Of Ponzi schemes and investment scams. A case study of enforcement actions in Malaysia
| Date | 04 January 2016 |
| Published date | 04 January 2016 |
| Pages | 231-243 |
| DOI | https://doi.org/10.1108/JFC-05-2014-0021 |
| Author | Aiman Nariman Mohd Sulaiman,Azza Isma Moideen,Sharon David Moreira |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial crime |
Of Ponzi schemes and
investment scams
A case study of enforcement actions in
Malaysia
Aiman Nariman Mohd Sulaiman
Faculty of Law, International Islamic University Malaysia,
Kuala Lumpur, Malaysia
Azza Isma Moideen
School of Management, International Islamic College,
Kuala Lumpur, Malaysia, and
Sharon David Moreira
INTI International University College, Penang, Malaysia
Abstract
Purpose – This paper aims to chart the enforcement actions taken by the Malaysian regulatory
authorities in relation to illegal investment schemes in Malaysia, and claries the various strategies
adopted by the Malaysian regulatory authorities to ensure protection of investors in the capital market.
The enforcement actions relate to the Swisscash scheme as well as commodities futures involving crude
palm oil and a more recent case involving gold futures. These schemes share similar characteristics with
Ponzi schemes that were thrust into the international limelight in the notorious Madoff Ponzi scheme
and its allegation of regulatory failure.
Design/methodology/approach – The paper claries, by way of case study, public enforcement of
illegal investment schemes promoted through the Internet and schemes involving cross-border
investments.
Findings – The enforcement powers of the regulatory authorities in Malaysia are being utilized to
ensure compliance with the law. The enforcement actions by the regulatory authorities in the
afore-stated cases are signicant in view of the successful custodial sentence of imprisonment, the
regulators’ public enforcement action intended to compensate investors and the most recent case which
is unfolding, due to the large number of alleged perpetrators and signicant wealth transfer involved.
Originality/value – Given the allegation of regulatory failure in other jurisdictions, this paper enables
a view to be formulated of the timeliness and appropriateness of the enforcement actions.
Keywords Corporate law, Financial services law, Securities regulation
Paper type Research paper
1. Introduction
Ponzi schemes and investment scams are not novel. In Malaysia, similar scams were
known as pyramid schemes or “get-rich-quick” schemes and were once promoted via
member-get-member multi-level marketing. However, as investors became (presumably)
more sophisticated, the scams also adopted a veneer of sophistication, utilizing the Internet
and promoting capital market products. For example, between June 1, 2007 and June 11,
2007, the Securities Commission has received close to 700 enquiries relating to illegal Internet
The current issue and full text archive of this journal is available on Emerald Insight at:
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Ponzi schemes
and
investment
scams
231
Journalof Financial Crime
Vol.23 No. 1, 2016
pp.231-243
©Emerald Group Publishing Limited
1359-0790
DOI 10.1108/JFC-05-2014-0021
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