Money game operators are having a big moment in the local media these days, though most of us would rather they disappear. Notable schemes such as MBI Group and JJ Poor to Rich (JJPTR) dominated recent news. The Ministry of Domestic Trade, Co-operatives, and Consumerism recently froze RM 177 million (around USD 41.5 million) from accounts linked to the MBI Group.

But JJPTR is truly something else. Details of the case are staggering. It’s estimated that 400,000 people fell victim to JJPTR’s money game scheme, involving 300,000 locals and 100,000 foreigners. In total, investors may lose RM 500 million. Consider that according to this article, the amount of losses caused by get-rich-quick schemes and love scams in Malaysia is believed to exceed RM 1 billion annually. That makes the losses from JJPTR half the annual money lost due to fraud.

So what are money games and how do we avoid them? How can we tell legitimate investment platforms from frauds?

Money games are really just another term for scams and Ponzi schemes. People are lured into these schemes because of the get-rich-quick promises.

Worse, there’s actually a strong demand for such services. This article states that there are more than 40 money game operators in Malaysia, a third of them based in Penang. What’s more is a source in the same article claims that 6 out of 10 adult Chinese in Penang have invested in money games. The demand stems from an appetite for higher investment returns; people are willing to take the risks involved.

To reduce the risk of loss, members of the public are advised to regularly visit the Bank Negara Malaysia (BNM) website for a list of companies and websites which are neither authorized nor approved under the relevant laws and regulation administered by BNM.

Not all new investment platforms are scams. Especially as we are living in the golden age of financial technology (FinTech). FinTech grew and developed as a response to the financial problems we face, from making financial information more easily accessible to addressing the lower return rates of traditional investments. Some new investment alternatives created by the FinTech industry include virtual currencies and peer-to-peer (P2P) financing.

A P2P financing platform essentially connects creditworthy businesses and SMEs with investors through an online marketplace. By investing into businesses and SMEs, investors will earn higher returns while businesses get working capital to grow and develop their enterprises.

There are exciting, profitable – and perfectly legitimate – investment opportunities out there. And if you know what criteria to look for, it isn’t difficult to identify money game operators from P2P financing platforms:

P2P Financing Platforms Money Game Platforms
Expected returns
  • Higher than fixed deposits
  • Up to double-digit returns/year
  • Account for default risks
  • Returns suspiciously high & unsustainable
  • Ex: 20% per month
Marketing methods
  • Doesn’t recruit investors as direct agents
  • Referral campaigns & incentives OK
  • Uses multi-level marketing to recruit agents
  • High agent commission rate
Product/service descriptions
  • Clearly defined products & services
  • Ex: SME financing & invoice financing
  • Product details are vague
  • General claims to gold & forex
Transparency
  • Investment fact sheets readily available
  • Lack of information
  • No idea what you are investing into
Government and regulations
  • Regulated by Securities Commission
  • Strict regulatory compliance requirements
  • Not regulated by government
  • Lacks operational license
Security
  • Funds managed by independent third party
  • Easy withdrawal process
  • Funds directly held by operators
  • Investor funds difficult to withdraw

Some final words. Here’s the quick key takeaways:

  • There is a big appetite in Malaysia for higher returns. But such hunger comes at a cost. There are many con artists and scams out there.
  • FinTech solutions such as P2P financing are here to stay. As an investment alternative, P2P financing offers high returns, is affordable, and its concept is easy to understand.
  • As with any investment, pick with caution. Choose a P2P financing platform recognized by the Securities Commission (SC) and has a good track record. For a list of P2P financing operators approved by the SC to operate in Malaysia, click here.