Finding Frauds

Financial Crisis Uncovers Deceit

Youssef Talaat

It turns out that Charles Ponzi was not the last of fraudulent businessmen. In fact, the current financial crisis has uncovered illegal schemes all over the world. In the United States, the largest case of investor fraud ever committed by one person was uncovered as soon as the stock market began to plunge. Bernard Madoff’s scheme of $ 65 billion was discovered as soon as he could not pay off investors who tried to withdraw their money fearing that it would be lost in the market downturn. His scheme primarily consisted of paying investors return from their own money or money paid by other investors rather than from profit.

Months after the infamous Madoff scandal, when the crisis lightly began affecting the Egyptian market, Nabil Al Boushy and his partner, Fikri Badr Eddin, got caught in the same trap.

Nabil Al Boushy and Fikri Badr Eddin, directors of Optima Company, are currently awaiting their trial before the Cairo Criminal Court on charges of investor fraud. According to the Rhyptian daily Almasry Alyoum, the prosecution reported that the defendants took hold of $ 203 million, which belonged to 83 investors. Al Boushy’s scheme was originally discovered in Dubai when a check in his name bounced back. His clients included many celebrities, government officials, and prominent members of the Egyptian community. He is now threatening to release the names of government ministers that received 180 % interest from his firm.

Al Boushy’s failed scheme is an indicator of the decline in the Egyptian stock market. Egyptian stocks are slowly declining and companies are reporting both decreasing profits and losses. Shares of companies that offer durable goods such as automobiles or real estate are most affected by the crisis. The interest rate has dropped in February for the first time since April 2006 as inflation and economic growth rates continue to slow down. Experts are expecting the inflation rate to drop to the single digit level by June. Even though the Egyptian market is negatively affected by the global crisis, one can say that it is somewhat stable when compared to markets in the United States or Spain.

One of two things caused these investors to trust Nabil Al Boushy: ignorance or greed, and one cannot pick the worse of the two. On one hand, investors could be ignorant; they thought that the immense profits he promised are ordinary and that this would be a solid, profitable venture.

On the other hand, they could be greedy; they let these immense profits blind them into believing whatever he claimed. In both cases, these investors did not act appropriately. People need to understand that businesses rise and fall all the time; some people win and some people lose.

They also need to understand that people rarely make money overnight. The art is not in making money, but in keeping it.