Along with other customers of Asia Fine Diamonds (AFD), Mr Stephen Yeo learnt the hard way that diamonds are not his best friend after his investment in rare coloured diamonds went awry.
Last December, Mr Yeo, 55, who works in the medical sector, invested $17,785.12 in a 0.21-carat round cut diamond - described as "fancy intense purplish pink" - from AFD. He never laid hands on it.
This is the latest firm to come under scrutiny after recent reports by The Straits Times on two other firms - One Plantation Capital and Tropical Forestry Venture - which offered attractive returns in their agarwood investment schemes to retail investors.
Last month, Mr Yeo filed a police report against AFD, which used to have an office in Maybank Tower in Battery Road.
Not only are AFD customers crying foul, according to company staff, but employees are also up in arms as they have not been paid their wages and commissions for a few months. According to an AFD employee who spoke to The Straits Times on condition of anonymity, about 20 AFD staff involved in sales, telemarketing and administrative functions have not been paid for about two months. The office closed down in January.
Under AFD's two-year scheme, customers are offered a choice of coloured diamonds from a brochure. After selecting a diamond of their choice, they pay the cost of the diamond upfront. The average cost per diamond was about $15,000.
Customers sign an acquisition form which acts as a request for AFD to buy the diamonds on their behalf. They also sign a "storage and buy-back contract" with AFD. In the contract, customers are described as "the storer", while AFD is "the storage provider".
They were told to expect delivery of their diamonds one month later. However, they were advised that to avoid paying GST for their diamonds, AFD would store them in Christie's Fine Art Storage Services at Changi Airport. They would be given access to the warehouse for the purpose of viewing their diamonds.
There would be a 15 per cent annual return on the investment sum for two years, payable at the end of each year. This works out to a total return of 30 per cent - about $5,300 in the case of Mr Yeo's investment.
At the end of two years, the customers can opt to exercise the option for AFD to buy back the diamonds and return them their initial investment sums. If they wish to keep the diamond, they will forgo the 30 per cent returns.
Mr Yeo said he knew something had gone wrong only when he was not contacted by AFD to say that his diamond had been delivered to the Changi warehouse more than a month after he had paid and signed the documents. He was later informed by an AFD employee that the firm was in financial difficulties and that the chief executive and owner had gone missing.
"I was greedy and tempted by the high returns of 30 per cent. I was very angry initially because I should have done due diligence. But the AFD office looked very nice and it is registered here. I took a gamble and decided to see what comes out of it," said Mr Yeo.
He recalled that AFD's 4,000 sq ft office was luxuriously decorated and there was a showcase of diamonds in one of the rooms. He was also trying to help a friend who had sold him a property in the Philippines in her previous employment before moving to AFD as a sales consultant.
AFD was set up last June and has a paid-up capital of $10,000, Acra records show. It stated that the firm's director, Mr Guillianno Norberto R. Mata Pena, is from the Dominican Republic.
Mr David Gerald, president and chief executive of Securities Investor Association of Singapore, cautioned retail investors to look out for telltale signs when something looks too good to be true.
"There have been a number of scams reported and yet some people are falling for scams over and over again. People must get smart and ask basic questions before parting with hard-earned money," he said.
"Telltale signs include high returns which are more than what banks and good growth companies can offer. They must ring bells in our minds. How can others offer such high returns? Don't get carried away by high returns or a good sales pitch. Ask for advice and don't deal with unregulated entities."