On the 1st of October 2012, Genneva Gold was raided by both the authorities in Malaysia and Singapore for suspected offences including illegal deposit taking, money laundering, tax evasion and avoidance, false description (misrepresentations), appointment of agents without licence, and failing to lodge statutory documents.
In Singapore, Genneva Pte Ltd, a gold trading company that has been the subject of a literal run by its customers, is under investigation by the Commercial Affairs Department (CAD) for alleged “financial improprieties”.
Its Orchard Tower offices were raided by CAD yesterday. The office is closed and its website is frozen. A number of employees were taken in for questioning. The police has confirmed that investigations are ongoing.
Genneva operates under a police licence that allows it to deal in second-hand gold. Its model is to sell specially marked gold to customers at a premium to the market. As of writing, it listed a price of $90 per gram on its website. The indicative retail gold price on the open market was about $70 per gram. Thus, Genneva investor pays a premium nearly 30% more for their gold. Genneva customers who hold on to their Genneva gold investment will a monthly 2% so-called discount off its list price. Genneva undertakes to buy back the gold in after the 3 months contact at the list price (the fine print on their contract stated that they are illegally obligated to buyback at the spot market price), and customers pocket the discount. Assuming a monthly rollover, they stand to earn as much as 24% year. Some customers have been offered a discount of as much as 2.5%.
Since early september 2012, Genneva Gold grapple with its worst case market scenario – that of a rush among customers for the exit. In that time, it has imposed a limit on the daily buyback of gold that it can do – reportedly five kilobars a day. Agents are also reportedly owed commissions for more than six months.
Three Genneva directors – Marcus Yee Yuen Seng, Ng Poh Weng and Chin Wai Leong, who are also directors of Genneva Sdn Bhd – are being sued by Bank Negara in Malaysia for alleged illegal deposit taking and alleged offences under anti-money laundering laws. The case is ongoing.
Genneva is in the Monetary Authority of Singapore’s Investor Alert list, which tells investors to be on guard against unlicensed entities. Other gold companies such as The Gold Guarantee and Asia Pacific Bullion are also on the list.