Jail for mastermind of 'unsustainable' investment scheme that offered gold bars

SINGAPORE - The mastermind behind an "extremely risky and unsustainable" gold membership programme that raised almost $30 million in capital from nearly 550 investors had his sentence upped from a fine to 12 weeks' jail by the High Court on Friday (June 28).

Prosecutors had appealed for a jail term to be meted out to Albert Tan Seo Whatt, 54, who had come up with the concept of selling "memberships" to investors by offering a gold bar upfront.

Tan was originally sentenced to a $600,000 fine by a district court last year after he pleaded guilty to 20 charges of offering securities to investors without a prospectus through Gold Insignia, a company he managed.

The case represents the first prosecution for the offence under the Securities and Futures Act.

Three others on Gold Insignia's management team have been sentenced to fines of between $30,000 and $60,000 for their respective roles.

Gold Insignia sold memberships priced between $5,000 and $1 million, promising investors regular payouts.

Initially, the payouts were offered at 18 per cent per annum, but this was later adjusted to 12 per cent per annum.

About 70 per cent of the membership fee was used to buy gold bars of between 50g and 10kg for investors to hold as collateral.

Investors who terminate their memberships could either keep the gold and stop receiving payouts, or return the gold and get a full refund of the fee.

 

Between June 2010 and November 2011, Gold Insignia sold 853 memberships to 547 investors, raising nearly $30 million.

During this period, Tan paid himself $431,000.

After Gold Insignia was placed on the Monetary Authority of Singapore's Investor Alert List in March 2011, another company called Insignia9 was set up to continue the business.

In written submissions arguing for Tan to be jailed, Deputy Public Prosecutor Nicholas Khoo said Gold Insignia's business was essentially a money circulation scheme in which old investors were being paid from money raised from new investors.

The lack of a prospectus was central to successfully attracting investors to such an unsustainable scheme, he said.

"The investing public was prevented from discovering that the 'investment' was simply a money circulation scheme without any special investment strategy to generate 92 per cent to 112 per cent returns on monies collected," said the DPP.

He argued that the district judge had failed to give sufficient weight to the markedly different role that Tan played compared to the other three.

On Friday, High Court judge Hoo Sheau Peng agreed with the prosecution that Tan should be jailed.

Justice Hoo noted that Tan's role was substantial and he had benefited from the scheme.

While there was no evidence of actual loss, significant sums belonging to multiple investors were exposed to loss, she said.

She also dismissed Tan's appeal for a lower fine.