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         Aug 4, 2010

         No such thing as high returns, low risk
         Beware of 'easy money' promises when it
         comes to investment schemes
         By Lorna Tan, Senior Correspondent

         THOSE who lost money in the Ponzi-like scheme allegedly run by Sunshine Empire will be relieved to
         see justice meted out to its designers. For the rest of Singapore, the episode contains lessons on how
         to spot a scam.

         Last Friday, Sunshine partners James Phang and Jackie Hoo were sentenced to nine and seven years'
         jail respectively for operating the scheme. Phang also got a $60,000 fine. His wife Neo Kuon Huay
         was fined $60,000 for falsifying payment vouchers together with him. They are appealing against the

         Sunshine will go down in Singapore history as the biggest Ponzi-like scheme operated here, drawing
         $180 million of funds from thousands - just how many is moot, given that Phang had earlier said
         there were some 20,000 'members' from Singapore, but the judgment noted that the actual numbers
         could not be ascertained.

         Set up in July 2006, Sunshine Empire offered so-called 'lifestyle' schemes. 'Investors' put in sums
         ranging from $240 to $12,000. In return, they were promised high cash returns and benefits in kind,
         such as redemptions for goods and free telephone talk-time. Some did get attractive returns early on,
         but most lost their money.

         But how is a potential investor to know if a promised investment scheme is bona fide? Here's a
         commonsensical guide:


         Making money was made to appear easy by Sunshine: Just sign up, recruit others, sit back and enjoy
         the quick gains.

         'Members' included retirees, working folk and droves of students who recruited their friends. They
         were won over by three things: Sunshine's plush Toa Payoh Central office, its affiliated businesses,
         and its adviser James Phang who reportedly exuded confidence when promising investors they would
         make fast money.

         In fact, some members paid to attend 'exclusive' three-day 'leadership programmes' at Sunshine -
         presumably to learn the techniques of exuding confidence and getting more people to sign up.


         Sunshine is not the first Ponzi-like scheme here and it probably will not be the last. In the early
         1970s, there was the Gemini Chit Fund. Investors recovered only 28.72 cents for every dollar they
         invested in the fund. The firm was wound up in 1972.

file:///C|/Users/saroja/Documents/ST0404.html[5/8/2010 7:35:14 AM]

         In a Ponzi scheme, people are enticed into investing by the promise of high returns. The returns,
         however, are paid out of funds from new investors entering the scheme. It all goes swimmingly until
         the flow of new funds dries up. This happens when the operator flees with the money or when he
         can't get enough new investors to pay off older ones.

         So if you are asked to invest money and rope in others with you, the warning bells should ring: Ponzi


         Ask if the person offering an 'investment' is working for an entity regulated by the Monetary Authority
         of Singapore (MAS). Under MAS rules, only professionally trained people can provide financial
         products and services.

         If you deal with an unregulated entity, you will not enjoy the protection of MAS laws, such as those
         that require the disclosure of information. If the firm is not in Singapore, you may not even be able to
         take action against it.

         Check the Financial Institutions Directory at for a list of approved financial


         MAS gets information on people who may be conducting financial activities under its jurisdiction
         without proper authorisation. For example, overseas scams may target Singaporean consumers by
         giving them the impression that they are operating here. They may use names similar to that of
         entities regulated by MAS.

         Check MAS' Investor Alert list, which details the entities it has not authorised to conduct regulated
         activities here. You can find it on the national financial education website

         Sunshine was placed on this list in September 2007. It was also on Malaysia's alert list. The Straits
         Times ran an article about Sunshine in October 2007. Still, people continued pouring money into it till
         the police moved in a month later and halted the firm's operations.

         5. QUESTIONS TO ASK

         In 2007, MoneySense issued a consumer alert to caution consumers against pie-in-the-sky investment
         schemes that consumers should steer clear of. Here are some questions you should ask:

           Is the provider regulated?
           What are the returns dependent on? Is the return being paid from new inflows of money or from
         actual investments?
           When will the returns be paid? What is the amount and how much is guaranteed? Who provides the
           How long must you stay invested? If you want to withdraw your money prematurely, what are the
         penalties and procedures?
           How can you monitor the performance of the investment? What reports will you receive and how


         Bear in mind a universal concept in investing known as risk-return trade-off: A low level of risk is
         associated with a low potential return, while a high level of risk offers high potential returns. An
         investment product promising high returns usually means there is a higher risk of you losing the
         capital. There is no such thing as a zero-risk, high return investment.

file:///C|/Users/saroja/Documents/ST0404.html[5/8/2010 7:35:14 AM]

         So if anyone offers you high returns and zero or low risk, warning bells should ring: Scam alert!

file:///C|/Users/saroja/Documents/ST0404.html[5/8/2010 7:35:14 AM]

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