UAE: Dodgy world of investment scams exposed; how residents are fooled
It’s a critical question: for those enjoying a comfortable life in the UAE, what’s the most likely way to lose it all? Job loss, business failure, relocation? While these are all possibilities, a major threat comes from investing in dubious companies. Each time you put your money into a company promising unrealistic returns, you risk disaster. But if you still have the nerve to make such reckless investments, then you must also be prepared to face the severe consequences of mixing greed with poor judgement.
Figures from Khaleej Times reveal that tens of thousands of UAE residents have lost their life savings to bogus investment plans in recent years. The latest example is BlueChip, which suspended payouts and vanished in March with an estimated Dh250 million, leaving a trail of devastated lives.
Operating from Al Jawahar Centre in Bur Dubai, the company promised a guaranteed monthly return of three per cent on investments. This translates to 36 per cent annually—an unsustainable figure for any legitimate business. Yet, nearly 800 people fell for their scheme, ignoring the old adage: if a money-making opportunity looks too good to be true, it probably is.
The allure of quick riches continues to trap people in its deceitful web year after year. Four years before BlueChip, another company, Acme Management Consultancy—run by BlueChip’s owner, Ravindra Nath Soni, and operating from the same office—vanished after swindling millions through similar deceptive tactics. An arrest warrant is now out against Soni.
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A burgeoning list of victims
Investigations by Khaleej Times reveal that in recent years, over 40,000 UAE residents have collectively lost hundreds of millions of dollars to fraudulent investment schemes. Victims were ensnared by companies such as Heera Group (2019), Sunfeast Infotech (2013), Acme Management Consultancy (2020), SpeakAsia (2013), MMA Forex (2017), Gold AE (2016), UT Markets (2017), Dizabo (2021), and Sky Media and the Metaverse Foreign Exchange (2023). Over 7,000 individuals alone saw their savings wiped out by the Exential Group, majority of whose victims were cabin crew and pilots of local airlines.
Exential’s owner, Sydney Lemos from Goa, is now serving an unprecedented 515 years in a Dubai jail.
Countless individuals have fallen victim to bogus crypto schemes like OneCoin, Habibi Coin, and GainBitcoin, which turned out to be pyramid schemes. Additionally, many people have been lured into dodgy trading platforms after being approached by strangers on WhatsApp, whom they never meet in person.
Dubai-based ex-IT director Pratik Singh lost Dh650,000, Ajman safety trainer Sajjad Khan lost Dh172,000, Sharjah Emirati businesswoman Sara lost Dh1,002,000, and Abu Dhabi’s Rashed Khan lost Dh73,460. Sajjad and Pratik admitted that the scammer—a fraudster who introduced herself as a woman named Coco—formed an online relationship with them over an extended period, under romantic pretences. Unknown to them, they fell for what is now known as the ‘pig butchering scam’.
More recently, a Dubai hotelier lost her entire savings of Dh660,000 to another variation of this scam, now targeting UAE residents en masse. Known as the task scam, it typically involves a website or mobile app that claims you can earn money by completing simple tasks, such as watching a video, liking a post, or creating an order. The catch is that you can only perform a limited number of tasks without upgrading your account.
Yet the burgeoning number of these cases alone cannot convey the personal horrors these fraudulent companies cause. Behind the figures lies a reality of agony and frustration.
An Indian expat living in Al Furjan, Dubai, who lost Dh1 million in BlueChip, is now unable to send his son to school. Another resident, a Filipina who invested in Dizabo, faces the same predicament for her daughter. Valentino, a former relationship manager at BlueChip, invested Dh55,000 into the venture—money now urgently needed for her father’s surgery.
Dubai-based banker Muhammad Irfan and retired Indian bus driver Shahid Khan, from Sharjah, lost over Dh70,000 each to Heera Group, which in 2017 was the title sponsor of the inaugural edition of the T10 cricket league in Dubai.
“I am broke,” said Khan. “I was a bus driver. One can well imagine what I used to make. Everything I saved over three decades in the UAE is gone.”
Predictable playbook
Financial and legal experts say all Ponzi and pyramid schemes, despite posing as legitimate investments, follow a predictable playbook.
They lure investors with promises of guaranteed high returns, often beginning with grandiose launches featuring lavish events and celebrity endorsements to create an illusion of credibility. “Scammers typically have professional-looking websites and documents and may sound very knowledgeable about the securities they are trying to sell,” said Hadiel Hussien, senior associate, at BSA, a Dubai based law firm.
However, the reality is starkly different. After the initial hype, these schemes unravel, with organisers vanishing and leaving investors empty-handed.
Blinded by greed
But why do educated individuals fall into these traps in the first place? The answer can be summed up in one word: greed. Ponzi schemes thrive on the allure of incredible returns, blinding people to the improbability of earning substantial money with little to no effort.
Last year, over 22,000 people from the Middle East, including many from the UAE, fell for Sky Media, an ‘earning app’ claiming partnerships with YouTube, TikTok, and Facebook. It promised a daily income of Dh128 just for watching videos and interacting with posts.
Days after its launch in 2022, Sky Media saw a big jump in sign-ups, especially from the Mena region. The app tempted users with a trial period offering earnings up to $20, with options to withdraw through Binance or USDT. But to earn more, users had to upgrade to VIP levels, which meant putting in investments from $150 to $40,000. People quickly jumped on board.
Now, many users are joining a Telegram group, where over 22,000 people have gathered, mostly from the Middle East. Among the victims are 20 employees of a hotel in Dubai Marina with losses between $2,000 and $15,000. At first, everyone was happy as long as payments came in, but when they stopped, they realised they were fooled. Just before payments froze, the company tempted users with a limited-time offer, promising the chance to win iPhones, laptops, Audis, BMWs, and cash rewards.
Jhocy Llena, a Filipina expat in Dubai, and her friend collectively lost nearly $57,000 (approx. Dh209,000) to the scheme. Elena Topliceanu, a former Dubai hotel employee from Romania, said Sky Media was introduced as a marketing company serving clients seeking likes and subscribers for their media channels.
However, the lessons were quickly forgotten when, a couple of months later, an undisclosed number of residents fell prey to Metaverse Foreign Exchange (MTFE). MTFE promised an earnings bonanza of $40 each week with just a $500 investment. People invested their savings, sometimes resorting to selling valuable household items or pawning them. All it took was downloading an app, creating an account, and depositing cryptocurrency. Inviting others promised even more lucrative rewards. The MTFE app’s user-friendly interface welcomed investors from all walks, including those without formal education.
Those who recruited a certain number of investors were given the title of CEOs. Initially, each CEO received $1,800 to lease an office. Profits were distributed weekly at hotels, accompanied by lavish meals. At these events, attendees learned how to invest in MTFE through cryptocurrency. Sri Lankan expat ML Silva, who attended one such event at MTFE’s now-closed Dubai’s Al Mamzar Centre office, reported losing $10,000.
To bolster its facade of legitimacy, MTFE appointed brand ambassadors and CEOs across various countries, including the UAE. However, this illusion was short-lived as the scheme collapsed. Traffic analysis of its website revealed that most visitors hailed from Asian and African countries such as Sri Lanka, Bangladesh, India, Nigeria, and the UAE, with nearly 30 per cent from other parts of the world.
MTFE’s Dubai Support Team alone boasts nearly 10,000 members on Facebook, while their Telegram channel has over 71,000 subscribers. Among the victims is Dubai’s Amjad Ali, who invested $25,000. MTFE’s deceit didn’t end with disappearing with his funds; they went further by plastering his cellphone number as their contact at their supposed Dubai office, leaving him besieged with calls from irate investors.
In recent years, UAE residents have also been losing money to forex and stock trading platforms that have proliferated across the country. These platforms use aggressive telemarketing tactics, flooding residents with persistent cold calls and overwhelming them with technical jargon. Sales agents send their schemes on WhatsApp and often insist on in-person meetings to present inflated or misleading investment projections. Despite promises of substantial returns, these agents are primarily focused on closing deals to earn their commissions, leaving many investors with significant losses.
Choosing reliable brokerage firms
Ahmed Azzam, an analyst at Equiti, a UAE-based global broker licensed by the country’s Securities and Commodities Authority (SCA), urges investors to choose licensed brokerage firms. “Just because the currency market is traded online and is decentralised does not mean it is not subject to regulatory bodies, which play a key role in protecting customer funds,” said Azzam. “The strength of brokerage firms depends mainly on the regulatory authorities and controls they are subject to. The stronger and more reliable the regulatory bodies are, the more confidence investors have in their brokerage company.”
Among the most powerful regulatory bodies globally are the CFTC and the NFA in the USA, the FCA in Britain, FINMA in Switzerland, ASIC in Australia, and the Securities and Commodities Authority (SCA) in the UAE. “An investor or a person interested in trading should not put their money in a company that lacks a license from a reputable regulatory body,” he warned.
Haider Hussein, senior associate at BSA law firm, emphasised the importance of self-protection. “Individuals should always verify the credentials of investment advisors or companies,” he stated. “Ensure they have the proper licensing to sell securities, offer investment strategies, or provide investment advice.”
He advised confirming with relevant authorities whether these companies are registered with regulatory bodies such as the Dubai Financial Services Authority (DFSA), the Financial Services Regulatory Authority (FSRA), the Securities and Commodities Authority (SCA), the UAE Central Bank, or the relevant securities exchange (Dubai Financial Market or Abu Dhabi Securities Exchange).
UAE authorities have repeatedly issued warnings against deceptive social media ads promising quick and easy money. Police departments across the Emirates have launched extensive campaigns on various platforms to caution the public about fraudulent websites, dubious social media links, and misleading online ads that prey on individuals with promises of lucrative returns.
Key questions to ask
Nigel Sillitoe, CEO of Insight Discovery, a Dubai-based firm specialising in markets, reckons investment scams in the UAE are on the rise, partly fuelled by the influx of wealthy expats moving to the region. He emphasised the importance of careful consideration when choosing a wealth manager from a regulated firm. “Before committing, it might be worth asking a few key questions.”
1) Inquire about the wealth manager’s background and qualifications.
2) Discuss their investment philosophy, asset allocation, and risk management strategies.
3) Establish clear communication and client relationship expectations.
4) Clarify the fees and costs involved.
5) Understand how they measure investment performance and the benchmarks they use.
Legal recourse
Instances of victims recovering their money from investment frauds modelled on Ponzi and Pyramid schemes are rare. “Restitution is a long and arduous process, but it is the only path to recovery,” said Farhat Ali Khan, a partner at CMI, a UAE-based legal consultancy firm advising BlueChip victims.
Khan underscores the legal avenues available to victims of financial scams, stressing that they can seek justice through civil proceedings in the appropriate court. “Victims have legal recourse to pursue justice,” he asserts, viewing losses as potential cases of criminal breach of trust and fraud. Khan advised that scammed victims should report the incident to relevant regulatory bodies, file a police complaint with all pertinent documentation, and pursue civil litigation to recover their funds. “If the scammer is identified through the police investigation,” he added, “the victim must file a civil lawsuit to attempt to recover their funds.”
8 red flags to watch out for
1. Unachievable returns, like promising 3 per cent monthly, or using terms like ‘guaranteed’.
2. Lack of senior management profiles on the company website.
3. Absence of regulatory information on the website.
4. Engagement of influencers, particularly unqualified ones.
5. Employment of cold calling tactics.
6. Presence of aggressive salespeople.
7. Limited-time offers.
8. Active social media presence without allowing comments.
mazhar@khaleejtimes.com
[Editor’s Note: Bluechip Computer Systems LLC and Bluechip Real Estate Brokers are not associated with the BlueChip Group mentioned in the article.]
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source: khaleejtimes
