Investors tell of worry as Dubai ponzi scheme payouts dry up

One Filipina says she took out loans to invest US$50,000 but she says she stopped getting payouts in November and is now worried her investment could be lost.

DUBAI // The net is tightening around rogue investment schemes in Dubai that have been milking hundreds of thousands of dirhams out of low-income workers who were duped with promises of big returns.

Investors who have pumped tens of thousands of US dollars into such “Ponzi” schemes claimed they were facing financial ruin and have reported matters to Dubai courts.

Financial advisers aired concerns in an article in The National in January following a growing demand for investments in foreign exchange funds they said were offering profits that were too good to be true.

That is proving to be the case, with investors claiming that they are owed thousands and that have not been paid since November.

Bogus traders lured investors with the promise of 110 per cent returns on foreign exchange markets, but are suspected of simply redistributing funds from new investors – a Ponzi scheme.

Jennifer, a 26-year-old Filipina who works for a cleaning company in Dubai, invested US$50,000 (Dh183,647) - almost 20 times her monthly wage.

With three of her friends, they invested $25,000 each with one investment group in Dubai in May last year, while she alone invested another $25,000 elsewhere. “For the first five months, they paid out after 15 working days and were never late,” she said.

“After November, things slowed down and we stopped getting paid. We had a relationship manager who said a problem with international banking was causing delays.

“I invested my savings and, like my friends, I’ve taken a bank loan to invest this money.”

Net profits each month would range from between $1,700 and $2,100 and were achieved by trading in foreign currencies, according to the relationship managers.

Investors could not view live trading information, but were given retrospective access to trading performance.

One investor said: “I started my investment with my broker in Media City in April last year. Money was good and trades and profits were conservative until December and January.

“They have a policy in our written agreement that states that when you initiate your withdrawal on the first of the month, you will receive the transfer after 15 working days.

“For two months in a row, they failed to fulfil this policy, and I have started to doubt their credibility. They said the delay would either be the holidays either here in UAE and where their bank is in Australia, or because of banking limitations.”

Financial advisers said that the scams have been widespread for years in Dubai and that investors risked losing everything should the funding for the schemes collapse.

Those found breaking the law can be hit with a three-year jail term and fines of up to Dh30,000.

One company advertising services as a foreign currency trader does supply documents to interested investors and a Department of Economic Development licence is clearly displayed on its literature. This allows it to trade in investment in commercial enterprises and management, but the company has no licence to perform as a trader.

Other documents showed phone numbers that were either out of service or went unanswered.

The UAE bans anyone from opening companies without a licence, but rogue operators continue to break the law, according to Yousef Al Bahar, a lawyer from Al Bahar and Associates who said investors were targeted on social media.

“Customers have to ask about the company with authorities to double-check their licence and what activities they are authorised to carry out.

“Customers who are scammed must report these companies to police and submit evidence.”

Dubai Police said that such complaints should be addressed to the anti-economic crimes department on 800 800243, or email [e-mail].