Aman Futures: Biggest Pyramid Scam in the Philipppines

Aman Futures Group ran the recent and biggest pyramid scam in Philippine history. The group, operated as a broker or dealer of commodity futures contracts, had duped 15,000 people in the Visayas and Mindanao of P12 billion by promising very good returns on their investments. At the height of the scheme, investors were getting interest rates as high as 41% for 8-day placement and 86% for 14-day placement. By the time the scheme collapsed, the 20-day placement was mostly offered with interest rates peaking at 67%. Manuel Amalilio, the chairman of Aman Futures, was reported to have gone into hiding in Malaysia. The Philippine authorities are working vigorously to bring those involved in the scam to jail for fear that angry investors might take the law into their own hands. There were already reports of retaliation allegedly perpetrated by some of the victims. Investors of Aman Futures include ordinary folks like fish vendors, motorcab drivers and poor neighbors who pooled their money to be able to reach the required minimum investment of P200,000, which was initially pegged at P1,000.

Pyramid scam is not new in the Philippines, however, people tend to fall prey to similar schemes. Reasons vary but greed and ignorance are a common denominator among the victims. The idea of get-rich-quick is so strong that people are tricked into investing their hard-earned money in a bogus scheme.
Here are the previous celebrated pyramid scams in the Philippines:

1. Multinational Telecom Investors Corp. (Multitel), headed by Rose Baladjay (aka Queen of Pyramiding), duped more than 950,000 individuals of several billions of pesos by promising a monthly 4% to 5% interest rate and using a double-your-money scheme. The pyramid scam crashed in 2002 and Baladjay reportedly got P20 million from the victims. She was sentenced in April 2012 by the Court of Appeals of up to 20 years in prison.
2. Royal Manchester Five Trading Corp. (RMF) of Cyrus Yap Hao swindled P2 billion from some 3,000 investors including celebrities and retirees, promising 3% to 5% interest each month. The investors were told their money would be placed in high-end money markets abroad, particularly in Hong Kong, the United States and Europe, as well as in futures trading, including government securities, treasury bills and foreign exchange trading. Hao now faces an estafa case at the Quezon City regional trial court.
3. Legacy Group of Celso de Los Angeles had a network of around 13 rural banks, a pre-need firm, as well as financing companies that served millions of clients all over the country.  De Los Angeles' downfall started when the Bangko Sentral ng Pilipinas (BSP) ordered the closure of his rural banks in December 2008 as these allegedly engaged in illegal activities. The central bank alleged that it was luring depositors with sky-high interest rates so it could funnel these to branches that were facing heavy withdrawals. He died in March 2012 with the unresolved P487-million syndicated estafa case filed against him.
4. Banco Filipino (BF), a thrift bank, enticed its 177,652 depositors with rates of between 6.0 and 13.9 percent compared with the industry savings account standard of between 1.0 and 2.0 percent, causing interest expenses to top interest income. It was shut down by BSP in March 2011 for running a "Ponzi" scheme, luring thousands of people with high yields and using new deposits to pay interest on old ones.
5. Tibayan Group of Investments Co., Inc. (TGICI) swindled 16 people in 2006 of their investment ranging from P50,000 to P1 million with an assurance that their money would gain 3% to 8% interest every month. Shortly after several investors were enticed to invest in the firm, the TGICI gradually ceased its operation and eventually closed its office. In December 2008, the Manila regional trial court charged 7 TGICI officials with syndicated estafa.
6. Performance Investments Products Corp. (PIPC). Its owner Michael H.K. Liew, a Singaporean, disappeared and fled the country sometime in July 2007 taking with him between $140 to $250 million of investors' funds. The victims were enticed to invest a minimum of $40,000 on the promised earnings of 12% per year.
7. FrancSwiss, a high-yield investment program (HYIP), offered 4.5% return on a minimum investment of $1,000. By the first week of July 2007, the program had been officially declared a Ponzi scheme by BSP and SEC. The related websites (www.francswiss.com; www.francswiss.biz; www.francswiss.us) became inaccessible and investors stopped receiving payments.
8. The Mateo Management Group (MMG) duped 950 or so people of some P193 million and $6 million in 2003, promising 2.5% interest per month on investments.

Pyramid and Ponzi schemes are similar in the sense that these are created to defraud people, giving hope of an extremely high rate of return. Several characteristics distinguish the two schemes:

• In a Ponzi scheme, the schemer acts as a "hub" for the victims, interacting with all of them directly. In a pyramid scheme, those who recruit additional participants benefit directly. (In fact, failure to recruit typically means investment return.)
• A Ponzi scheme claims to rely on some esoteric investment approach and often attracts well-to-do investors; whereas pyramid schemes explicitly claim that new money will be the source of payout for the initial investments.
• A pyramid scheme typically collapses much faster because it requires exponential increases in participants to sustain it. By contrast, Ponzi schemes can survive simply by persuading most existing participants to reinvest their money, with a relatively small number of new participants. (www.wikipedia.org)

The Philippine Securities and Exchange Commission posted on its website an investor’s guide on how to recognize internet-based ponzi investment schemes and the following are some of the features:

• No SEC registration
• Investment in foreign currency, preferably in US Dollars
• Offers or guarantees a huge profit in a very short period
• Utilizes a binary network (i.e. upline and downline) to earn commissions
• No paper trail (i.e. contracts, receipts)
• Promises little or no financial risk
• Provision for lock-up period where an investor cannot touch the investment (i.e. 60 days)
• Assures pay-off of investments in a short time
• Uses high-pressure methods to convince investors to reinvest their earnings
• Unknown principal office, address, founders, directors or officers
• Orientation seminars are conducted informally

And here is SEC’s Investment Scam Checklist:

The following are some guidelines on Pyramid and Ponzi schemes from U.S. Securities and Exchange Commission's website.
Pyramid Schemes
In the classic "pyramid" scheme, participants attempt to make money solely by recruiting new participants into the program. The hallmark of these schemes is the promise of sky-high returns in a short period of time for doing nothing other than handing over your money and getting others to do the same.
The fraudsters behind a pyramid scheme may go to great lengths to make the program look like a legitimate multi-level marketing program. But despite their claims to have legitimate products or services to sell, these fraudsters simply use money coming in from new recruits to pay off early stage investors. But eventually the pyramid will collapse. At some point the schemes get too big, the promoter cannot raise enough money from new investors to pay earlier investors, and many people lose their money. The chart below shows how pyramid schemes can become impossible to sustain:

What are some Ponzi scheme “red flags”?
Many Ponzi schemes share common characteristics. Look for these warning signs:

• High investment returns with little or no risk. Every investment carries some degree of risk, and investments yielding higher returns typically involve more risk. Be highly suspicious of any “guaranteed” investment opportunity.
• Overly consistent returns. Investments tend to go up and down over time, especially those seeking high returns. Be suspect of an investment that continues to generate regular, positive returns regardless of overall market conditions.
• Unregistered investments. Ponzi schemes typically involve investments that have not been registered with the SEC or with state regulators. Registration is important because it provides investors with access to key information about the company’s management, products, services, and finances.
• Unlicensed sellers. Federal and state securities laws require investment professionals and their firms to be licensed or registered. Most Ponzi schemes involve unlicensed individuals or unregistered firms.
• Secretive and/or complex strategies. Avoiding investments you don’t understand or for which you can’t get complete information is a good rule of thumb.
• Issues with paperwork. Ignore excuses regarding why you can’t review information about an investment in writing, and always read an investment’s prospectus or disclosure statement carefully before you invest. Also, account statement errors may be a sign that funds are not being invested as promised.
• Difficulty receiving payments. Be suspicious if you don’t receive a payment or have difficulty cashing out your investment. Keep in mind that Ponzi scheme promoters sometimes encourage participants to “roll over” promised payments by offering even higher investment returns.