Monday, November 4, 2013

When Robin Hood Turned Out to Be Just Hood: Story of "Double Shah" Ponzi scheme in Pakistan

If a man, having had no financial education, went to Dubai (United Arab Emirates) for six months, came back, and claimed he can DOUBLE the money you give him in only 15 days, would you believe him? Most of us would answer: no way.

Yet that's what thousands of people did in Pakistan, in the infamous case of "Double Shah", the nickname bestowed upon Syed Sitbul Shah. And like Charles Ponzi, Double Shah's scam did not last, even though people were lining up to give him money, just like Charles Ponzi.

In 2005, Syed Sitbul Shah, who was a mere humble school teacher, took leave from his work and spent six months in United Arab Emirates, specifically Dubai. Upon return to his town, Wazirabad, in Punjab region of Pakistan, he started circulating the news that he has learned the secrets of money in Dubai, that he can double people's money in 15 days.

And it took only one person (his old friend) to start, and a small amount to get started. When that was doubled, word spread, soon 1 became 10 (his old work colleagues), 10 became 100... And soon people are lined up outside his home DEMANDING that he take their money for doubling. Soon the dates start to slip. 15 days became 30 days, 30 days became 60 days, and then 70 days. Now dubbed "Double Shah", he purchased various assets with the money, such as multiple gasoline and CNG stations in Punjab, the region he was in, as well as alleged casinos in Dubai. It is estimated that he had gathered TENS OF BILLIONS of Rupiahs (up to 1 billion US dollars) by some estimates. Some claimed that he had RETURNED 40 billion rupiahs to investors.

All that came crashing down when a newspaper "The Nation" out of Lahore published a full investigative report, prompting a full police investigation on in April 2007 and arrest of Double Shah a week later. (Just like Charles Ponzi).

Upon report of his arrest, two thousand people surrounded the police station, at least half of whom actually believed that Shah had the Midas touch, that they want Double Shah released to continue to work his "double magic". The other half just wondered what happened to their money.

Double Shah's nephew was reported by newspaper to have said, "the arrested of a committed man like his uncle had shattered the dreams of thousands of people".

Double Shah was convicted by Pakistan National Accountability Bureau to have engaged in economic fraud and will spend 14 years in jail plus a fine of 5.4 BILLION Rupiahs. (50 million USD)

Even today Double Shah is believed by some devout locals to actually have possessed the power to double money, and refused to believe Double Shah had been operating a Ponzi scheme.


The MLM Skeptic makes the following observations:

Scammers ALWAYS look trustworthy

Many people fly the flag of trustworthiness, pushing every trigger such as wearing white, cites God, calls for prayers, claim to be benefiting the rich and poor alike, blah blah blah. Even a few demonstrations of his alleged powers is not really proof. Illusions and magic and fraud are quite simple to accomplish.

Scams are recycled

This case is virtually IDENTICAL to how the Charles Ponzi case turned out, except Ponzi only promised double in 90 days, not 15. And Ponzi at least had initially a plausible method (arbitrage of international reply coupons) to achieve such profits. Double Shah had nothing. Just like Ponzi, Double Shah was exposed by a newspaper, prompting his arrest.

Robin Hood are often just Hoods

Many people who believed in Shah because he doesn't discriminate... he'll take anybody's money.  Yet many of these "helpers of the poor", "providing opportunities to all" turned out just to be "hoods" who cheated some of the poorest people in the world, who had even less to lose than others.

Alleged Victim's Opinions Cannot Be Trusted

Victims, going through 5 phases of grief (denial, anger, depression, bargain, acceptance), cannot be counted on to say logical and sensical things until they reached acceptance.

  • Denial -- I was not cheated! It's the government! They ruined a good thing!
  • Anger -- Hang him! Hang him! I hate myself! How can I be this STUPID!?!?!
  • Depression -- How do I live with myself having lost my family savings? 
  • Bargain -- Can I just get SOMETHING back? ANYTHING? 
  • Accept -- I have learned my lesson


Enhanced by Zemanta

No comments:

Post a Comment