Episode Transcript
[00:00:00] Speaker A: Hello, friends, foes and financially curious folks. I'm Miles, the esteemed and, yes, self appointed announcer for the best true crime and scam busting podcast in the known universe. Behind the Scams.
That's right.
The only show where Ponzi meets punchline and fraudsters get exposed faster than a bad toupee in a wind tunnel.
Today's episode. Oh, it's a good one.
We're heading straight into the glittering high rise haven known as the United Arab Emirates, or UAE for short.
If you're thinking where exactly is that?
Don't worry, I've gotcha.
The UAE is nestled on the southeastern tip of the Arabian Peninsula, right along the Persian Gulf.
It's home to places like Dubai with its Lamborghini, traffic jams and indoor ski slopes, and Abu Dhabi, the capital where oil money meets modern art and mega mosques.
There's also Sharjah, Ajman and a few others. But let's be honest, you came for the scandals, not the travel tips. And scandals, my friends, are what we've got.
In this two part expose, Nick and Sue, take us deep into how traditional Ponzi schemes are being rebranded as flashy tech startups in the uae.
These aren't your grandma's pyramid schemes.
We're talking about scammers in suits, using AI buzzwords, rented Lambos, fake TEDx talks and luxury office spaces to lure in investors from all over the world.
This first episode, part one, dives into how these schemes are built.
How the illusion of innovation is carefully crafted to hide a hollow core of lies and hype.
So if you've ever thought a blockchain powered banana farm sounded too good to be true, you were right. Now, before I spoil all the fun, let's pass it over to the ones who actually did the homework.
Here's Nick and SUE with part one of the Mirage in the Desert, exposing the UAE's startup scam culture. Take it away, Nick and Sue.
[00:02:10] Speaker B: Thanks, Miles. So we have something I think our listeners will find fascinating and scary at the same time.
Welcome back to behind the Scams, where we dive into the shadiest corners of the scamming world.
I'm sue and today we're talking about something that's been, like, absolutely blowing my mind lately.
Ponzi schemes in the UAE that are totally disguised as legitimate startups and scamming people out of a lot of money. Joining us today, as always, is my wonderful husband Nick, and my link to all things law enforcement.
[00:02:49] Speaker C: Hey everyone, this is Nick. And great to be here today.
[00:02:51] Speaker B: Nick, you have been researching this topic, like, crazy. Like, I swear you haven't slept in days diving into this stuff.
[00:02:59] Speaker C: That's, that's pretty accurate, actually.
And, and I can't wait to share what I've found because this is, you know, fascinating and terrifying at the same time.
These scammers are getting really, really sophisticated with how they're presenting themselves.
[00:03:18] Speaker B: I know, and that's what makes this so scary. Right, so you've been doing some in depth research about all these schemes running rampant in the uae, which stands for the United Arab Emirates. The larger cities in the UAE include Dubai and Abu Dhabi. The name of this podcast episode is the Mirage in the desert, exposing the UAE's startup scam culture. Because this particular scam is so involved, but. But so important, we will be breaking this episode into two parts. This is part one of our series.
[00:03:55] Speaker C: You got that right, Sue. This story is very involved, so great idea to break it up into two parts. Now onto our story.
My findings have shown how these, these operations are essentially just, you know, traditional Ponzi and pyramid schemes, but dressed up in fancy startup clothes with all the buzzwords and promises of innovation.
It's like old scams with a new shiny tech veneer.
[00:04:23] Speaker B: So, Nick, before we get too deep into the UAE situation, I think some of our listeners might need a quick refresher. What exactly is a Ponzi scheme? Like, how do these things actually work?
[00:04:36] Speaker C: Right, right.
So a Ponzi scheme is basically.
Well, it's a form of fraud where the person running it, you know, pays returns to existing investors using capital from new investors rather than from actual legitimate profits. They're named after Charles Ponzi, who. And, and this is actually pretty interesting. Pulled off a famous scheme back in the 1920s.
[00:05:05] Speaker B: Wait, so it's literally just taking new people's money to pay the earlier investors?
[00:05:10] Speaker C: That's.
[00:05:10] Speaker B: That's it.
[00:05:11] Speaker C: Exactly. That's literally all it is.
The whole thing is just a shell game.
There's no real business generating actual returns. The person running the scheme just. They just take money from new investors and use that cash to pay the people who invested earlier. And they pocket a big chunk for themselves, obviously.
[00:05:33] Speaker B: So how do they differ from, like, real investments? I mean, don't all investment funds take in new money all the time?
[00:05:40] Speaker C: That's a great question. The key difference is that legitimate investments actually, you know, do something productive with your money. They buy assets that generate real returns, stocks that pay dividends, bonds that pay interest, real estate that collects rent, that kind of thing.
With a Ponzi scheme, there's there's nothing actually happening with the money except like redistribution.
The operator might claim they're investing in, I don't know, cryptocurrency trading algorithms or exclusive foreign markets or something super complicated sounding. But they're not, they're just, they're just moving money around.
[00:06:23] Speaker B: But how do these things even get off the ground in the first place?
[00:06:27] Speaker C: Well, they usually start by promising really attractive returns, way above what legitimate investments can offer.
Like, if the stock market is returning 10% annually, these schemes might promise, you know, 30% or even more.
And at first they actually deliver on those promises.
Early investors get paid exactly what they were told they'd get.
[00:06:52] Speaker B: And then those early investors tell all their friends. Right?
[00:06:55] Speaker C: Exactly. Word of mouth is like super powerful. Those early investors become your best marketers because they've seen the proof that it works. They got their amazing returns. So they tell family, friends, colleagues, and the scheme grows.
[00:07:13] Speaker B: So why do they always collapse if new people keep joining?
[00:07:16] Speaker C: That's the thing. They mathematically have to collapse eventually. The scheme needs more and more new investors to pay the growing pool of existing investors.
It's basically, it's exponential. At some point you run out of new people to recruit, or some external factor causes too many people to try withdrawing at once and. And the whole thing just implodes.
[00:07:43] Speaker B: God, that's terrifying. And I'm guessing that's when people realize they've been scammed.
[00:07:48] Speaker C: Sadly, yes. By the time it collapses, the person running the scheme has usually, you know, siphoned off millions for themselves and, and the investors, especially those who came in later, they lose everything.
[00:08:02] Speaker B: So, Nick, I've been meaning to ask you about the uae.
It's got this reputation as like this emerging tech hub, right? What's actually going on there that makes it such a hotbed for these startup disguise scams?
[00:08:18] Speaker C: So I got something super cool for you on this. The uae and especially Dubai and Abu Dhabi, and they've been like aggressively trying to diversify their economies beyond oil for years now.
And they've poured billions into creating this whole ecosystem for tech startups and innovation. You know what I mean?
[00:08:41] Speaker B: That actually makes sense. I've seen all those fancy promotional videos about Dubai's future city stuff.
[00:08:48] Speaker C: Exactly. The thing is, well, they've created these free zones and these special economic areas with like really attractive tax benefits and minimal regulation to draw in entrepreneurs and investors from all over the world. And it's worked. There's been this massive influx of talent and capital and.
[00:09:11] Speaker B: But that sounds positive, doesn't it? Like what's the downside.
[00:09:15] Speaker C: The downside is it's created this perfect storm for scammers. See, you've got this environment where there's tons of money floating around, investors eager to get in early on the next big thing, and, and regulatory oversight that's still playing catch up with the speed of all this growth.
[00:09:38] Speaker B: Oh, so it's like it's basically a playground for people running these schemes.
[00:09:43] Speaker C: You hit the nail on the head.
It totally is. The UAE has all these legitimate startups doing innovative things, right? But mixed in with them are these operations that, you know, they talk the talk, they use all the same buzzwords, blockchain, AI, fintech, whatever's hot. But they're actually just elaborate Ponzi schemes dressed up in startup clothes.
[00:10:10] Speaker B: How do these scammers take advantage of the startup culture specifically?
[00:10:14] Speaker C: That's actually really fascinating.
In the startup world, it's normal for companies to operate at a loss for years while they grow. It's normal to pivot your business model. It's normal to be a bit secretive about your proprietary technology.
All of these things that would be red flags in traditional business are just, they're part of startup culture.
[00:10:37] Speaker B: Right, like how Amazon didn't make a profit for what, like decades?
[00:10:41] Speaker C: Exactly, for decades. And scammers, they leverage that expectation. They'll say things like, oh, we're in stealth mode or we can't reveal our proprietary algorithm or we're focusing on growth before profitability.
These are all legitimate things, real startups might say.
But.
But scammers use this language as cover.
[00:11:06] Speaker B: And I'm guessing the international nature of Dubai makes it even more complicated.
[00:11:10] Speaker C: Oh my God, yes. Dubai is this incredible melting pot. You've got investors from Europe, Asia, Africa, America, all bringing different expectations about how business works, different understandings of financial regulations and different levels of sophistication when it comes to due diligence.
[00:11:33] Speaker B: That sounds like a recipe for confusion that scammers can exploit.
[00:11:38] Speaker C: Absolutely. And there's another factor that makes the UAE particularly vulnerable. The culture there really values like status and connections. So if a scammer can get a few high profile people involved early, maybe some minor royals or, or well known business figures, other investors just, they just assume it must be legitimate.
[00:12:02] Speaker B: I've heard they even host these lavish events to attract investors, right?
[00:12:06] Speaker C: They do these elaborate launch parties in luxury hotels, sponsorships of major events, offices and prestigious towers. It's all part of creating this illusion of success and stability. And in Dubai especially, appearances matter. If you look successful, people assume you are successful. It's the Perfect environment for what experts call affinity fraud.
[00:12:32] Speaker B: And I'm guessing all this rapid growth must make it hard for regulators to keep up.
[00:12:36] Speaker C: You've got that right.
The UAE's financial regulatory system is actually pretty sophisticated on paper. But, but the pace of change has been so rapid that enforcement struggles to keep up. And, and when you add in the international dimension, operators from one country registered in another, targeting investors from dozens of others, it becomes this jurisdictional nightmare.
[00:13:02] Speaker B: So Nick, what's particularly scary about these modern Ponzi schemes is how they disguise themselves as legitimate startups. How do they pull that off? Exactly.
[00:13:13] Speaker C: So I got something super cool for you on this.
The modern Ponzi scheme has gotten like incredibly sophisticated. They're not just, you know, some guy in a cheap suit promising ridiculous returns anymore. These operations have. And, and they've completely co opted the language and aesthetics of legitimate tech startups. It's actually, it's pretty impressive in a really twisted way.
[00:13:43] Speaker B: What kind of terminology are they using to sound legitimate?
[00:13:46] Speaker C: Oh man, they are absolute masters at buzzword bingo. They'll throw around terms like disruptive technology, AI powered algorithms, blockchain integration, machine learning, optimization, you know what I mean? And they use these terms in ways that sound impressive, but. Well, when you really analyze what they're saying, it its meaningless word salad.
[00:14:10] Speaker B: That makes it really hard for the average investor to spot, doesn't it?
[00:14:14] Speaker C: Totally.
Because here's the thing, most investors, even sophisticated ones, don't have deep technical knowledge in every field. So if someone's pitching you an AI driven fintech solution with proprietary blockchain architecture, how many people can actually evaluate that claim?
Not many. And the scammers, they know this and, and they exploit this information asymmetry.
[00:14:42] Speaker B: Are there specific narratives these scams tend to use?
[00:14:45] Speaker C: Yes, there are these, these common templates they follow.
One favorite is the we've discovered a market inefficiency that nobody else has noticed story.
Another is the our proprietary algorithm is can predict market movements claim.
Or my personal favorite, the we've got exclusive access to deals nobody else can get line. These narratives play on people's fear of missing out on the next big thing.
[00:15:15] Speaker B: Oh, what about their online presence? I'm guessing that's important too.
[00:15:19] Speaker C: Absolutely crucial. These operations invest heavily in creating this digital facade of legitimacy.
We're talking slick websites with stock photos of diverse teams, glossy white papers filled with complex charts that don't actually tell you anything meaningful, fake testimonials and, and social media accounts with purchased followers and engagement.
[00:15:43] Speaker B: What about the people running these schemes? How do they present themselves?
[00:15:47] Speaker C: That's where it gets really interesting.
The front men, and they're usually mentioned, they craft these elaborate Personas as visionary entrepreneurs.
They'll claim to have worked at Google or Goldman Sachs or some prestigious firm.
They'll have professional photo shoots and expensive suits standing next to luxury cars.
They'll give TEDx talks and appear on obscure podcasts. It's all about building this perception of success and expertise.
[00:16:17] Speaker B: So what are the red flags that investors should really be watching out for?
[00:16:22] Speaker C: Great question.
First and foremost, guaranteed returns. If anyone promises you consistent above market returns with no risk, run away.
That's like the most basic red flag.
Another big one is pressure tactics. This opportunity won't last.
We're closing this investment round tomorrow, that kind of thing.
Legitimate investments don't need to rush you.
[00:16:50] Speaker B: Any other warning signs?
[00:16:52] Speaker C: Oh, yeah, tons. Look for vague explanations about how they actually make money. Watch out for businesses that seem to be more focused on recruiting new investors than developing their product.
Be suspicious of companies that can't clearly explain their business model or technology.
And.
And always be cautious when the founder's lifestyle seems to be the main selling point of the business.
[00:17:18] Speaker B: It sounds like these scammers put so much effort into appearing legitimate. Couldn't they just, I don't know, start real businesses with all that energy?
[00:17:28] Speaker C: Right, that's the crazy thing. Some of these people are incredibly smart and charismatic. They could probably build legitimate businesses if they wanted to, but, well, running a real business is hard. You have to create actual value, solve real problems, deal with competition. With a Ponzi scheme, you just need to be good at marketing and telling stories and pay the early investors with money from the later ones until it all collapses.
[00:17:58] Speaker B: Is there anything unique about how these schemes operate in the uae?
[00:18:02] Speaker C: Specifically, what makes the UAE version special is the international angle.
These operations often target expatriate communities who might not be familiar with local regulations.
They exploit the fact that Dubai especially has this reputation as a place where fortunes are made quickly. And they use the legitimate government initiatives around innovation and entrepreneurship as cover for their activities. It's like they're parasites on the actual innovation ecosystem.
[00:18:38] Speaker B: So, Nick, can you share some specific examples of these Ponzi schemes that have been operating in the UAE recently? I think our listeners would really want to hear about actual cases, so I.
[00:18:53] Speaker C: Got something super cool for you on this.
There have been, like, several major cases that really highlight how these scams operate.
One of the most notorious was this company called Phoenix Capital Ventures. They positioned themselves as this, you know, exclusive investment firm. With access to special deals in real estate development across Dubai and Abu Dhabi. They promised investors like consistently 20% annual returns, which is, that's just, that's just absurd in today's market.
[00:19:31] Speaker B: 20%, that's huge. How did they convince people that was possible?
[00:19:36] Speaker C: Right? It's crazy. They had this whole elaborate story about special relationships with government officials and exclusive access to pre development projects.
The founder, this guy named Amir Rahim, he presented himself as this, you know, this well connected entrepreneur with royal family connections. He drove around in a Lamborghini, had an office in the Burj Khalifa and was constantly posting photos with celebrities at luxury events.
And he would tell investors that the high returns came from getting in on projects before. Before they were publicly announced.
[00:20:17] Speaker B: How much money did they end up taking from people?
[00:20:19] Speaker C: The authorities estimate it was around $85 million from over 300 investors.
Many of them were expatriates living in the UAE, British American, South African professionals working in Dubai who thought they were making smart investments for their future.
When it all collapsed last year, many of these people lost their life savings.
[00:20:45] Speaker B: That's devastating. But what happened in the end was this. A mere guy caught.
[00:20:49] Speaker C: He actually, he fled the country before the authorities could get to him. Last anyone heard, he was in the Maldives. But there's an Interpol red notice out for him now.
The whole operation was a classic Ponzi. They were using new investor money to pay the returns to earlier investors while Rahim and his partners were siphoning off millions for themselves.
[00:21:15] Speaker B: Are there other examples that follow a different pattern?
[00:21:18] Speaker C: Oh yeah, definitely. Another major one was Tech Vision Innovations.
This was more of a, a tech focused scam.
They claim to have developed this revolutionary AI trading algorithm that could predict cryptocurrency price movements with, with 90% accuracy.
The founder, Sarah Chen, positioned herself as this, you know, this wonderkind developer who had previously worked at major tech companies.
[00:21:47] Speaker B: What made her story convincing to people?
[00:21:49] Speaker C: She was actually really brilliant at the technical jargon.
She'd give these presentations with complex looking code on screen, impressive dashboards showing supposed real time trading results and white papers filled with mathematical formulas for non technical investors. It was impressive and intimidating. And she had built this community around the investment seminars, exclusive telegram groups, investor retreats at luxury resorts.
It created this sense of belonging and exclusivity.
[00:22:25] Speaker B: I'm guessing there was no actual AI algorithm.
[00:22:28] Speaker C: Exactly.
The whole thing was smoke and mirrors. When investigators finally got access to their systems, they found that the trading platform was just a sophisticated front end with no actual functionality. It was displaying fake data And? And the supposed returns investors were seeing in their accounts were completely fabricated.
This one took about $40 million from investors before it collapsed.
[00:22:57] Speaker A: Hmm.
[00:22:57] Speaker B: Were the authorities able to catch her?
[00:22:59] Speaker C: Yeah, in this case, they actually did. She was arrested trying to leave Dubai and is currently facing criminal charges. But most of the money was already gone, spent on luxury lifestyle, expensive office space, and marketing to attract more victims.
[00:23:15] Speaker B: These examples are really disturbing. What about scams targeting specific communities?
I've heard that's common too.
[00:23:24] Speaker C: That's absolutely right. And it's one of the most heartbreaking patterns.
There was this case called Oasis Family Investments that specifically targeted the Filipino expatriate community in the uae.
The operators were themselves Filipino and used cultural connections and trust to build their scheme.
They marketed it as a way for domestic workers, nurses, and other expatriate workers to build wealth for their families back home.
[00:23:55] Speaker B: Oh, no. So they were targeting people who were probably not making huge salaries to begin with.
[00:24:01] Speaker C: Exactly. And that's what makes it so awful. They had a minimum investment of just Dh5,000, about 1,300, which made it accessible to people with modest incomes. They claimed to be investing in a portfolio of businesses both in the UAE and the Philippines. And because they paid consistent returns at first, word spread quickly throughout the community.
People were investing their entire life savings, taking out loans, even pooling money with family members.
[00:24:34] Speaker B: How do these operations manage to fool so many people? Is it just the promise of high returns?
[00:24:40] Speaker C: It's actually way more sophisticated than that.
The psychological tactics they use are incredibly effective.
First, they build this foundation of social proof. They make sure early investors get paid and become vocal evangelists.
They hold these lavish events that make the company look successful and stable.
They create a sense of community that makes people feel like they're part of something special.
[00:25:10] Speaker B: That's really manipulative, using people's trust against them like that.
[00:25:14] Speaker C: It is. And they're masters at at overcoming objections. If someone expresses doubt, they have ready answers. They'll show bank statements, office space, even fake trading systems. Some will even register legitimate companies and have surface level regulatory approvals that don't actually validate their investment claims, but look impressive to the average person.
[00:25:43] Speaker B: This is all so calculated, it makes me wonder how anyone can avoid falling for these scams.
[00:25:48] Speaker C: That's the scary part. These operators are really good at what they do. Even sophisticated investors can be fooled if they don't do extensive due diligence.
And in the uae, specifically, the rapid growth and the focus on being seen as an innovation hub has created this perfect environment. For these scams to flourish alongside legitimate businesses.
[00:26:15] Speaker B: So let's talk about the regulatory environment in the uae. Why is it that these schemes seem to be able to, you know, flourish there specifically?
[00:26:26] Speaker C: So I've been looking into this a lot and the regulatory environment in the UAE is like really interesting.
It's kind of, it's complicated. Right. The UAE has actually made significant efforts to establish robust financial regulations, especially in the main financial centers like the Dubai International Financial center and Abu Dhabi Global Market.
But, and this is a big but, there are these, these structural challenges that create opportunities for scammers.
[00:27:05] Speaker B: What kind of structural challenges are we talking about?
[00:27:08] Speaker C: Well, for one thing, the UAE has multiple regulatory jurisdictions. You've got mainland regulations, you've got free zones, you've got financial free zones.
And each has different rules and different regulatory bodies overseeing them.
And sometimes there's this lack of coordination between these different authorities which creates these regulatory gaps that scammers can exploit.
[00:27:36] Speaker B: That sounds like a recipe for confusion. How does that play out in practice?
[00:27:40] Speaker C: In practice it means that a company can sometimes set up in one jurisdiction but operate across multiple areas.
They might get a basic commercial license that doesn't actually permit investment activities, but then they go ahead and market investment opportunities anyway.
By the time regulators catch on, these operators have often already collected millions and are ready to disappear.
[00:28:08] Speaker B: I've also heard that the UAE is really focused on attracting business and investment.
Does that affect how strictly they enforce regulations?
[00:28:17] Speaker C: That's absolutely part of it.
The UAE has this ambitious vision to diversify away from oil and become a global business hub. They're really focused on economic growth and attracting foreign investment and talent.
This creates this pressure to maintain a business friendly environment with like minimal bureaucracy and low regulatory barriers.
[00:28:42] Speaker B: But doesn't that make it harder to catch the bad actors?
[00:28:45] Speaker C: Exactly. It's this constant balancing act. They want to attract legitimate businesses while keeping out fraudsters. But that's incredibly difficult to do. And sometimes the emphasis on speed and efficiency in business setup means that the due diligence process isn't as thorough thorough as it could be. A company can be established in just a few days in some cases.
[00:29:12] Speaker B: What about enforcement? When they do identify these schemes, how effective are they at shutting them down?
[00:29:18] Speaker C: The enforcement piece is.
It's complicated too. The UAE authorities have definitely stepped up their game in recent years. They've established financial crime units, they've implemented stricter AML regulations, but they still face significant challenges.
One major issue is that by the time a scheme is identified, the perpetrators have often already moved money offshore through Complex networks of shell companies and cryptocurrency.
[00:29:50] Speaker B: That sounds like a nightmare to track.
[00:29:52] Speaker C: It really is.
And then there's the international dimension.
Many of these scammers are foreign nationals who can quickly leave the country.
Once they're gone, the cross border legal cooperation required to extradite them and recover funds is.
It's extremely complex and time consuming.
And not all countries have strong extradition treaties with the uae.
[00:30:19] Speaker B: Are there any specific regulatory weaknesses that make the UAE particularly attractive for these schemes compared to other financial hubs?
[00:30:28] Speaker C: Yeah, there are a few things that stand out. First, the UAE still allows for significant financial privacy, which can make it harder to track funds.
Second, until recently they've had a more limited framework for regulating cryptocurrencies and digital assets which are often used in these schemes. And third, the focus on being seen as a crypto friendly hub and has attracted legitimate crypto businesses, but also, you know, some shadier operations.
[00:31:02] Speaker B: How does this compare to regulations in places like the US or uk?
[00:31:07] Speaker C: So compared to places like the US and uk, the UAE regulatory system is still, it's relatively young.
The SEC in the US has been around since the 1930s and has extensive experience and resources for investigating investment fraud.
In contrast, Some of the UAE's regulatory bodies were only established in the last two decades.
They're catching up quickly, but there's still this experience gap.
[00:31:37] Speaker B: What steps is the UAE taking to address these issues?
[00:31:40] Speaker C: They're actually making significant progress in recent years.
They've strengthened their anti money laundering laws, they've established specialized financial courts, and they've increased penalties for financial crimes. The central bank and financial regulators regularly issue warnings about suspicious schemes and, and they've also established better cooperation mechanisms with international law enforcement.
[00:32:09] Speaker B: Do you think these efforts will be enough to curb these schemes?
[00:32:12] Speaker C: Honestly, it's going to take time. Regulatory systems evolve through experience, often in response to specific cases and challenges. The UAE is going through that evolution now. Each major fraud case helps identify weaknesses in the system that can then be addressed. But it's sort of like it's like this cat and mouse game, right?
As regulations tighten, scammers adapt their methods.
[00:32:43] Speaker B: It sounds like there's a real tension between wanting to be business friendly and also protecting investors.
[00:32:49] Speaker C: That's exactly it. And finding that balance is incredibly challenging for any financial hub, not just the uae.
Singapore, Hong Kong, even London and New York all face similar challenges.
The difference is just in the maturity of their regulatory systems and the resources they have available for enforcement.
[00:33:12] Speaker B: So Nick, given all these regulatory challenges in the uae, I'm Curious about something. How and why are US Authorities getting involved in these cases? I mean, these scams are happening thousands of miles away. Right.
[00:33:27] Speaker C: So that's, that's actually a really fascinating question.
US Authorities like the sec, the Department of Justice and the FBI have been increasingly active in investigating these UAE based schemes for a few key reasons. First of all, many of these schemes, they actually target American investors. Right. Like if US Citizens are losing money, US Authorities have a strong interest in pursuing the case.
[00:33:58] Speaker B: But how common is that? Are American investors really putting money into these UAE schemes?
[00:34:04] Speaker C: Oh, absolutely. Way more than you might think.
See, these scammers are.
They're really sophisticated in their marketing. They use social media, they use online investment platforms that can reach investors globally. And many Americans are attracted to these supposed opportunities and in emerging markets like the UAE because they promise these, these incredible returns that seem impossible to get domestically.
[00:34:36] Speaker B: I see. So it's about protecting U.S. citizens.
[00:34:39] Speaker C: That's part of it, but there's more.
Another major factor is that while many of these schemes, even though they're physically based in the uae, they often use US Financial infrastructure in some way.
Like they might process payments through US Banks, or they might be using U. S based payment platforms or, or even listing their companies on U.S. exchanges or OTC markets.
[00:35:09] Speaker B: And that gives U.S. authorities jurisdiction.
[00:35:11] Speaker C: Exactly. Under U.S. securities laws, particularly what's called the conduct and effects test, the SEC can claim jurisdiction if there's substantial conduct in the US Related to the fraud or if the fraud has a significant effect on US Markets or investors.
So even just routing transactions through US Banks can sometimes be enough to establish jurisdiction.
[00:35:37] Speaker B: That's, that's really interesting. What about the people running these schemes? Are they Americans?
[00:35:43] Speaker C: In some cases, yes.
And that's another key point. Some of these operations are actually run by US Citizens or residents who've set up shop in the UAE to take advantage of the regulatory gaps we talked about.
And in those cases, US Authorities absolutely have jurisdiction over those individuals, even if they're operating abroad.
[00:36:08] Speaker B: So how does this work in practice? I mean, the US can't just send agents into the UAE to make arrests, right? Right.
[00:36:14] Speaker C: Well, no, not exactly. It requires, it requires international cooperation. The US has mutual legal assistance treaties with many countries, including the uae. These treaties create frameworks for sharing evidence, freezing assets, and even extraditing suspects in criminal cases.
But I got to tell you, this process can be.
It can be really complicated and time consuming.
[00:36:42] Speaker B: I can imagine. Are the UAE authorities generally cooperative with US Investigators?
[00:36:48] Speaker C: You know, relations have actually improved significantly in recent years. The UAE has recognized that cooperating with international law enforcement enhances their reputation as a legitimate financial center.
There's now regular collaboration between agencies like the FBI and UAE law enforcement.
They share intelligence, they coordinate investigations, and in some cases, they even conduct joint operations.
[00:37:14] Speaker B: Have there been any notable successes from this kind of cooperation?
[00:37:18] Speaker C: Oh, yeah, several. Like, in the last few years, we've seen multiple cases where US Authorities working with UAE counterparts have managed to shut down major schemes and return millions to investors. For. For example, in.
In one recent case, US prosecutors worked with UAE authorities to bring charges against a group running a $300 million investment fraud that was based in Dubai but had hundreds of American victims.
[00:37:48] Speaker B: That's impressive. But what about.
What about when the scammers flee? I imagine that must happen a lot.
[00:37:55] Speaker C: It does, and that's.
That's where international networks become crucial.
The US Has a global reach through organizations like Interpol and through its own diplomatic and law enforcement presence worldwide.
So even if someone flees the uae, they might find themselves detained at an airport in, say, Thailand or Turkey based on an international warrant.
[00:38:20] Speaker B: So there's really nowhere to hide in the long run.
[00:38:23] Speaker C: Well, there are still challenges.
Some countries don't have extradition treaties with the US or the uae, and moving money through cryptocurrency can make it harder to track.
But the net is definitely.
It's definitely tightening. Digital forensics has improved dramatically, and the international cooperation against financial crime is stronger than ever.
[00:38:46] Speaker B: What about the money itself? Can victims actually get their investments back?
[00:38:50] Speaker C: That's.
That's often the hardest part, unfortunately.
Even when authorities successfully prosecute the perpetrators, recovering the funds is complicated.
These scammers are usually quick to spend investor money on lavish lifestyles, or they hide it in complex networks of offshore accounts and digital assets.
US Authorities can and do freeze assets when possible, but the recovery rate is typically.
It's typically much lower than what was invested.
[00:39:23] Speaker B: That's pretty depressing. Is there any international body that oversees all of this?
You know, something above both the US And UAE authorities.
[00:39:32] Speaker C: Not exactly a single overarching authority. But there are important international organizations that set standards and promote cooperation.
The Financial Action Task Force, or fatf, sets global standards for combating money laundering and terrorist financing. And organizations like the International Organization of securities Commissions work to coordinate securities regulation across borders. But at the end of the day, enforcement still happens at the national level.
[00:40:05] Speaker B: But let's talk about the real cost of these schemes scams. Nick, beyond all the legal and regulatory details, what about the actual victims? I mean, these aren't just numbers on a Spreadsheet, right? These are real people with real lives that get completely upended.
[00:40:24] Speaker C: Oh absolutely, Sue.
The, the human impact is just, it's devastating honestly. And, and that's something that often gets lost in the headlines about these multi million dollar schemes.
Like behind every dollar figure is someone's life savings or retirement fund or you know, money they were saving for their kids education.
[00:40:50] Speaker B: Nick, now I know you have some specific stories you can share because I'm curious about who these victims typically are. I am sure you have armed yourself with this knowledge, but for now we are going to save your important information for part two of this podcast. So Nick, stay right where you are. And to our listeners, please join us right back here for part two of this podcast.
See you soon. Now Miles, please close out this episode and tell us what we learned and what's coming up in our next episode.
[00:41:23] Speaker A: And there you have it folks. Part one of our special deep dive into startup scams in the uae.
If your eyebrows aren't at least halfway to your hairline right now, you might want to check your pulse. What we've uncovered so far is the glitzy facade, luxury offices, TEDx style speeches, and AI powered promises that scammers use to lure in investors across the globe.
But behind that curtain, it's just the same old con game.
New money paying, old promises until the whole thing collapses like a Jenga tower on a cruise ship buffet table. But don't worry, we're not done yet. In part two, Nick and Sue will take you from theory to reality.
We'll dig into the actual cases, the big names, the jaw dropping numbers, and the victims who lost everything chasing what seemed like the next big thing.
If you thought the setup was slick, wait till you hear how it all unravels. Until then, I'm Miles, the voice of behind the Scams, reminding you if someone's promising 30% returns with no risk, the only guaranteed thing is that they're about to take your money on a luxury vacation without you. Stick around.
Part two is coming to behind the Scams soon.
