Investment scams ripping off gullible public

Gullible islanders have a remarkable ability to get deceived by various investment frauds despite the media extensively highlighting numerous instances of people getting duped by con artists. Insatiable greed prevalent within the society enables fraudsters to rip off the hard-earned money of people by promising lucrative financial returns within a short period of time.

Such deceitful arrangements appear in various forms – unregistered finance companies, pyramid schemes, forestry investment plans, as well as online and crypto offerings. Although the instruments used by deceivers change from time to time, the modus operandi has remained unchanged. One common feature among the fraudulent efforts to attract funds from the public is promising hefty returns compared to the interest rates of fixed deposits in licensed banks and finance companies.

More than a decade ago, a large number of people were defrauded by Sakvithi Ranasinghe – a famous English tuition master and Golden Key Finance Co. – which was linked to the Ceylinco Group – by operating unregistered finance companies. The masses were tempted by pledging unrealistic interest rates such as 36% and 72% and when the two firms collapsed, depositors were left in despair. What followed was a tale of absolute chaos with some of the victims even committing suicide as they could not bear the emotional pain. Numerous senior citizens who placed their hard-earned savings on the two firms with the objective of enjoying a convenient retirement out of the high-interest earnings they expected had to go through an unfortunate predicament.

The current low interest rate environment coupled with the high cost of living provides the ideal foundation for con artists to play their tricks. People need to be highly sceptical of investment/deposit plans that promise excessive returns in consideration of past ordeals.

Meanwhile, in the recent past there have been some aggressive marketing campaigns by forestry investment companies to attract funds from the public via emails, Facebook, etc. In fact, the social media has become the prime tool by which scammers attempt to hoodwink the masses. Concerns have been expressed as to whether the forestry investment firms that canvass money from the public have the legal capacity to accept funds. 

A company that solicits funds for agarwood cultivation – which is owned by a former international cricketer – is promising 54% annual average returns with two sets of investment horizons – three years and eight years. There is another vanilla investment firm which promises the public Rs. 800,000 in three years for a minimum investment of Rs. 500,000 apart from returning the initial investment annually within three years after the initial investment period. Doubts arise as to how these companies could promise guaranteed returns related to commodities. Many would recall how the investors were duped by the infamous Touchwood Investments Plc – who solicited funds from the public to invest on the trees of their teak, mahogany, sandalwood plantations in Sri Lanka and Agarwood plantations in Thailand by promising guaranteed returns – about more than a decade ago. The sordid saga ended up in courts as the company was unable to pay back even the initial investments of its clients. Such past experiences represent the dangers associated with putting money in forestry investment plans.

The desire of Sri Lankans to become instant millionaires is greatly helping the efforts of unsavoury personalities who have no qualms about swindling the money/wealth of others. Finally, when people realise they have been deceived by con artists, the blame is directed towards the Government and Central Bank. However, the fault lies with those who recklessly put their money in such unrealistic ventures.

There are alternative investments like unit trusts, shares, debentures, lands, and real estate through which people could earn reasonably attractive returns but one needs to be mindful of its risk and returns. Unfortunately, even the educated segments of the society lack financial literacy, which provides the ideal platform for charlatans to cause misery and despair through devious practices.