For a time, the United Investors Fund was quite possibly the world's most lucrative investment. The fund, based in Abu Dhabi, promised returns of 10 per cent per month or more from plays in the UAE's booming property sector, according to one investor, and allowed anyone to cash out at any time. In mid-2008, however, the scheme came crashing down. Mohammed Fallah, the man behind it, was arrested and charged with running a financial company without registering with the Central Bank. He was acquitted on criminal charges this week, but commercial cases remain. The Abu Dhabi Judicial Department (ADJD) recently announced that Dh166 million, or 31 per cent of investors' claims of Dh531m, had been repaid. A total of 1,665 investors are involved, according to the ADJD.
"An employee from the company approached us and said if we put in Dh100,000, we would get a guaranteed return of 10 per cent every month," says one Emirati investor, who declined to be named because of the ongoing civil case. "I gave them Dh200,000." Investors say it worked like this: people gave cash to United Investors Fund and in return received a cheque from the company in the same amount, representing their initial outlay. They could cash in this cheque at any time. As long as they stayed invested, however, they would receive monthly cheques for about 10 per cent of their investments.
A month after putting his money in, the Emirati investor says he received Dh20,000 from the United Investors Fund. Another month later, however, he did not receive a cheque on schedule. He called the company to ask about it and was told the owner was in jail. "Myself and others started approaching the company asking what exactly was going on," he says. "We want our money back. They said the guy is in jail, and that's why it's going to take longer to get your money back; just wait. We then went to the court, filed our claims, and gave the cheques that they had given us."
It all started in 2007, when Mr Fallah decided to set up a property investment fund to carve for himself a piece of the lucrative and promising market. With his educational background in investment, Mr Fallah thought he could turn his knowledge into profits. He acquired all of the necessary documents and licences. Or so he thought. Within a year of launching, Mr Fallah had more than 1,000 clients who had invested a total of Dh200m. The focus of the company, according to its website, was strictly to create a portfolio of the most profitable property investments across the country.
Mr Fallah was born in the UAE to Jordanian parents and knew the market well. His passion for business, according to family members who spoke on condition of anonymity, had developed since his youth. "He was always business-minded, thinking of how to make money," one family member says. His business thrived across the country and his reputation quickly spread as one of the UAE's savviest investors. According to court documents, he promised 10 per cent to 12 per cent monthly interest.
Mr Fallah, meanwhile, was enjoying the fruits of the scheme. At the height of his success, his combined assets and company investments were worth Dh800m, according to court documents. An impressive fortune for a man in his late 20s. He had it all. The watches, the cars, the seaview office, the holidays, the shopping sprees and the confidence of his investors. That was until the police arrived at his office on May 13, 2008, on the order of the Abu Dhabi Attorney General's office.
What followed was a string of acquittals, convictions and more acquittals as Mr Fallah worked to wind down the company and distribute proceeds to investors. Last year, he was granted bail and allowed to visit his empty office for 12 hours a day to try to dissolve the business, monitored by a pair of plain-clothes officers sitting outside. The United Investors Fund's massive returns were not the problem, according to authorities. An Abu Dhabi court acknowledged last year that Mr Fallah had in his account enough to pay out all of his clients four times over.
The problem was that Mr Fallah failed to obtain a licence from the Central Bank giving him the authority to "take money from people". On May 13, 2008, Mr Fallah, along with four of his colleagues, father and brother, were arrested and questioned on suspicion of money laundering and not having a licence from the Central Bank. According to Mr Fallah's testimony in court, he did not know that he required that licence and he was under the impression that he only needed the trade and business licence, which clearly described his business as an investment company. After questioning and an initial investigation, the money laundering charges were dropped and his four colleagues, father and brother were released.
Mr Fallah was imprisoned and denied bail shortly after. His assets and bank accounts were frozen. No money could go in or go out to his clients. He was tried by the Criminal Court of First Instance in Abu Dhabi under the gavel of Justice Hazam Kamal and found guilty. On June 2, 2008, he was sentenced by the court to one-year imprisonment, fined Dh50,000 and received a two-year ban from from doing business and a deportation order.
Mr Fallah appealed the sentence and after a series of judgments was acquitted this week by the Abu Dhabi Court of Cassation, the emirate's highest judicial body. A one-year sentence imposed by an earlier court was served as of June 23 last year , but Mr Fallah is still being held. A lawyer for Mr Fallah's family said he hoped the Court of Cassation's recent acquittal would result in his release. Investors, meanwhile, are still waiting to get their money back. The ADJD has started to distribute funds, but it is unclear how much of the investors' money will ultimately be returned. Investors are happy that the case is progressing, but few expect to receive their entire investment.
"I still havent gotten my money back," one investor says. Jonathan Brookes, a financial adviser at Acuma Wealth Management in Dubai, says investors should be sceptical of any scheme that offers abnormally high returns, especially when backed by any sort of guarantee. Even the highest-yielding term deposits, generally considered some of the safest investments, will only return about 5 to 7 per cent per year, he says.
"The old adage is if it's too good to be true, it probably is," says Mr Brookes. "Certainly I look very hard at anything that has guarantee attached to it. You have to look at who's giving the guarantee and what it means and the stability of the office issuing the guarantee." email@example.com firstname.lastname@example.org email@example.com