Hundreds caught up in 35% returns scheme

In a case that has echoes of a ‘Ponzi scheme’, an employee of a state agency is in police custody as the lawmen probe a scheme that offered a 35% rate of return monthly and into which hundreds of persons invested their monies but were not paid their profit since the year began.

At least 300 persons turned up at City Hall, where some of the affected persons convened a meeting yesterday, in an attempt to find out about their money. It was not clear why or how the meeting was held at City Hall and senior city officials said that they had no knowledge of it.

A source, who was present at the meeting, informed this newspaper of the gathering but when this newspaper arrived, it was already over and the names of those affected were being recorded. Many persons at the venue, who were approached, declined to speak about the issue and the persons, who appeared to be in charge, including a pastor of the South Ruimveldt church, which the employee reportedly attended, refused to speak. They said that they did not want the matter to be in the media.

Persons were divided into groups and told to record their names and telephone numbers. A wide range of persons was present, including some from the business sector and they were divided into groups such as those from the West Coast Demerara, West Bank Demerara and East Bank Demerara among other locales. Persons were appointed “leaders” of the groups and they collected the information. People from as far away as Berbice were among those affected. A senior police officer confirmed to this newspaper last evening that he was aware of the matter and said that persons close to him were also affected.

This newspaper’s source said that the persons were warned not to speak to the media, since a businessman wanted to “subsidize” the export scheme, and this would be jeopardized if the media got wind of the matter. Another source said that the person is a close associate of the state agency employee.

This newspaper was told that the state agency employee mobilized the money by saying that he has a business exporting vegetables to Antigua. An associate would then go around informing potential investors about the business and the rate of interest they would get if they invested their money in it.  This has been going on for about three to four years now, this newspaper was told.  Efforts by Stabroek News to ascertain the name of the “export business” were futile.  Persons, who invested, were required to sign a contract.

The source said that the persons were given the option of investing their money and then collecting the interest and the capital at the end of the month or collecting the interest alone. Since the returns were lucrative, many persons opted to collect the interest alone, this newspaper was told. The news also spread by word of mouth and other persons invested in the scheme. Reports coming out of yesterday’s meeting say that one man invested as much as $11.5M while others also invested millions and others varying sums in the thousands and hundreds of thousands of dollars. It could not definitively be established yesterday, how much money was involved but from the indications at the meeting, the source said, it was in the tens of millions. Many persons were holding on tightly to their contracts as they signed their names yesterday.

The source said that in December the investors were informed that the rate of return paid would drop to 20% because the business was affected by the global financial crisis. They were told that although the vegetables were sent out, the market had dipped. Since then, no monies were paid and the investors attempted to get back their money. This, they found, they could not do.

Meantime, the source said that yesterday, they were told that a businessman wanted to “subsidize” the scheme and wanted the contact information for the overseas markets. In time, they were told, if the businessman found it lucrative, their monies would be repaid. Another source said that the businessman is a close associate of the state agency employee.

According to Wikipedia, a Ponzi Scheme is a fraudulent investment operation that pays returns to investors from their own money or money paid by subsequent investors rather than from profit. The Ponzi scheme usually offers abnormally high short-term returns in order to entice new investors. The perpetuation of the high returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors in order to keep the scheme going. High profile persons charged with operating a Ponzi Scheme in the US recently include Allen Stanford and Bernard Madoff.

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