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 Financial Happenings Blog 
Tuesday, April 01 2008

Each year ASIC awards the "Pie in the Sky Award" to the most outrageous financial scheme that's too good to be true.

 

Previous winners include:

 

2007 - Ponzi scheme operated by Guiseppe Mercorella that offered people between 3 and 6 % per month.  The illegal scheme received $216.9 million from investors who ultimately lost $76 million. Mr Mercorella is now serving a five year jail term on ASIC charges.  Many of the investors were from South Australia, and many from the local Italian community who became aware of the scheme through family and friends. This is typical of how many people become involved in ?Ponzi' schemes. Some investors mortgaged their homes to invest with Mr Mercorella.

 

2006 - An illegal investment scheme promoted through wealth seminars throughout Australia. Operated by Mr Craig McKim, Pegasus Leveraged Options Group (Pegasus) lured approximately 90 unsuspecting investors and raised $3.7 million. Over $2.1 million of the funds raised were lost in personal gambling and other personal expenses by Mr McKim.


In the case of the Pegasus scheme, the NSW Supreme Court found investors were promised returns of up to 8% a week - figures described by the Court as 'astronomical'. Investors were even issued with a Certificate of Guarantee by a fictitious ?International Investment and Securities Commission'.  Mr McKim was jailed in October 2005.

 

And the winner for 2008:  A disturbing 'advanced fee fraud' scam.

 

This email scam pleaded with people to help a Togo barrister access US$17 million from the estate of a man who along with his family was killed in the Boxing Day tsunami three years ago. This outrageous offer was just too good to be true.


According to the offer, people could get a share of the wealth by claiming to be the deceased's next of kin. To claim the wealth, you would need to respond to the email. The nature of this type of fraud is that you would need to pay a fee before you would receive the money. This is an advanced fee fraud where you would pay to receive nothing.


Of course there is no $17 million estate, and people were being scammed for the upfront fees', said Ms Delia Rickard, ASIC's Acting Executive Director of Consumer Protection.

 

Runner Up for 2008: In Step Super

 

Instep Super was advertising on television, radio and online offering returns on investment of superannuation funds between 8 and 20 %.  The advertisements also claimed Instep Super was ?the best performing superannuation fund in Australia'.  Instep Super did not have an Australian financial services licence.  ASIC concluded that Instep Super did not have any reasonable basis for claiming to be the ?best performing superannuation fund in Australia'. As a result the Instep claims were found to be misleading and deceptive. Fortunately, no one invested in Instep Super.

 

3rd place getter for 2008: Electroharvest

 

This device supposedly recycled 'ambient electromagnetic radiation back into usable household energy' promising to cut ordinary Australians' power bills by 37 per cent.  Investors were invited to invest up to $40,000 with 'guaranteed' returns of at least 30 per cent per annum.  ASIC launched this fake scam on April Fool's Day in 2007 to educate investors about how to identify and avoid financial scams. Anyone who tried to go ahead and invest was led to a page with advice about how to research investment offers and who to contact for help.  The fake website, www.electroharvest.com, has attracted more than 75,000 hits since it was launched in April 2007.

 

Check out ASIC's FIDO Pie in the Sky Award website for more details.

 

Regards,

Scott Keefer

Posted by: Scott Keefer AT 12:00 am   |  Permalink   |  Email
 
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