval from the main office in Germany on whether we would comment or not”.

Don, another team leader who refused to have his last name published, said: “We are all clients. We refer and invite other clients. We do not recruit.”

A spokesperson from Emgoldex in Seychelles told Gulf News via email that these ‘Emgoldex clients and team leaders’ are fraudulent operators who are using their name without authorisation.

“As a business, Emgoldex has suffered extensively at the hands of persons passing themselves off as Emgoldex — using our name, and brand without consent and in a manner that is harmful to ourselves and others,” the email read.

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“This behaviour has been immensely disappointing to our company and so we continue to explore new means of addressing this behaviour. Part of this is a decision to move the business onshore from Dubai to Europe, to make use of continental and oftentimes domestic regulatory laws to enforce best practice.”

The spokesperson said the video was “neither prepared by our company nor sanctioned by our company. We are seeking to have this video removed”.

When confronted with this statement from Seychelles, Don said: “There are those who don’t follow the programme as per its terms and conditions, taking advantage of the programme, and are not giving the full amount promised in the programme.”

Countless investors

Here's where the problem lies -- there is no way to verify which client or team leader is genuine.

Don could not give an exact number of Emgoldex clients but said “they are countless”. They operate individually and often conduct their business presentations and payouts in restaurants and hotels.

“Yes, we are taking risks in doing this and so far we have no complaints because Emgoldex has fulfilled their promises to us.”

The Philippine consulate-general said it considers this scheme “illegal solicitations” as advised by Manila’s Securities and Exchange Commission. The consulate also warned those who participate in it can be held liable for fraud.

“The consulate reiterates its public advisory dated May 17, 2015 regarding the Securities and Exchange Commission Disclaimer dated February 26, 2015, which underscores the need for the Filipino public to refrain from peddling, soliciting, or participating in investment schemes of or on behalf of unregistered and unlicensed companies such as Emgoldex Philippines,” an advisory sent to Gulf News read.

“It is most unfortunate that there are still people who would not heed or disregard these official notices/advisories, be willingly lured into investing in this scheme and recruit their fellow Filipinos in the Philippines abroad.”

The scheme is relatively new in the UAE. Emgoldex clients on social media appear to be happy to get their payouts easily. So far, there are no reports of anyone not getting his payout.

But residents who declined to invest in Emgoldex said it is only a matter of time until the market gets saturated and the chain breaks.