As I scanned the internet about news of the closure of Jacama Sales and Marketing, which I wrote about last week, I noticed that there were a number of comments from those involved in it arguing the following:
- That they were perfectly happy with the system and that no one was complaining — and that all this was some sort of conspiracy by the government who didn’t want people to rise from their poverty.
- That they bought and sold products and were “partnered” with several establishments, such as some well-known retailers. That made them legitimate (or so they think).
- That they had the necessary government permits, and that the Securities and Exchange Commission (SEC) had no business meddling in their affairs because the company is registered as a sole proprietorship, and thus was under the jurisdiction of the Department of Trade and Industry (DTI).
- That they had a detailed analysis showing how the company is sustainable.
As I looked at these comments, I realized that a lot of people still don’t understand how these scams work. In fact, there are reportedly three other scams that are under investigation at the moment. Someone also asked what would the SEC do about this company since there are rumors that they just went under the radar for the moment but will reopen in a different location with a different name.
I do not know what the government will do about this, although I do laud them for nipping this in the bud before it blew out of proportion. For my part, I am doing my best to educate the public about this. Hopefully this article and similar ones I have written before will help you analyze “opportunities” that people offer to you, or will help you explain to your friends or relatives why or how their particular offering sounds dubious.
So let’s look at how to counter the objections I mentioned above:
- Every scam has happy people. There is always someone profiting from a scam, otherwise, what is the point? Just because there are happy people and no one is complaining doesn’t mean that it is a legitimate business. No one is complaining YET because the scam hasn’t reached the critical mass for it to break down. If you do a little research, the complaints come in after the scammers have already fleeced hundreds of millions and run off with the money.
My accountant tells of a small group of investors who put in 70 million pesos in Aman Futures (which victimized around 15,000 people last 2012 with an estimated 12 BILLION pesos). They were given an iPhone each and the owner brought them on an all-expense paid trip to China where he supposedly showed off his businesses and investments. The scam broke wide open a short time later and these investors lost their hard-earned money and were left only with the most expensive iPhones in the world.
So as much as I complain from time to time about the inefficiency of government and the stupidity of some of its policies and procedures, this is one time that I am reasonably satisfied with their actions. This is no conspiracy. This is government actually doing its job in preventing the general public from falling prey to another multi-million scam.
- Just because a company has products doesn’t automatically make them legitimate. You should also look at what the products are, if they are reasonably priced, and how they are sold. Since many investment scams have been reported in the news, scammers have also wised up and added “products” to their schemes in order to make their business look legitimate.
So what products are being offered by Jacama? They are products which can be bought anywhere else for one-fourth of the market value. This is a fact they openly admit. When you fork over the minimum “investment” of P1,800, you get P450 worth of products. For example, you can “buy” gift cheques from a well-known supermarket chain worth P450.
Now I will ask you, who in their right mind will pay P1,800 for P450 worth of gift cheques? I might as well go to the supermarket directly and buy P450 worth of gift cheques for, well, 450 pesos (though they might charge a small fee on top of that for services or something to that effect, which is perfectly acceptable).
Clearly, I am not buying the product for the sake of the product. The product is merely an excuse for me to enroll in the scheme which will allow me to make money. In the words of the SEC Advisory against Jacama, “The sale of the product is merely a RUSE to make it appear that the said entity is engaged in the marketing and distribution of products.”
A counter-point that can be made here is that people are willing to buy overpriced or high-priced products like designer bags or clothes, expensive supplements from networking companies, and so on. However, the difference is that people buy these products because of their unique benefits that the owners perceive they can enjoy, and they would be unable to get these products anywhere else. For example, a wealthy person may buy a designer bag from a boutique worth 1 million pesos because of the perceived quality and stature it may bring. That person buys the product for its own sake, and will be unable to buy the product anywhere else for 1/4 of the price — unless it were fake or had defects.
I still buy some products from a legitimate networking company I joined more than a decade ago, like toothpaste, soap, and other toiletries even if they are high priced because I like the quality, and I cannot get these products anywhere else so I am willing to pay that price. The point is, I am buying the product for the sake of the product and not for the sake of recruiting others (I stopped actively networking around 15 years ago) or to double my money.
Now, back to Jacama, why would someone pay 4 times the price of a product that he can get anywhere else for its true value? Clearly, there is another motive there and that makes it highly suspect.