SALMAH, a retired secondary school teacher, ploughed her entire gratuity money into the country’s infamous gold investment scheme Genneva Gold. It was her second investment after her first reaped a return of more than 30% per annum.

A few weeks later, a joint-effort by the police, the Companies Commission of Malaysia (SSM) and Bank Negara came knocking on the doors of the Genneva Gold office in Kuala Lumpur.

That was five years ago. Salmah, along with a few thousand other people who had invested in the scheme, are still waiting and hoping to get their money back.

"Each day, that hope of recovering my money gets smaller and smaller," Salmah laments.

The amount investors ploughed into the Genneva Gold scam is estimated to be more than RM1bil.

The latest craze is the "foreign exchange" (forex) trading scheme that guarantees returns that, when you think about it, are considered just "too good to be true". And nobody has an idea on the amount that has been invested in the schemes, although some estimate it to be between RM3bil and RM4bil.

The returns range from 110% per annum to 250% per annum – staggering figures that cannot be matched by the world’s best hedge fund managers.

In comparison, the Top 20 best-performing hedge funds in the world registered a return of just above 3% on a total fund size of RM465bil in 2015. According to LCH Investments, a company that ranks hedge funds, the Top 20 hedge funds only made a profit of RM15bil for their investors last year. Included in the Top 20 are funds managed by household names such as George Soros, Steve Cohen, Ray Dalio and Bill Ackman.

What’s worse is that the other hedge funds outside the Top 20 collectively lost some US$99bil of their investors’ money.

"So how do forex schemes, which are the playground for hedge funds, give such returns is a wonder. Such schemes provide returns that are clearly not tenable," says a fund manager.

According to Bank Negara’s website, a forex trading scheme refers to the buying or selling of foreign currency by an individual or company in Malaysia with any person who is not a licensed onshore bank, or who has not obtained the approval of the central bank, subject to the Financial Services Act 2013 or Islamic Financial Services Act 2013.

"This scheme involves the act of buying or borrowing foreign currencies from or selling or lending foreign currencies to a non-licensed onshore bank," says Bank Negara.

It says that operators usually operate on a small scale and claim they can provide remittance services efficiently, without the need for any documents or identification. They rarely use documents to validate and verify the transactions

"By engaging in these transactions, customers run the risk of being cheated and their funds may never reach their intended destination."

The operators usually target job-seekers by placing attractive advertisements to lure them to join the company, after which they use the employees to solicit for new investments.

"Often, the employees will be encouraged to approach their families, relatives and friends before targeting members of the public," says Bank Negara.

Untenable returns

One representative for an offshore forex trading firm says an investor needs to place a minimum initial investment of US$1,000 (RM4,000).

"Returns are 4% per day for 80 days, so the amount bloats to US$3,200. At the end of 80 days, the company takes 30% and the investor takes the rest, which is US$2,240," says the trader, who requested anonymity.

Assuming that conversion is done at RM3.50 to the dollar, US$2,240 would amount to RM7,840.

This would mean that for an initial investment of RM4,000, you make RM7,840 in 80 days, or 96% in just under three months. If this were the case, then on an annual basis, your returns would be 384% (96% per quarter times four).

The trader assured that his operations have been running smoothly over the past six months "without any hiccups".

Meanwhile, Leong, an entrepreneur, says he has been "investing" in a forex trading scheme for about a year and has been "very happy" with the gains.

According to him, the investors only need to put in US$1,000 and are then guaranteed a 20% return every month. Unlike the earlier mentioned scheme, which has an 80-day tenure, this one runs indefinitely.

"There is no duration. You can reinvest your 20% or you can keep topping up your investment," says Leong, who calls the scheme his "sweet investment".

Leong says the scheme is run by a New Zealand-based firm and has been operational for about five years.

"We try to accumulate as many people as possible so that the investment pool can get bigger."

Asked if he ever gets sceptical, Leong says: "If you understand forex trading, you can trade and always make money."

One lawyer says that the fact that "some unlicensed broker" is taking money from Leong is already wrong.

"Deposit-taking is illegal, unless you’re licensed by Bank Negara," he says.

According to Bank Negara’s website, illegal operators usually operate on a small scale and claim they can provide remittance services efficiently, without the need for any documents or identification.

They rarely use documents to validate and verify the transactions. By engaging in these transactions, customers run the risk of being cheated and their funds may never reach their intended destination.

"Illegal operators usually portray a professional and reputable image, a high-tech office layout and advanced IT facilities, such as LCD screens displaying movements in exchange rates to provide the impression that a legitimate and real business is being conducted. These facilities are merely a false front," says Bank Negara.

Says one victim of a now-gone-bust forex trading firm: "When I first heard of this company, it was represented by a smooth-talking Malaysian businessman who owned super-fast cars, who claimed to be earning millions of ringgit per year and was living the ultimate dream lifestyle.