Investment scam on the rise

Fraudsters exploit fear with investment scams or the next ‘hot stock’ based on false rumours


THE economic impact brought on by Covid-19 has led to many people making irrational decisions with “too good to be true” schemes that take advantage of their desperation to make ends meet.

Those who were retrenched or having salary cuts are becoming vulnerable and could fall victim to unethical activities that prey on their fears, said Malaysian Financial Planning Council immediate past president Michael Kok.

He said fraudsters exploit fear with investment scams, such as unrealistic schemes to quickly recover financial losses or the next “hot stock” based on false rumours.

“Victims would ‘profit’ at an early stage of the scheme and they would be advised to re-invest their gain. Ultimately, their investment will vaporise.

“They may also incur additional costs if they want to hire lawyers and take the perpetrators to court,” he told The Malaysian Reserve (TMR).

According to the Malaysian Administrative Modernisation and Management Planning Unit website, in most cases, the victims of these schemes would have lost all their money as they may have used their life savings or obtained loans from banks or cooperatives.

Get-rich-quick Schemes

Members of the public must be careful with investment schemes which promise interest rates, returns or profits which are much higher than the returns offered by licensed financial institutions for their deposits.

Kok said while victims are promised high returns, they may not be given any copies of the complete agreements by the company and that there is no assurance that the operators of such schemes can continue to pay the high returns.

“At the beginning of such schemes, the operators would use money received from subsequent depositors to pay high returns or to repay the principal amount to earlier depositors.

“However, the operators cannot invest the deposits in equally or more lucrative ventures or investments and therefore cannot sustain the high returns or repayment promised to their depositors,” he added.

He said these schemes will fail if they do not continuously receive new deposits.

“At that time, such ‘get-rich-quick’ schemes will collapse, and the depositors or investors would have already lost their investments,” Kok explained.


When times get tough, people are inclined to go to great lengths to make money, perhaps just for the sake of putting food on the table, said financial consultant Shamsuddin Kadir.

He said fraudsters take advantage of their victims’ desperation due to retrenchment, unemployment and other uncertainties caused by the Covid-19 pandemic.

“These scams are downright absurd, with promises of big profits after only six hours of investment.

“For gold investment, a criterion to identify a scam is the absence of fees. There is no such thing because the gold storage box is not free. Better you keep the gold bar at home,” he said.

Lack of Knowledge

Shamsuddin noted that when the ends do not seem to meet, people become easier to convince — even educated people can become trustful.

Before making any drastic decision, Shamsuddin advised people to educate themselves on the type of investment they are considering.

“However, people nowadays do not seem to be bothered by doing some background checks before they invest. They simply put in their money and get scammed.

“In this case, it is worth the trouble. If you read more on investment, you will ask the necessary questions when you are approached by an agent and determine whether it is a scam or not,” he said.

Minimum 5 Investment Portfolios

Shamsuddin said Covid-19 has taught us to not rely on a single source of income considering the higher risk of job loss and the worsening job market.

“People need to have at least five types of investment or savings. While 2020 saw a lower dividend for Amanah Saham Bumiputera (ASB), the rate of return in gold investment in gold is higher.

“Investing in stocks is also easier these days. If people still find it hard, the traditional saving of RM5 and RM20 notes works wonders, too,” he added.

Permodalan Nasional Bhd on Dec 23 announced a distribution payout of 4.25 sen per unit plus an “Ehsan” payment of 0.75 sen for the first 30,000 units for its flagship fixed-price unit trust fund ASB for the financial year ending Dec 31, 2020.


Universiti Putra Malaysia’s Faculty of Human Ecology deputy dean (Graduate Studies and Industry and Community Network) Professor Dr Mohamad Fazli Sabri said besides desperation, greed is also a factor of one falling prey to scams.

He said although people are aware of the high-risk-high-return concept, they opt to risk-free investment due to greed.

“Furthermore, fraudsters nowadays go for volume starting from RM500 investments compared to the RM20,000 minimum 10 years ago.

“When they realise that they were conned, they would not really bother as the amount of RM500 may not be huge,” he told TMR.

Mohamad Fazli said the public must be careful if they are approached by operators by mail, telephone, Internet or in person, because the intention is always the same — to take money from unsuspecting victims for goods or services that they have no intention to provide.

Read our earlier report

SC: Increase in investment scams during pandemic