Avoiding investment scams | Inquirer Opinion

Avoiding investment scams

/ 05:07 AM June 24, 2019

Religion, greed and ignorance are a potent mix that unscrupulous individuals exploit to amass a fortune from gullible victims. Such has been the strategy of pyramiding and Ponzi scams around the world.

The first sign that an investment proposition is a fraud is the extremely high yield or return promised for one’s money. Savings in banks will give at most 5 percent for special time deposits. Money lent to blue-chip companies like Ayala Corp., PLDT or San Miguel by buying their debt paper will give an average return of 7 percent. These yields are for a year, not a week or a month.

So if some wise guy comes up and promises to double someone’s money in less than a year or promises a return on investment of 30 percent a month, best to turn around and walk away. It will save one his or her hard-earned money. That surely is a financial scam.


A typical pyramid scheme is where participants make money solely by recruiting new participants who will invest. The mastermind promises a high return in a short period of time, and there is no product or service actually sold as the main focus is the recruitment of new investors.


A Ponzi scheme (named after Charles Ponzi, who victimized investors in the 1920s with a postage stamp speculation scam) is similar in that it also pays high returns to existing investors with money collected from new investors.

Such is the case of Surigao del Sur-based Kapa Community Ministry International Inc. (Kapa), whose founder and president Joel Apolinario and its other officials are now facing criminal complaints for their involvement in a large-scale investment fraud.


The Securities and Exchange Commission (SEC) charged that they violated the law that prohibits Ponzi schemes when they offered impossibly high returns and paid investors using the money contributed by other investors.

Kapa was found to have been enticing the public to “donate” at least P10,000 in exchange for a lifetime monthly return called “blessing” or “love gift” equivalent to 30 percent of the donated amount, without doing anything except to wait for the payout.

The SEC said it believed millions of Filipinos were lured to invest in the fraudulent scheme. Based on Kapa’s own claims that it has more than 5 million members, the SEC noted that this translated to at least P50 billion generated from the scam. This would be equivalent to a monthly payout of P15 billion—which the SEC said was “mathematically unsustainable.”

There are other similar scams victimizing people in the provinces. Following the crackdown on Kapa, the SEC also ran after five more groups running illegal investment schemes. These were Rigen Marketing, Organico Agribusiness Ventures Corp., Ada Farm Agriventures, Ever Arm Any Marketing and Alabel-Maasim Credit Cooperative.

These companies encouraged the public to invest money in various products, promising hefty monthly returns ranging from 35 percent to 500 percent, according to the SEC.

There are “red flags” that are easy to spot. Notice the first and most common in all these scams? Very high returns on investment. The other red flags are that the financial products being offered are not registered with the SEC, and the sellers themselves are not licensed by the SEC, among others.

When faced with an investment proposition, the first thing to do is to check if the organization one is investing in and the securities the company is issuing are registered with the SEC, and if the salesperson is licensed.

The country has all the laws and regulations against these investment scams. There are adequate penalties and prison terms for the perpetrators — a maximum fine of P5 million or imprisonment of seven to 21 years, or both.

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However, these scams continue to proliferate because of a lack of information, especially in the poorer provinces where the level of financial literacy is low. A grassroots information campaign specifically targeting the rural populace is needed in this regard, to make the public more aware of the simple fact that there are no “get-rich-quick” formulas to improve one’s financial standing in life. And that greed has never resulted in anything good, financial or otherwise.

TAGS: Inquirer editorial, investment scams, Kapa, Ponzi scheme, SEC

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