BY now, people who have not heard of JJPTR and its founder, Johnson Lee would have heard about them.

In the near future, more people may come to know of this 28-year-old man, who has managed to get countless of people investing in JJPTR since mid 2015.

Since news broke earlier this week that JJPTR was in trouble, after a hacking incident into its trading accounts that had purportedly caused the company to lose up to half a billion ringgit of investors’ money, Lee had posted voice and video recordings on JJPTR’s Facebook page to brief worried investors.

He told them he had not run away and that he would return “every sen” to investors who claimed to have lost money. He promised to introduce them to a new investment plan next month. He said he would retain the JJPTR brand and logo, and he would find out who did this to them with the help of professionals.

The Sun quoted a source saying that Lee had met with 40 “introduce brokers” to discuss the new plan. News reports said some JJPTR branches were open for staff to take questions from concerned investors, but none reported sightings of Lee.

The existing plan involves investors giving JJPTR a minimum US$25 to a maximum US$1,000 for a guaranteed 20% monthly return. 

Even banks are unable to guarantee such a high and fixed investment return, making the JJPTR deal too good to be true, and also too good to pass up. 

Early investors had confirmed receiving their returns worth several hundreds of ringgit amount without having to do much or risk anything. For most, they had broken even in less than half a year.

Even before trouble even began, JJPTR’s detractors had called the scheme a scam. 

Lee said his intention was to help “change people’s lives”, as represented by the JJ Poor to Rich brand name, denying detractors who say it’s a “Ponzi scheme”.

What’s a Ponzi?

Named after American Charles Ponzi, a typical Ponzi scam is a “fraudulent investing scam promising high rates of return with little risk to investors”. 

It generates returns for older investors by getting new investors, like a pyramid scheme. The scam comes to light when there is not enough money to go around anymore.

Typically, a Ponzi scheme will give a guaranteed promise of high returns and pay investors their returns consistently regardless of the market conditions.

Investors will no clear understanding of how their money is invested, will not have official paperwork on their investments and may even have trouble removing their investment.

The scheme usually begins unravelling when there are no more new investors, or in other words new capital to pay the earlier investors. While the early investors usually recover their capital or even profit from this, latecomers are usually trapped when the scheme runs out of money.

Famous Ponzi scams

In the first 1920 scam, Charles Ponzi plan was based on arbitrage of international reply coupons for postage stamps. The scheme began to fall apart when he began diverting the investments to pay older investors and himself.

In 2008, the world was schocked when well known stockbroker Bernard Madoff, the former non-executive director of Nasdaq, was arrested for operating a Ponzi scheme. 

Using a lavish lifestyle as a cover, Madoff managed to lure and convinced investors to give him some US$65 billion by promising high returns. He ran his investment company on Wall Street for almost 2 decades before his arrest.

At the time of his arrest, investigators concluded that some US$18 billion of investors’ money had disappeared. After pleading guilty to the charges, Madoff was sentenced to 150 years prison, the maximum allowed.

Allen Stanford’s US$7 billion Ponzi scheme centred on his banking operations in Antigua, in the Caribbean. Some 30,000 individual investors were swindled and prosecutors failed to find as much as 92% of the assets the Stanford International Bank claimed to have.

Stanford was sentenced to 110 years prison in 2012 for defrauding investors and continues to serve his sentence in Florida today.

Closer to home

In Malaysia, many had fallen for schemes, including MLM (multilevel marketing) businesses, to earn a little extra. Some of the well-known ones include the multimillion dollar scam SwissCash or Swiss Mutual Fund in 2006 that operated through the internet.

It claimed to be an “easy, fast and secure scheme” where investors’ funds were channelled to business activities ranging from oil exploration to shipping and agriculture in the Caribbean.

Investors paid a registration fee of US$30 to join the scheme, which allegedly offers huge returns for a minimum investment of US$100. Those behind the scheme claimed that investments of US$1,000 or more could earn a profit of up to 300% after 15 months.

Forex trading, like what JJPTR has been doing, is now one of the current trends for people looking to make fast money.

Bank Negara Malaysia, which has JJPTR on its financial consumers alert list of known companies not authorised under the relevant laws by the central bank, had been warning the public of illegal forex trading schemes.

It said illegal operators usually went small-scale and claimed they could provide remittance services efficiently, without the need for any documents or identification. They rarely used documents to validate and verify the transactions. 

Clients would be told to approach their direct family, relatives and friends before targeting members of the public to join the scheme.

“Investors will usually get high returns on their initial investments. This will convince them to increase their investments in hopes of higher returns. The illegal operators may also encourage investors to increase their investment to try to recover their losses.

“Investors who lose their money through purported volatility of exchange rate movements are informed by the illegal operators that they need to pay margin-call in order to recover their paper lose.

“Eventually, they will end up losing everything when the illegal operators suddenly go missing,” BNM said on its financial fraud alert website.

JJPTR is reportedly also red-flagged in several other countries, including Singapore and Philippines. It is said to have branches around Asia, Australia and even North America.