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The Thailand Investment Scam

November 17, 2015
easy money

easy money

With every positive invention, scams invented by unscrupulous operators follow. Here is a story about how one scam came across my desk for two different clients in the same week!

The first case: A new client was referred to me. The task was to assist in a transaction where a Kuwaiti company was going to purchase 10% of the client’s equity for $5.5 million. The investor had located them through an Angel website (an Angel is a high net worth individual that is interested in investing in startups). Naturally, the client was ecstatic. They had not raised even 10% of that sum yet.

I had some healthy skepticism, but my task was to investigate and counsel, not to jump to conclusions.

The investor wanted to fund the investment through a Thailand company and recommended two Thai law firms. I checked both firms out through their websites. A US lawyer was a partner in one of the firms so I choose to start with that firm.

I spoke to the lawyer and everything seemed fine- at first. I did some heavy due diligence to make sure this lawyer and his firm were legitimate (the website looked real and the firm roster was deep; also, the lawyer had ostensibly authored a legal treatise).

The Thai lawyer (contact me for the name), sent the client an invoice- $2500 flat fee for his due diligence and $9500 for Thai registration- payment due in advance. My fraud indicator started redlining. One, the lawyer had changed his fee schedule (he quoted me an hourly rate). Two, what country charges $9500 to register a company? In the US, states charge between $50 and $250.

My client wasn’t ready to throw in the towel and I agreed that a little more digging was worthwhile. So, we asked the investor to send the investment contract to us. Once I saw this, I knew a scam was afoot as the contract did not resemble a contract prepared by anyone with $5.5 million to invest. Another red flag!

I wrote to the investor and suggested a few legal measures that would assure my client that he was a real investor. The response was all derision and scorn towards me and my ideas and complaining that my client had already agreed to the proposed structure.

After this message, my client was satisfied that the investor was running a scam. And, he told me that the investor had rejected the first Thai firm that my client had tapped to assist them!

The second case: A good friend is attempting to raise money for a stock trading platform. He was contacted by representatives of a large Thai chemical company. After asking him some questions and having him fill out a few applications, they were willing to invest $26.5 million in the trading platform.

One small catch: he had to register this company in Thailand. The cost: $13,000.

Needless to say, after dozens of polite emails, no money changed hands.

Lessons to be learned:

1. Even if you aren’t looking to raise money, you never know who you are dealing with on the web. I still don’t know if the “investor” was the person he said he was. He claimed to be an executive in a Kuwaiti construction company. You could see “his” name on that company’s web site. But, was the person on the website the person sending the emails?

2. Don’t trust someone else’s lawyer, especially if they are recommended to you by a counterparty. The Thai lawyer appeared legitimate, but he was not. The lesson: hire your own lawyer who only has loyalty to you and comes recommended by someone you trust.

3. If something looks too good to be true, it probably is. This is a real pitfall for entrepreneurs. They live their company’s ups and downs and they believe in its promise. But, they are the opposite of objective. So again, hire a good advisor (lawyer or investment professional) to help guide you with your raising funds. With that advisor’s help, you should adjust your sites about what the parameters are for a reasonable investment. If the offer isn’t in the ballpark, it may be a scam.

If you want more information, contact Avrum Aaron at 201-379-9230 or avrum@lop-llc.com.

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From → Contracts, Start Ups

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