What you can do to avoid investment scams: expert advice

Dubai: Before you are able to spot the telltale signs of a Ponzi scheme, it’s important that you understand what the fraud is all about. Named after notorious US-scamster Charles Ponzi, the scheme functions by paying off new investors with money from old ones. This is precisely what happened at Exential, UTMarkets, MMA, Sunfeast and several other dodgy companies.

“If anyone is considering investing in a scheme that they’ve been advised or even promised will give them very high returns -- it’s probably best to avoid it because it may well be a scam,” warns Sam Instone, CEO, AES International. Agrees Dubai-based professional trader and coach Sara Waqar.

“People should be wary of schemes which guarantee exorbitant returns over a monthly time period and come with the assurance that their principal amount will remain safe. ”While robust forex strategies may produce well over 10 per cent in some months, there is always an element of risk,” she says.

“The best way to avoid such scams is to invest in quality forex education. You should also due diligence and listen to your gut feeling before you commit your hard-earned money to a financial scheme. A rule of thumb of the financial market is: What seems too good to be true, is never true. There is no other interpretation of this evergreen cliche.”

According to Instone, people should take financial advice from a qualified professional rather than someone who cold calls them. “Prevention is better than cure,” says Gaurang Desai, CEO of the Dubai Gold and Commodities Exchange (DGCX). “Investors should go through registered intermediaries and make sure that the company they are dealing with is registered with exchange houses like DGCX which is regulated by federal authorities,” he says.

Instone said his advice to investors would be to buy Andrew Hallam’s book The Global Expatriate’s Guide to Investing and choose how to invest from there. It has a list of all the best investment venues for a range of different nationalities and its wisdom can massively positively impact the investment outcomes people experience. If people don’t want or don’t have time to read it they can find a fee-based independent financial planner who should tell them this. And yes, make sure the business is licensed. Don’t sign a contract without reading it and keep on checking things!

Verifying the credentials of promoters can save you a lot of time, money and heartache,” says Pramod Bothra, director, Evermore Global DMCC.