UAE market scams typical sign of a booming economy
Posted on 29 April 2008 with no comments from readers
The alleged embezzlement at listed Dubai real estate firm Deyaar has prompted a third arrest, the Lebanese head of sales whose not been named. Meanwhile, a 36-year old Emirati has been arrested for a reportedly swindling 2,500 people in Abu Dhabi out of $550 million in a Ponzi scheme which offered interest rates of 30 per cent per month.
It is astonishing that nobody had noticed that the scam artist had no legal status or that nobody seems to have conducted anything resembling due diligence into this scheme.
Yet economic booms have fallen prey to such scandals since mankind first started living in urban communities. People lose touch with reality in a boom and become sucked up in the excitement to the extent that they end up becoming suckers. There is also a strong element of collective greed at play.
Original Ponzi
The Ponzi scheme is named after a New York con-man Charles Ponzi (pictured here after his arrest) but I doubt he invented this scam. It is so simple. You promise high returns on investment, and achieve it for a few months by paying out the first investors with money from later investors, and this goes on until you have amassed a capital sum, and then you flee with the money.
Usually the scam artist gets too greedy and does not run in time. However, anybody who thinks that the revelation of market scandals like this will damage the economic boom in progress is probably misguided. The economic forces of oil at $120 a barrel are beyond the control of governments let alone con-men.
Bad guys
But it is a warning to investors in the UAE to remember to do their homework when making investments. Economic booms attract the bad guys as well as creating genuine business opportunities.
The UAE central bank governor Sultan bin Nasser Al Suwaidi told the Arabic media that informal fund management or pooling of resources among friends and family is also illegal and dangerous. This may be true but for many investors ignorant of finance it is likely the only channel open to them.
But be careful who you trust in a boom, and if schemes seem too good to be true then they probably are. Be careful too about the ‘asset class’ you choose. Speculating in mobile phone numbers, as the article below explains, is probably unwise.
