Authenticity comes through credibility. The credibility is build periodically. It is neither a one night stand nor get rich over night matter. It requires years and years of actions and dealings with humans. Any financial deal for any business usually starts when a buyer or seller gathers information about the entity. There are humans attached to the entities.
The broker is not only checking the authenticity or credibility of the business; but also checks for humans. The CXOs play vital role in business management. Majority of the business in Pakistan are family owned. There are very few corporations where capital is raised as an IPO. The majority of the family owned businesses reshuffle their funds within the family. They may borrow from banks; however, most of the funding or the capital injected is from inside the family savings.
Authenticity of Businesses
Authenticity for a family owned or a corporation entity is a different process. Each of them require checking of the business and personal documents. A lot of Personally Identifiable Information (PII) is being shared with the business broker and other professionals who are part of the business deal. The privacy is the utmost part of this authenticity.
A simple definition of Ponzi Scheme is to provide fraudulent investing scam which generates ROI for earlier investors from later investors. For example, the Person A (a schemer) is running a scheme. The scheme returns roughly about 20% of PKR Rs. 100,000.00 which is PKR Rs. 20,000.00.
Person B want to invest PKR Rs. 100,000.00 in a scheme. The Person A who is running a specific scheme comes to Person B and provides insights about the scheme. Now, the Person A goes to the Person C, Person D so on and so forth with the same story.
The schemer, Person A, collects the money from the last investor and returns with percentage to the first investor.
The problem arises when the schemer (Person A) does not have any new investors. Eventually, investment amount dries up and there is no funds to shuffle.
Famous examples of Pakistani Ponzi Schemers
- Double Shah (Source: https://www.dawn.com/news/244461/nab-takes-double-shah-into-custody)
- Muhammad Younis (Source: https://www.dawn.com/news/1452843)
- PSlash (https://www.arabnews.pk/node/1782216/pakistan)
- Axact – Fake Diploma Scam
- There are individuals and business entities involved and an investor has to do better due diligence
Famous examples of Western Ponzi Schemers
- Charles Ponzi – Now, you know where the word Ponzi is coming from!
- Lou Pearlman
- Bernie Madoff
Pakistani Government helps investors educate all the time about schemes. Any real estate purchase must be authenticated by the government officials. Any investor can easily investigate about listed companies on Juma Punji.
- Incorporated Companies
- Licensed Entities
- Listed Companies
- Not for Profit Companies
- Securities and Exchange Commission of Pakistan (SECP) – https://www.secp.gov.pk
- Jama Punji – An investor education initiative by SECP – https://jamapunji.pk/
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