Ponzi-Style Fraud Caused Billions of Losses to Citizens in Abu Dhabi

The UAE is not unmoved by its share of Ponzi schemes. In recent months, Abu Dhabi has witnessed one of the biggest investment scams in its history, which has affected more than 3000 people. 54 arrests were made in connection with the scam. The alleged mastermind of the investment fraud is an Emirati national while people from other nationalities were among the arrested individuals. Eight people among these 54 were arrested from other countries. with the assistance of Interpol.

According to the prosecutor of the case, Hassan Al Hammadi, the fraud was an intricate Ponzi scheme, which was carried out under the guise of a car-trading business. .According to unofficial estimates, the scam is valued around Dh2.3 billion.

What is Ponzi Scheme?

All those fraudulent investment schemes, where investors are promised considerable high rate of returns and negligible risk of losing money are called Ponzi schemes. This type of investment scam is sustained by generating high returns to initial investors in order to set the stage for acquiring new ones. However, this cycle can’t continue for long since scammers don’t have enough money to satisfy all investors. At this point, scammers shut down their operations, and flee with all the investment money.

A Ponzi scheme will continue to work well as long as scammers are successful in attracting more investors to their scam. ‘High returns with very low risk’ is the bait they use to lure more people into their trap. Most of those fraud investment scams use legitimate transactional channels to earn investors’ trust.

These schemes pay the first investors with their profit share, which encourages others to join their sham investment schemes.

What Happened in Abu Dhabi Ponzi-style Investment Fraud?

Scammers in Abu Dhabi used a second hand car business to disguise their investment scam. This Ponzi scheme actually worked in two parts. In first part, the fraudsters would buy used cars with post-dated checks. In second part, they would sell those bought cars to other victims without delivering them at the time of the deal. They then used this money to pay back investors whose checks are due. This measure was taken to maintain the authenticity of their scam in case any of the sellers tried to deposit the checks.

They then ask buyers to sell the cars through them with high profits. Most of the victims were promised 70 to 100% profits.

Investigations revealed that people who were part of the scam took the possession of all the investor’s capital. They used this money to buy luxury cars and special license plates. Many of the defendants also bought properties and shares with the looted money. One of them even bought camels worth Dh10 million. As of now, Dh53 million cash was recovered from fraudsters’ home and from car showrooms. Dh100 million in different bank accounts was also frozen. Around 395 vehicles have been seized which authorizes have managed to sell for Dh52 million.

How to Identify a Ponzi Scheme?

If you are going to invest your money in any venture, then make sure that you are not throwing it into a shady Ponzi scheme (or any scheme for that matter). There are certain common indicators that the possibility of a shady investment scheme may be materializing.

Guaranteed High Returns

This is the most common feature shared by all the Ponzi schemes. They promise ridiculous returns on investment with 100% guaranty. One should remember that in the real world, no investment can promise 100% assurance, since every investment, if done in real market scenario involves some inevitable risks.

Consistent Returns Regardless of Market Milieu

With any legitimate investment, profit and returns vary according to the respective markets. But most of the Ponzi scams provide their investors with consistent returns to maintain their trust, and to lure more victims into their trap.

Vague Operations

If you ask the details of their business, there are minor chances that they would be able to satisfy you with the description of their business and investment model. They overcomplicate the details so that people don’t bother to know their business details.

How did this Ponzi car scheme spiral into a multi-billion scam that affected thousands of citizens? This is the question government authorities and law-enforcement agencies of the UAE should be asking themselves. There is no doubt corruption exists within some parts of the government. One wonders if they had some connection? Even after all the government recovery process, a large deficit exists and many citizens will never be able to be reimbursed their hard-earned money.

Posted On November 20, 2017