RM80 Million in Losses After ‘Islamic’ Scheme Falls Apart

More than 230 investors are asking authorities in Malaysia to investigate a company that ran what was claimed to be a Shariah-compliant investment scheme. The company is believed to have caused losses of at least RM80 million.

The Malaysian International Humanitarian Organisation (MHO) said the scheme looked legitimate at first. It used the name of a well-known Shariah adviser and appeared to follow Islamic financial principles. These factors gave many people confidence to invest.

MHO Secretary-General Datuk Hishamuddin Hashim said the company promoted Islamic Redeemable Preference Shares (IRPS) through marketing agents. The scheme was advertised as being in line with Islamic law. It had Shariah compliance certificates and submitted an official document, called an Information Memorandum (IM), to the Securities Commission Malaysia (SC).

Many investors believed that this meant the scheme was approved by the SC. However, this was not the case. Hishamuddin explained that submitting an IM does not mean the investment is approved, and that it is only allowed for “sophisticated investors”, that is for people with a net asset value of at least RM3 million and who invest a minimum of RM250,000.

In this case, many investors were ordinary people, not qualified under the law. Some invested as little as RM50,000, well below the legal threshold. This raises serious questions about whether the scheme was being offered in a way that broke the rules.

One of the agents who helped market the scheme, Datuk Seri Mahadi Badrul Zaman, said he too was a victim. He claimed to have lost more than RM20.7 million after investing in two of the involved companies.

Mahadi is also known for being the husband of actress Heliza Helmi. His name and his company, AUF MBZ Consortium Plt, were listed last year on the Securities Commission's investor alert list. The SC stated this was because of “unlicensed capital market activities” involving unlisted public company shares.

There is now growing pressure for regulators to take action. MHO wants a full investigation into the scheme, including the role of the Shariah adviser named in the documents. It also wants authorities to investigate whether false advertising and fraud were involved.

Hishamuddin said the case involves the public interest, as the victims include professionals from the oil and gas industry and well-known corporate figures. He urged the SC to open an official investigation and refer the case to the Attorney-Generals Chambers for possible charges.

Meanwhile, the controversy has gained attention on social media. Actress Fathia Latiff previously accused Mahadi of cheating her by failing to deliver a house she paid for five years ago.