Investment scams are synonymous with Ponzi scams, named after the postage stamp speculation scheme operated by Charles Ponzi in the 1920s. Such scams basically operate on the "rob-Peter-to-pay-Paul" principle. Funds collected from new investors are used to pay the returns due to existing investors. As long as there are fresh funds from new investors, the investment scheme could be sustained.
Mary Tay (Mary) was operating such a typical investment scam. Whilst in the employment of Tullet Prebon (Singapore) Limited (TPSL), she solicited for funds from her colleagues by offering a variety of investment opportunities. Mary promised them returns ranging from 12.5% to 100% of the principal sum invested. The principal sum invested, together with the promised returns, would be repaid in instalments over a period of 10 to 12 months. The scam began to unravel when Mary could not sustain the scheme and started to default on her payments to the investors.
One of Mary’s investment schemes was in the trading of milk powder. To assure the investors that the scheme was legitimate, Mary claimed that the supplier of the milk powder was introduced to her by a Sister Mah, who was a senior nurse with Mount Elizabeth Hospital. In addition, Mary also offered investments in the trading of medical supplies and to secure various goods that were being downloaded at the port.
Mary was aware that at the material time, there were no such investments. Between February 2002 and September 2006, a total of 11 investors, most of whom were staff of TPSL, had invested approximately $996,928 with Mary. She was charged with 13 counts of cheating under the Penal Code, Chapter 224. She eventually pleaded guilty to 5 charges, with the remaining charges taken into consideration and was sentenced to imprisonment of 66 months.
The scheme operated by Mary is one of the many forms that an investment scam could take. It also illustrates the ease with which such investment scams could carry on undetected for long periods of time. In its initial stage, investors would receive their promised returns. This convinces them that the investment exists. The investors would then throw caution to the wind and begin to invest increasing amounts into the scheme. At the same time, they would also introduce friends and family to this "golden" investment opportunity. Unwittingly, they are facilitating the continuance of the scam as increasing fresh funds received are used to sustain payments to existing investors. The scam is, however, doomed to collapse as eventually the inflow of fresh funds cannot keep pace with the payments to existing investors.