Is this a Singapore Ponzi in the making?

By Mr. Getty Goh 

CEO of CEO & Co-Founder, CoAssets Ltd (ASX: CA8) |

Recently some new CoAssets members got in touch with me. Knowing that i have written articles on how to spot scams, they wanted to pick my brains and see what i thought of this deal.

Based on my understanding, this particular Brazilian developer (remember ECO House) was trying to raise S$19million. The payout is shown in the EDM below (I have blanked out the company name and logo, so as not to give away the identity of the developer and asset management company).

So are they a scam? Is what they are doing illegal?

Without doing due diligence, i cannot comment whether this is a scam. However, when it come to legality, there are several points to note:

1. To raise funds from members of the public in Singapore, the company must have a Capital Market Services License (CMSL). Since it is stipulated by law, to raise funds without a proper license is deemed not legal and such companies may often see themselves landing on the MAS alert list.

2. Depending on the exemption they use, companies, in general, can only raise NOT more than S$5m every 12months. Anything more, will require the company to lodge a prospectus document with the authorities. You can read the guidelines here (http://www.mas.gov.sg/Regulations-and-Financial-Stability/Regulations-Guidance-and-Licensing/Securities-Futures-and-Funds-Management/Guidelines/2016/Guidelines-on-Personal-Offers-made-pursuant-to-the-Exemption-for-Small-Offers.aspx)

In short, companies that are trying to raise > $5m without having the proper license, lodging a prospectus and/or the proper structure is place is not legal. While it is still possible for the company to make money and give returns in the near-term, what are the long-term prospects of dealing with an business entity that is not compliant from the onset?

If you have benefited from this short commentary, please feel free to share with as many friends as possible so that they will know what to look out for and not unwittingly fall prey to illegal business scams :-)