How a UAE entrepreneur nearly lost $250,000 to fraud in a fundraising round

The scammers posed as an investor’s advisers and asked for a flat fee commission to be paid in crypto

Christiana Maxion was left $12,000 out of pocket after travelling to meet men claiming to represent an investor. Chris Whiteoak / The National

Christiana Maxion, founder of matchmaking app Maxion, was thrilled to be on the verge of closing a new round of funding in April, only to discover it was a scam.

It left her $12,000 out of pocket and delayed the roll-out of the next phase of her business.

Her case is not an isolated one. More than £612 million ($797 million) was lost to investment fraud in the UK last year, according to the City of London Police.

In the UAE, about 54 per cent of people have been a victim of fraud at least once, compared with the global average of 52 per cent, Visa’s annual Stay Secure survey released in December found.

Fraudsters targeted Ms Maxion in April, when she received an email from a person claiming to represent an investor. She went on a Google Meet call to discuss more, but the other person only joined on audio, not video.

“He loved our product and asked for more information,” Ms Maxion says. “I sent the updated financials. At first, the investor was the girlfriend of an older Swiss man who wanted to diversify her portfolio. She was looking into tech products and founders in Dubai.”

However, Ms Maxion adds: “The second time we spoke, the investor turned into a Qatari national living in Switzerland. Then I was asked to meet the investor’s contacts in Barcelona for the deal to proceed.

“I decided to go and invited my finance lead as well, but insisted on having a video call with everybody involved. We had a short video call with one of the guys, who was very abrupt. I was a little thrown off.”

When Ms Maxion reached Barcelona, she met two men who she had not spoken to before. They took her and the finance lead for dinner, where they brought up the topic of a success fee.

“A success fee is normal, usually a percentage of the investment ranging from 1.5 per cent to 2.5 per cent, but they were asking a flat fee of 250,000 USDT [equivalent of $250,000] in crypto. I said let's discuss it after signing the deal,” she recalls.

“We returned to Dubai. They called and said the investor wants to proceed with the deal. But the investor had changed for the third time to a German doctor.

“By then, all conversations were focused on their commission and how they wanted to receive it. I was told to meet the investor in Brussels, Belgium.”

The middleman demanded that the commission be paid in crypto and he did not want the investor to know about it. He also asked Ms Maxion to show proof of funds, which she refused saying she didn’t, as a start-up, have 250,000 USDT.

Although Ms Maxion promised to send the commission using a licensed crypto company, the middleman became agitated and asked her not to involve any third parties.

Instead, he insisted that she open a cold crypto wallet – a way of holding cryptocurrency keys offline – and bring it to Brussels to show them proof of funds before the investor transferred money.

“At this point, I realised this was a scam,” says Ms Maxion. “They also got upset with us on a call and started yelling,” she says.

She did some research and discovered some worrying information. “One of their domains was shut down because other people had reported them. The fraudsters had created two fake websites pretending to be legitimate Swiss companies, BJ Invest and Chevalier Finance Group. We called the actual companies and shared information with them. They were also using a real person as an investor, but sent us a fake passport copy.”

Ms Maxion blocked the fraudsters. When she flagged the scam on social media, other start-up founders in Dubai shared experiences of similar fraud.

“I was thankful that the only money I lost was on travel,” she says. “Never pay out of pocket to travel to meet someone before doing a video call. It’s also not normal when someone gets angry and emotional during a business deal. Also, watch out for a secret commission and unwillingness to share the investor’s contact details. Try to speak directly to the investor.”

Fraudsters commonly use fake emails, bogus calls and text messages to trick people into sharing personal details so they can steal their money. Advances in technology make it easier for fraudsters to exploit weaknesses, cybersecurity experts say.

Zahir Sabur, senior associate at law firm Reed Smith’s Global Corporate Group in Dubai, says there have been a number of attempted and successful investment scams, ranging from the relatively rudimentary to those which are much more sophisticated.

Cross-check the communication details, such as email addresses, to ensure they match the official domain of the company

Hadiel Hussien,
senior associate, BSA Ahmad Associates

There is not a clear correlation between the level of sophistication and the success rate of any scam, he says.

“We have seen senior business leaders in the US be scammed out of tens of thousands of dollars based on emails with a bogus middleman,” he explains.

The usual markers tend to involve counterparties with no obvious track record in a particular sector, websites which are basic or generic, company names that sound like prominent people or institutions, and the use of middlemen, Mr Sabur says.

Any one of those factors does not necessarily mean an opportunity is a scam, but their presence should mean that further checks and caution are needed, he warns.

Hadiel Hussien, senior associate at law firm BSA Ahmad Bin Hezeem & Associates, says conducting thorough online research about the company can reveal important information, including any past complaints or warnings about their practices, as the relevant authorities tend to publish alerts to the public about past scams.

“It is also essential to cross-check the communication details, such as email addresses, to ensure they match the official domain of the company, as scammers often use generic Hotmail, Yahoo and Gmail domains, or mismatched domains,” she says.

“It is also advisable to meet the contact person from the company offering the investment opportunity in person.”

Be sceptical of unsolicited offers, especially those received via cold calls, emails or social media, Ms Hussien warns.

If an individual falls victim to an investment scam, they should immediately stop dealing with the suspected scammers, gather all relevant evidence, including documents, emails and bank statements, and file a criminal complaint to report the fraud to the relevant police authorities, she says.

Victims should also seek legal advice to navigate the reporting process and pursue civil litigation to recover lost funds. In some cases, authorities may take provisional measures, such as freezing the scammers’ bank accounts and websites, she adds.

Mr Sabur from Reed Smith points out that the UAE is attracting global attention and people will use foreign interest in the Emirates for nefarious purposes.

Ultimately, if it seems too good to be true or if you are unsure of something, talk to credible people on the ground and use external advisers and trusted contacts to sound things out, he recommends.