Investors cry foul over $10m start-up 'scam'
-
Investors cry foul over $10m start-up 'scam'
They claim they were tricked into thinking company was doing well
By JALELAH ABU BAKER
THEY thought they were investing in the next Google or Yahoo!, but after sinking more than $10 million. into a start-up fronted by an entrepreneur from Hong Kong, a group of Singaporean investors have now lodged a police report alleging the proposal was a scam.More than 20 investors had put money into a website touted to be the first business-to-business portal for suppliers in the region to market their products in China.
But they say the start-up has failed to take off.
Among the investors are a former MP, businessmen and lawyers who requested anonymity to avoid embarrassment. Aged 50 to 60 some are seasoned investors while others are first-timers.
Speaking to The Straits Times, eight of them claimed they were approached by a Stockbroker, who used to be a trading representative at a securities firm here, in 2006 and 2007. They said they trusted him as he was senior and had several years of experience.
The Hong Kong businessman in question appeared to have a doctorate and has links with Chinese and Hong Kong officials, they said.
The company that would run the website was described as a professional IT firm specialising in e- business solutions and products. According to a presentation the investors attended here, it had invested millions of dollars over six years to develop the website.
The investors bought the company's pre-IPO shares and were told they would get back manifold returns but were not allowed to see its accounts. They were also offered Hong Kong carpark space as collateral.
While most of the investors knew the Hong Kong businessman through the former stockbroker, one of them, a 51-year-old owner of a materials supplier who invested $500,000 had met the businessman in Japan several years ago. He later attended a seminar the businessman has sponsored at a Singapore university. "He had a way of talking, and making it seem like he knew many people."
An independent valuation pegged the company's worth at HK$857 million (S$140 million).
Several international advisory members were said to be part of the company.
The investors were also told Hong Kong and Macau entrepreneurs such as Mr Richard Li and Mr Stanley Ho were investors.
The businessman even appeared on the cover of a Hong Kong magazine. "But we found out that it is really easy to get these kinds of magazines produced there, said another investor, a 52-year-old marketing director who put in $300,000.
Late last year, the investors were told the company was not making money and they could invest in another of his firms. While some of them acknowledge that any investment carries a risk, they claimed the businessman had delayed telling them how the company was doing. They also allege he had tricked them into thinking it was doing well.
They started filing police reports from February. They added that they had been called up for interviews with the Commercial Affairs Department which deals with white-collar crime here.
The former stockbroker, who previously coordinated meetings and handled all administrative jobs here for the businessman, said he himself had made a police report against his former boss.
He claimed he was paid $10,000 per month. He is now working in Malaysia as he said he has suffered damage to his reputation and could not get a job here.
"He forced me to resign, saying the company was not doing well. He shouted vulgarities at me and scolded me," the former stockbroker said. Attempts to reach the Hong Kong businessman failed.
Top of the news, The Straits Times, May 28 2012, Pg A3
-
Times are bad.
