With every positive invention, scams invented by unscrupulous operators follow. Here is a story about how one scam came across my desk for two different clients in the same week!

The first case: A new client was referred to me. The task was to assist in a transaction where a Kuwaiti company was going to purchase 10% of the client’s equity for $5.5 million. The investor had located them through an Angel website (an Angel is a high net worth individual that is interested in investing in startups). Naturally, the client was ecstatic. They had not raised even 10% of that sum yet.

I had some healthy skepticism, but my task was to investigate and counsel, not to jump to conclusions.

The investor wanted to fund the investment through a Thailand company and recommended two Thai law firms. I checked both firms out through their websites. A US lawyer was a partner in one of the firms so I choose to start with that firm.

I spoke to the lawyer and everything seemed fine- at first. I did some heavy due diligence to make sure this lawyer and his firm were legitimate (the website looked real and the firm roster was deep; also, the lawyer had ostensibly authored a legal treatise).

The Thai lawyer (contact me for the name), sent the client an invoice- $2500 flat fee for his due diligence and $9500 for Thai registration- payment due in advance. My fraud indicator started redlining. One, the lawyer had changed his fee schedule (he quoted me an hourly rate). Two, what country charges $9500 to register a company? In the US, states charge between $50 and $250.

My client wasn’t ready to throw in the towel and I agreed that a little more digging was worthwhile. So, we asked the investor to send the investment contract to us. Once I saw this, I knew a scam was afoot as the contract did not resemble a contract prepared by anyone with $5.5 million to invest. Another red flag!

I wrote to the investor and suggested a few legal measures that would assure my client that he was a real investor. The response was all derision and scorn towards me and my ideas and complaining that my client had already agreed to the proposed structure.