Newsletter | September 2020

Ponzi Schemes Using Virtual Currencies The SEC investigates and prosecutes Fraudsters may also be attracted to As the world evolves and new many Ponzi scheme cases each year to using virtual currencies to perpetrate technologies arise, so does previous prevent new victims from being harmed their frauds because transactions in fraudulent schemes also evolve and and to maximize recovery of assets to virtual currencies supposedly have multiply. We thus want to warn investors. greater privacy benefits and less our investors that the prevalence regulatory oversight than transactions As with many frauds, Ponzi scheme of online fraudulent investment in conventional currencies. Any organizers often use the latest schemes, which involve Bitcoin and investment in securities in Namibia innovation, technology, product or other virtual currencies, are on the remains subject to the jurisdiction growth industry to entice investors rise. of Namfisa regardless of whether and give their scheme the promise of the investment is made in Namibian In this article we’ve used an investor high returns. Potential investors are Dollars or a virtual currency. In alert issued by the US Security often less skeptical of an investment particular, individuals selling Exchange Commission Office of opportunity when assessing something investments are subject to be Investor Education and Advocacy novel, new or “cutting-edge.” registered and licensed by Namfisa. (SEC) extensively and adjusted it with Look Out for Potential Scams relevant Namibian information. The Common Red Flags of Fraud Bank of Namibia also continuously Using Virtual Currency Many Ponzi schemes share common investigate multiple businesses Virtual currencies, such as Bitcoin, characteristics. The following are suspected of being ponzi or pyramid have recently become popular and some red flags: schemes. are intended to serve as a type of money. They may be traded on online • High investment returns with little or no risk Ponzi Schemes Generally exchanges for conventional currencies, Every investment carries some A Ponzi scheme or Pyramid scheme including the US dollar, or used to degree of risk, and investments is an investment scam that involves purchase goods or services, usually yielding higher returns typically the payment of purported returns online. involve more risk. “Guaranteed” to existing investors from funds We are concerned that the rising investment returns or promises of contributed by new investors. Ponzi use of virtual currencies in the global high returns for little risk should be scheme organizers often solicit new marketplace may entice fraudsters viewed skeptically. investors by promising to invest funds to lure investors into Ponzi and other in opportunities claimed to generate • Overly consistent returns schemes in which these currencies high returns with little or no risk. Investments tend to go up and are used to facilitate fraudulent, or In many Ponzi schemes, rather down over time, especially those simply fabricated, investments or than engaging in any legitimate seeking high returns. Be suspect transactions. The fraud may also investment activity, the fraudulent of an investment that generates involve an unregistered offering or actors focus on attracting new money consistent returns regardless of trading platform. These schemes often to make promised payments to overall market conditions. promise high returns for getting in on earlier investors as well as to divert • Unregistered investments the ground floor of a growing Internet some of these “invested” funds for Ponzi schemes typically involve phenomenon. personal use. investments that have not been registered with a regulator in

T: +264 61 299 1950 | E: [email protected] | www.cam.com.na general or specifically with Namfisa. Ask higher investment returns. Don’t be fooled yourself where you are going to complain by the fact that you or someone you know or who you are going to sue, and in which is receiving the promised return in rather court of law under which jurisdiction, if you short cycles such as weekly. Fraudsters lure lose your investment or one day suddenly investors in this way to not withdraw any cannot log into the fraudsters website and capital and to spread the word. the site disappeared. • Incentive to recruit new members • Unlicensed sellers Ponzi schemes can also incorporate Namfisa regulation and law require pyramid structures and offer tiered investment professionals and their firms membership structures and incentives to be licensed or registered. Many Ponzi to recruit new investors. This is against schemes involve unlicensed individuals or the law and is a major sign of pyramid unregistered firms or online websites. Also schemes. Over the past year the Bank of websites that frequently change names is a Namibia has identified multiple pyramid sign of unregulated and fraudulent activity. schemes of which the most well known is • Secretive and/or complex strategies and the Whatsapp Stokvel and Global Green fee structures Network. It is a good rule of thumb to avoid Don’t get fooled investments you don’t understand or for Low interest rates and very volatile equity and which you can’t get complete information. property investments as a result of Covid-19 • No Financial Intelligence Act (FIA) lockdowns, cause many investors to search for requirements alternatives that simply do not exist. Don’t get Legitimate investment opportunities fooled and be lured into losing your hard earn require you to comply with minimum money. FIA requirements. You should be highly skeptical of investment opportunities Contact us and let us assist you to make the that do not ask about your source of sensible investment choices that are in line income and positive identification and with your unique risk profile to achieve your documentary proof to be verified. investment success. • No clear investment objective Our sales team is readily available at Be skeptical of any investment opportunity [email protected] or that cannot provide you with clear 061 - 299 1950 for all your investment needs, information as to what you invest in and whether you are investing for yourself, your how income is to be derived from the children, trust or business. investment. Any investment must make sense and should pass the common logic test. If it does not make sense or is to good Economic Update to be true it most probably is a scheme and The worst is over. It certainly appears that not true. the second quarter of 2020 was the bottom • Short term return payouts and high of the contraction in economic activity and frequency returns the hight of restrictive policies with respect Be suspicious if you don’t receive a to the Covid-19 pandemic. GDP numbers of payment or have difficulty cashing out most countries confirmed a sharp and deep your investment. Ponzi scheme organizers contraction. Namibia’s economy shrank by sometimes encourage participants to “roll 11.1% in real terms compared to a year ago. over” promised payments by offering even

T: +264 61 299 1950 | E: [email protected] | www.cam.com.na This overall number hides the fact that certain Following a surge, Agricultural output is industries virtually collapsed while only a few normally subdued for several quarters. Fishing grew. For instance, unsurprisingly, Tourism is also driven by seasonal factors. Mining crashed by 64%. Three industries contracted may or may not recover sharply in a growing, by around 30%, Manufacturing, Transport albeit uncertain, global economy. This sector and Support Services. Wholesale and Retail has now been contacting for seven quarters trade contracted by 23%. The malaise in this in a row and could be due for a rebound. industry continued unabated with 14 out of Depending on the uptake of credit in the wake the past 20 quarters negative. This means of the aggressive lowering of interest rates, a that it is now a third smaller than what it was 5 few sectors such as Wholesale and Retail Trade, years ago. Real Estate, Finance and Construction could bounce sharply. The outlook for the Public A handful of sectors contracted by around Service sectors will largely depend on the 10% or less, such as Fishing, Mining, Finance, wherewithal of the state’s finances and ability Real Estate Services and Construction. The to maintain solvent operational entities. latter appears to be bottoming out after an horrific five-year period – twelve out of the past Unfortunately, the shadow of Covid-19 will 20 quarters registered deep contractions – so remain around for an extended period as well. much so that the industry is now only a third of Its effect is largely due to unpredictable policy what it was in 2015. actions that may come about in the wake of data changes, which in itself is subject to Sectors that are largely in the public services dispute. The latest instance of this is that in domain such as Electricity & Water (-2.5%), South Africa, the Minister of Health disbanded Administration and Defence (-5.1%), the scientific advisory committee on the Education (-1.2%) and Health (+6.0%) held coronavirus amid disagreements. There also up reasonably well. The latter, together with appears to be a second wave of infections Information & Communication (+11.0%) and across Europe with differing and ad hoc policy Agriculture (+47.2%) were the only sectors responses. that expanded. The surge in Agriculture is attributable to a bumper grain crop. Generally, Therefore, even if the worst is over, there we see that grain production globally and remains a sting in the tail. By this we mean regionally is quite high this year. that there are lagged effects of events of the past eight months that will only It is likely that, having contracted so sharply, become clear in time. For instance, the economic activity should pick up over the impact on unemployment is still to play out. next year or so. Global growth expectations Government’s finances will remain under have stabilised at around +5% for 2021, severe strain, which will have an impact on with Developed Markets (DM’s) at +4.5% the economy directly, as well as investor and Emerging Markets (EM’s) at +6%. For confidence and interest rates. The degree to this to come about, one generally bargains which the banking industry will wrestle with on a degree of normalisation in business-, non-performing loans and bad debt will have consumer- and investor confidence as well an impact on its willingness and ability to as the release of pent-up demand that built extend credit in an environment of generally up during the lockdown periods. Therefore, weakening credit worthiness. the global and regional outlook is subject to unusual uncertainty. This applies to Namibia As far as the Namibian dollar is concerned, as well where we expect positive growth next our view is that it will be fairly strong over the year, but it could range from 1.5% to 4.5%. next six to eighteen months vs. the US dollar,

T: +264 61 299 1950 | E: [email protected] | www.cam.com.na trading in a range of N$16.50 to N$17.50, Capricorn Unit Trusts’ Annual not exclusively but mostly. Our sense is Financial Statements that it already discounts weak economic fundamentals and political risk if one The summarised report of the 30 June remembers that over the past ten years it has 2020 Annual Financial Statements of all the depreciated by around 150%. Furthermore, Capricorn Unit Trust Funds are available on our it should be supported by a very high interest website under the “News Platform” section. rate differential – the ten-year yield in SA is 9.5%, while that of the USA is 0.6%. Exports View it here now: Financial Statements should also do much better in a growing world economy next year. The audited Financial Statements and the auditor’s report thereon are available for inspection at the company’s registered office.

T: +264 61 299 1950 | E: [email protected] | www.cam.com.na