This article was first published in the June 2017 China edition of Accounting and Business magazine.

Anybody who wants to understand why there is no shortage of investment scams in Malaysia would do well to start by studying conversations in online communities.

Social scientists would have a field day exploring social media platforms, chat rooms and discussion boards to figure out why there is an endless parade of victims of Ponzi schemes and other con games that target investors.

Amid the constant cyberspace chatter on where and how people should invest, one can find a fascinating contrast of savviness and ignorance, of persuasiveness and gullibility, and of opportunism and victimhood.

Every now and then, Malaysians hear of some new-fangled investment venture that promises high and consistent returns. Typically, its promoters claim that these exceptional gains are possible because they have a unique and sure-fire way to profit from activities such as land banking and property development. The basic selling point is that such schemes offer a hard-to-resist opportunity to make good money with minimal time and effort.

‘Financial scams target people of all backgrounds, ages and income levels. Fake lotteries, advance-fee frauds, get-rich-quick schemes and internet investment schemes are some of the favoured means of separating the unwary from their hard-earned savings,’ says Bank Negara on its website.

As the central bank points out, some people join these dubious schemes with their eyes wide open; they are well aware of the deceit but are prepared to risk their money anyway. Why?

A trawl through the internet forums will yield some insights into the minds of those who invest in these scams. And because they can post messages anonymously, they tend to be candid.

From the discussions on investment schemes, for example, we learn that there are essentially two types of victim: those who are greedy and foolish, and those who are naive and foolish.

This is no big revelation, but what is surprising is how these two groups react when the schemes go sour. There is the usual combination of shock, anger and despair. In addition, there is often denial, suspicion and the blame game, with the authorities often the punch bag.

Investors who understood the risks they were taking are mostly resigned to their losses. It is the rest who are often unwilling to recognise their folly and are eager to fault others.

They blame the regulators for not stepping in earlier to halt the schemes. Or when these investors are convinced there is nothing wrong with the schemes, they blame them for ruining operations that had apparently been running well.

Worst still, some investors insist that enforcement action against the schemes is meant to shield the licensed investment players from competition.

There is another observation made, and it paints a portrait of the ugly Malaysian, the first-wave investor who is not blind to the fact that people will end up being cheated. But these early birds are sly enough to know that their money is safe. Are they not part of the deception? 

Errol Oh is executive editor of The Star