The real McCoy or just fool's gold?

[Musicwhiz]

Another gold company featured today. This time it's Genneva. Another scam cum Ponzi scheme?

Dec 25, 2010
The real McCoy or just fool's gold?
Gold dealer's business model attracting fans and detractors alike
By Francis Chan, Companies Correspondent

A MALAYSIAN gold dealer operating in Orchard Towers is attracting plenty of investors - and some online scrutiny - thanks to the generous terms it offers.

The firm, called Genneva, has an unusual business plan: It sells gold at a 2 per cent discount to the prevailing market price, with a guarantee to buy it back 30 or 90 days later.

Its business model seems to be counting on gold maintaining its steady rise.

The market has certainly been on its side, with gold prices climbing 25 per cent this year with no signs of slowing.

Genneva, which started in Singapore in 2008, is licensed by the Police Licensing Division to deal in second-hand jewellery, gold and white gold, but it is not regulated by the Monetary Authority of Singapore (MAS).

A check with the Accounting Corporate and Regulatory Authority shows the firm has a paid-up share capital of $500,000. It has three Malaysian directors Marcus Yee, Ng Poh Weng and Chin Wai Leong, and a Singaporean director Leow Wee Khong.

A senior staff member who did not want to be named told The Straits Times that the gold sold to Genneva's clients is priced at rates similar to those at local goldsmiths and jewellery stores, and not on spot prices in global markets.

'We give them a 2 per cent discount from the prevailing market price, and they take the gold with them. We don't hold the gold for them here,' he said.

Clients have the option of selling back the gold to Genneva after a 30- or 90-day period for the price they would have paid without the discount. This means they make a 2 per cent return. They can also hold on to the gold and sell it on the open market.

Another senior Genneva employee at the office said the gold is mainly procured from distributors here like United Overseas Bank. Genneva selects gold randomly after it takes delivery of the metal for testing and certification at the Singapore Assay Office every fortnight.

'We can't certify every piece of gold we get because the tests conducted by the Singapore Assay Office is a destructive test, meaning they have to drill or scrape samples for testing,' he explained.

Genneva's offer has been derided by some netizens as being too good to be true. Others questioned how firms like Genneva can turn a profit offering such high returns.

The Straits Times understands from a source familiar with such business models that the gold price is usually marked up to include other costs, such as shipping, testing and certification, security, insurance and even marketing.

The mark-up could range between 10 per cent and 15 per cent.

Recently, a gold dealing firm called The Gold Label (TGL) hit the spotlight when it was placed on the MAS' Investor Alert List. TGL - which has no known connection to Genneva - sold gold to customers, promising a return of up to 9 per cent over a six-month period. But it reportedly had cash-flow issues and filed a notice to appoint liquidators for voluntary winding-up in October.

Genneva's parent unit in Kuala Lumpur is also in the regulatory spotlight. It is under investigation by Bank Negara Malaysia for conducting illegal deposit-taking activity.

However, someone at the Genneva office in Singapore told The Straits Times, on condition of anonymity, that it remains confident no further action will be taken by the Malaysian authorities.

Malaysia's central bank is expected to release the findings of its probe in the first quarter of next year.

Customers The Straits Times spoke to at Genneva's service centre in Orchard Towers earlier this week did not seem fazed by the Bank Negara probe or by concerns raised on the Internet.

For clients like Mr Christopher Tan, 39, owning an actual piece of the precious metal makes them feel secure about where they are putting their money.

'I hold the physical gold bar, which has an inherent value, (but) to me this is calculated risk,' he said.

Investor Andrew Tay, 29, said the firm kept its promise of buying back the gold.

A veteran financial adviser, who did not want to be named, said that, as with all investments, investors need to consider the risks involved and not be overwhelmed by the promise of high returns.

'Gold looks good now, but so did the 5 per cent returns or so offered by products like Lehman Minibonds and other credit- linked notes in their heyday,' he said.

Gold prices have steadied in recent months to US$1,384.38 per ounce as of yesterday, after soaring to a high of US$1,423.75 on Dec 6. A year ago, it was at US$1,105.40.

franchan@sph.com.sg

[arthur]

I highly questioned the journalistic std of our reporters. Why on earth couldn't they be bothered to check up on this company before writing a piece on it? They could have lead to ignorant investors unknowingly went for this Ponzi scheme.
Is this the best ST reporters can do? Beside putting unfavorable pictures of opposition parties and writing ghost letters in forums to support ridiculous govt policies which nobody in the right mind would even be bothered to in the first place?

(SINGAPORE) A gold company in Singapore which is promising up to 24 per cent returns a year has become something of a talking point among some netizens.

The generous return is offered by Genneva Pte Ltd, which began operations in Singapore last year and has offices at Orchard Towers and Far East Shopping Centre.

The firm is also connected to a Malaysian company which is currently being investigated by Bank Negara Malaysia.

Genneva here in Singapore is licensed by the Police Licensing Division to deal in second-hand jewellery, gold and white gold. It offers customers full refund at their original purchase prices as well as a 2 per cent discount every month, according to its website.

According to a Genneva salesperson, the customer can walk back into the firm's office every month to get a cheque or cash for 2 per cent of the purchase price. For a 1,000 gm goldbar which costs $55,000, the 2 per cent amounts to $1,100 each month.

The firm sells the gold at a premium of at least 15 per cent over the prevailing market price.

Customers can also sell their gold items back at the end of one or three months at the original price including GST.

'The only risk here is if the company stops operating but you still have the gold which can be sold to any goldsmith or pawnshop,' said the Genneva salesperson.

The firm buys gold from reputable banks here, though if a customers asks specifically for gold from a particular bank, it may not always be available as it may be sold out, he said.

On the Bank Negara investigation, he said that it is common for the central bank to investigate companies if there are complaints.

Attempts to talk to the management of Genneva Pte Ltd has not been successful though one employee said the company is not related to the Malaysian company Genneva Sdn Bhd other than that they share some common shareholders and directors.

On the genneva.com.sg website, under the organisation chart, links between the Singapore and Malaysian companies are shown.

The website also said that the founder is Malaysian Ng Poh Weng who is the production director of Genneva Sdn Bhd.

The Malaysian company, which began operations in 2007, offers a similar investment model - a generous 2.5 per cent return per month with full refund at original purchase prices.

A Bank Negara Malaysia spokeswoman told BT that Bank Negara Malaysia is currently conducting investigations into Genneva Sdn Bhd under suspicion that it is conducting illegal deposit taking activities in breach of Section 25(1) of the Banking and Financial Institutions Act 1989 and Section 4(1) of the Anti-Money Laundering and Anti-Terrorism Financing Act 2001.

While under investigation, the accounts of the Malaysian company have been frozen as the assets have been seized by Bank Negara Malaysia.

Charles Ho, president of the Singapore Jewellers Association, said he is sceptical of the return offered by Genneva Pte Ltd.

It's the first he's heard of a gold company with this business model, he said. More people will jump into it if it was so easy to generate over 24 per cent profit margin, he added.

'How do they generate over 24 per cent per annum to cover their profit margin, which they have to in order to pay you 24 per cent?' he asked.

http://www.cpf.gov.sg/imsavvy/infohub_ar...7}&print=1

______________________________________________________________________


Four hit with 796 charges

KUALA LUMPUR: Three directors and a former director of a gold invest­ment scheme company have pleaded not guilty to 796 money laundering charges involving millions of ringgit.

The directors of Genneva Sdn Bhd – Ng Poh Weng, 60, face 263 charges involving RM185mil while Marcus Yee Yuen Seng, 58, faces 234 charges amounting to RM153mil and Chin Wai Leong, 34, face 210 charges involving RM212mil.

Former director Liew Chee Wah, 56, faces 89 charges involving RM31mil.

The four men had allegedly issued and cashed 364 cheques from illegal proceeds at a bank in Jalan Ampang between July 20, 2007, and Dec 6 last year.

DPP Mohd Haziq Razali asked the court to set bail at RM4mil each although it was a non-bailable offence, adding that the amount involved was huge.

However, counsel K.K. Wong, acting for Ng, Yee and Chin, said his clients were willing to report to the Bank Negara investigating officer every month pending disposal of the case.

Wong said that since Bank Negara had frozen their personal and company bank accounts and their asset of gold bars since July last year, there was no risk of them absconding.

“The company has business dealings in Singapore, Hong Kong and China,” he said, adding that the men, who were first offenders, could only afford to raise RM100,000 for bail and were willing to surrender two land grants as surety.

Wong also said failure to post bail would only result in the “death” of the three companies overseas, affecting some 2,000 clients.

Liew’s counsel Keppy Wong said his client, who resigned from his post last March, had no previous convictions and that he had cooperated with Bank Negara.

Sessions Court judge Rozana Ali Yusoff then set bail at RM1mil in two sureties for Ng, Yee and Chin, and RM800,000 for Liew, and fixed Nov 16 for mention.

She also ordered the four to surrender their passports.

Later, a Bank Negara senior official said the cheques were used for various purposes, including buying gold, paying investors and remitting cash to their company’s branches abroad.

He said Bank Negara had frozen some RM20mil in cash and RM3mil in gold assets belonging to the company.

Four hit with 796 charges

KUALA LUMPUR: Three directors and a former director of a gold invest­ment scheme company have pleaded not guilty to 796 money laundering charges involving millions of ringgit.

The directors of Genneva Sdn Bhd – Ng Poh Weng, 60, face 263 charges involving RM185mil while Marcus Yee Yuen Seng, 58, faces 234 charges amounting to RM153mil and Chin Wai Leong, 34, face 210 charges involving RM212mil.

Former director Liew Chee Wah, 56, faces 89 charges involving RM31mil.

The four men had allegedly issued and cashed 364 cheques from illegal proceeds at a bank in Jalan Ampang between July 20, 2007, and Dec 6 last year.

DPP Mohd Haziq Razali asked the court to set bail at RM4mil each although it was a non-bailable offence, adding that the amount involved was huge.

However, counsel K.K. Wong, acting for Ng, Yee and Chin, said his clients were willing to report to the Bank Negara investigating officer every month pending disposal of the case.

Wong said that since Bank Negara had frozen their personal and company bank accounts and their asset of gold bars since July last year, there was no risk of them absconding.

“The company has business dealings in Singapore, Hong Kong and China,” he said, adding that the men, who were first offenders, could only afford to raise RM100,000 for bail and were willing to surrender two land grants as surety.

Wong also said failure to post bail would only result in the “death” of the three companies overseas, affecting some 2,000 clients.

Liew’s counsel Keppy Wong said his client, who resigned from his post last March, had no previous convictions and that he had cooperated with Bank Negara.

Sessions Court judge Rozana Ali Yusoff then set bail at RM1mil in two sureties for Ng, Yee and Chin, and RM800,000 for Liew, and fixed Nov 16 for mention.

She also ordered the four to surrender their passports.

Later, a Bank Negara senior official said the cheques were used for various purposes, including buying gold, paying investors and remitting cash to their company’s branches abroad.

He said Bank Negara had frozen some RM20mil in cash and RM3mil in gold assets belonging to the company.

Four hit with 796 charges

KUALA LUMPUR: Three directors and a former director of a gold invest­ment scheme company have pleaded not guilty to 796 money laundering charges involving millions of ringgit.

The directors of Genneva Sdn Bhd – Ng Poh Weng, 60, face 263 charges involving RM185mil while Marcus Yee Yuen Seng, 58, faces 234 charges amounting to RM153mil and Chin Wai Leong, 34, face 210 charges involving RM212mil.

Former director Liew Chee Wah, 56, faces 89 charges involving RM31mil.

The four men had allegedly issued and cashed 364 cheques from illegal proceeds at a bank in Jalan Ampang between July 20, 2007, and Dec 6 last year.

DPP Mohd Haziq Razali asked the court to set bail at RM4mil each although it was a non-bailable offence, adding that the amount involved was huge.

However, counsel K.K. Wong, acting for Ng, Yee and Chin, said his clients were willing to report to the Bank Negara investigating officer every month pending disposal of the case.

Wong said that since Bank Negara had frozen their personal and company bank accounts and their asset of gold bars since July last year, there was no risk of them absconding.

“The company has business dealings in Singapore, Hong Kong and China,” he said, adding that the men, who were first offenders, could only afford to raise RM100,000 for bail and were willing to surrender two land grants as surety.

Wong also said failure to post bail would only result in the “death” of the three companies overseas, affecting some 2,000 clients.

Liew’s counsel Keppy Wong said his client, who resigned from his post last March, had no previous convictions and that he had cooperated with Bank Negara.

Sessions Court judge Rozana Ali Yusoff then set bail at RM1mil in two sureties for Ng, Yee and Chin, and RM800,000 for Liew, and fixed Nov 16 for mention.

She also ordered the four to surrender their passports.

Later, a Bank Negara senior official said the cheques were used for various purposes, including buying gold, paying investors and remitting cash to their company’s branches abroad.

He said Bank Negara had frozen some RM20mil in cash and RM3mil in gold assets belonging to the company.

http://thestar.com.my/news/story.asp?fil...sec=courts



 

[Musicwhiz]

These 4 are the same directors for the Singapore-based Genneva right? If I were an investor and I read such news on them in the Malaysian papers, I'd be turned off from investing. It's an issue of integrity - they can deny all they want but there must have been some basis for charging them in the first place.

Sounds like the Sunshine Empire case where everyone requested not to be named and said that there would not be problems - until it was too late.

And Arthur, you are right to say that our journalists' standards are poor. ST has very biased and skewed reporting!

[d.o.g.]

The firm sells the gold at a premium of at least 15 per cent over the prevailing market price.

Bingo. Here is the key to the Ponzi. Again, your 2% per month is coming from the 15% premium you paid. If the Ponzi does not at least double in size (1 new customer for each existing customer) every 7 months, it is game over.

Ponzi schemes have been around for more than 100 years. People never learn.

I highly questioned the journalistic std of our reporters. Why on earth couldn't they be bothered to check up on this company before writing a piece on it?

If Siow Li Sen (the writer of the article) had applied some basic financial analysis it would have been clear that this Genneva thing was probably a Ponzi. Then the article would have been a warning and served as a public service announcement. Unfortunately this was not done so we got an incomplete article with only some facts but no analysis or conclusion.

[veritas]

The real McCoy or just fool's gold ? I think only those who have invested are fit to give an answer !

Investors who purchased gold with this company since day one have earned more than 24%. It's real hard $$$ that speaks for itself!

[kazukirai]

The real McCoy or just fool's gold ? I think only those who have invested are fit to give an answer !

Investors who purchased gold with this company since day one have earned more than 24%. It's real hard $$$ that speaks for itself!

Hi Veritas,

You sound like you're vested. I'm not sure I agree with you that only those who are invested are fit to give an answer because we have witnessed many 'investors' in mini-bonds, DBS high notes, green-zoned land banks and the likes.

Perhaps you would like to share more on why you bought into this investment?

[d.o.g.]

I had dinner recently with a friend and learned to my horror that she had been selling gold on behalf of Genneva and The Gold Label. In my attempt to convince her to stop, I had to articulate the problems I saw with these firms, and it became clear that these firms are almost definitely frauds.

The key to understanding the fraud is, as always, to follow the money. What exactly do the firms do with the money?

For reference purposes, let's say the price of gold is $1,000.

We know the firms sell the gold at a markup over the market price, 15-25%. Let's just say 20% for simplicity's sake.

So now we follow the money:

1. You buy gold for $1,200 (20% premium).
2. The firm buys gold on the open market for $1,000 and delivers it to you.
3. Each month thereafter the firm pays you 2% on your $1,200 "investment", for a simple return of 24% per year.

So the question to ask is:

How does the firm generate the money to give you 24% on your original cost?

1. We know the firm only has $200 to work with since $1,000 was used to procure the gold.
2. The 2% monthly return is on the $1,200, so it amounts to $24/month.
3. This $24 is actually 12% of the $200 residual left with the company.
4. The company must be performing some sort of activity that can generate in excess of 12% per month.

I do not know of any legitimate business activity that can sustain a return on capital of 12% per month. Without compounding, this would already amount to a return of 144% per year. Money laundering, pimping, drug dealing, weapons smuggling, loansharking or human trafficking might do it. But these are not legal activities, at least not in Singapore. Even credit card balances attract interest at "only" 2% per month.

Occam's Razor states that the simplest answer is usually the correct one.

I posit that the simplest (and correct) answer to how the firms make money is that Genneva, The Gold Label and all other firms with similar investment/cashback arrangements are in fact Ponzi-type schemes where new investors' money is used to pay off old investors in order to generate the appearance of returns.

Because the original $200 residual is exhausted within 9 months, each old customer must be matched with a new customer within this time. But now the new customer's $200 residual is paying both him and the old customer, so it runs out in under 5 months. 2 new customers must be found, then 4, 8, 16 etc i.e. the scheme must double in size every 5 months in order to keep going. Obviously a scheme that requires this sort of growth rate to survive is highly likely to collapse within a few years. I would be very surprised if any of these schemes are still around in 5 years.

Violation of Banking Act:

I also checked the Banking Act, where it is made quite clear in Section 4A that unless appropriately licensed, no person can accept deposits in Singapore.

Since both Genneva and The Gold Label purport to pay "rebates" that function identically to interest, they are in effect taking deposits that amount to the residual $200 and paying interest on it i.e. they appear to be functioning as illegal banks.

[arthur]

This is getting serious. Why isn't MAS even bothering about this?
Are they really not obliged to help at all?

[Jon-san]

If I may borrow a famous phrase, When the buying stops, the selling will too. More financial literacy should be advocated. I wonder, do chinese newspapers have articles on financial literacy or more tabloid type news? Newspapers are still the primary mode of information dissemination after all.

[yeokiwi]

If I may borrow a famous phrase, When the buying stops, the selling will too. More financial literacy should be advocated. I wonder, do chinese newspapers have articles on financial literacy or more tabloid type news? Newspapers are still the primary mode of information dissemination after all.

Our papers are too conservative in dealing with these companies even though they probably know in their mind that these companies are probably scams.
They tend to be neutral in their reports even though the odds are against the investors who invest their money in these firms.

Actually, the newpapers can easily give a damning report and I doubt these crooks will dare to take SPH to court.