In the past few years, we had seen many so-called alternative investments gone wrong. From land banking to oil fields (oilpods) to wine.

If you had a bad experience with some of these investments, you would likely have gone through a tough time trying to get any form of recourse including being put on a merry go round between your MP, MAS, Small Claims Tribunal (SCT), FIDRec, CAD, the police and a lawyer (depending on who you approach first in the chain). I sympathize with those who have been put through all these.

All these products continue to stay as unregulated investments and do not fall under the purview of MAS, which means the alternative investment product providers can pretty much do what they like.

The irony is that MAS has been trying in recent times to tighten up on the regulations that relates to the sale and marketing of investment products.

For example, there are restrictions even on the font size to be used when placing an advertisement to market an investment product.

Simple products like low cost index funds can only be sold to accredited investors and are not available to retail investors.

And yet some of these toxic alternative investments continue to be sold to the man in the street without any regulation. There is an urgent need to start regulating some of these investments in order to protect retail investors. The buck has to stop somewhere.

There is a site that has been writing a few articles recently on some investors’ unpleasant experiences with land banking. If you go there, you will be able to see a number of comments as well as links to a few other news site that did some other reporting on land banking.

You can find the site here:

Land Banking

While it is still up to you to differentiate facts from opinions, the site is definitely worth a read to get more educated on some of the perils of land banking.

Bruce Day, the appointed receiver for Powder River Petroleum, has released the interim report of his findings. If you are an existing investor with Oilpods and would like to know more about the developments, you can download the report here:

Powder River Receiver’s Report

There’s one part of the report that existing investors of both Oilpods and Powder River will be very concerned about. The cost of the leasehold and the price that it was sold to Asian investors are as follows:

• In 2005, cost of leasehold – $997,794. Price sold to investors – $4,498,820
• In 2006, Cost – $144,637. Price sold – $17,705,262
• In 2007, Cost – unknown. Price sold – $18,764,060

If the numbers reported by Bruce is correct, then I am not very optimistic of the production capacity of the oil wells – certainly not at the projected revenues given by Oilpods/Powder River. Taking 2006 for example, I don’t think a $144,637 well can generate $1.7-3.4 million/year to give a 10-20% return.

Things will be clearer once Lee Keeling and Associates, an independent oil and gas engineering consulting firm, gives their evaluation of the oil and gas properties of Powder River Petroleum in a few weeks’ time.

An agreement was also made by Brian Fox to pay a 9% interest to investors on their investment amount for the initial phase. In 2007, a total of $4,413,406 in interest payments were made to investors. Of this amount, $3,263,004 came from funds received from subsequent investors.

Following the legal lawsuit by Oilpods, Powder River and Brian Fox has now proceeded to file their defence. Details can be found in this document.

A lengthy lawsuit will only mean that it will take a longer time for investors with Oilpods to find out what is going to their investments.

Incidently, this case was also reported in today’s newspaper.

This incident highlights the risks of investing in unregulated alternative investments. You have to be mindful that you might not have a clear exit strategy with your investments should things go wrong.

If you ever plan to invest in such products, make sure it is extra money you can set aside for a long time. Above all, never commit too much of your investment capital into such schemes.

Earlier on, I visited the website of Powder River Petroleum to find out more updates about their lawsuit by Oilpods.

Powder River has already been placed into receivership for a host of charges brought against them – these includes operating a ponzi scheme and cheating thousands of Asian investors.

(Update: Powder River will be contesting those charges.)

The receiver has uploaded at the Powder River website quite a fair bit of information on what is happening .

However, the links don’t seem to be coded correctly. I managed to find the correct links to download the documents. Here they are for easy access:

Petition

Plaintiff’s First Amended Petition

Affidavits of Newsome, Chang, Lim Romine

Order Appointing Receiver

Plaintiffs Motion for Temp Restraining Order and Permanent Injunction

Plaintiffs Motion to Reduce Bond

Temporary Restraining Order

Initial Receivers Report

Last week, investors with OilPods would have received a letter from the CEO of OilPods, Mr Mark Chang.

Oilpods markets (oil and gas) working interest in the US, with the oil and gas lease operated by Powder River Petroleum International, formerly known as Powder River Basin Gas Corp and traded on the OTC Bulletin Board.

Investors of those working interest receive monthly payouts based on their share of the revenue generated from the sale of the oil and gas produced.

This month, no payout was received.

A check on filings by Powder River to SEC shows that the company is having cash flow difficulties.

OilPods has instructed their legal representatives in the United States to take the necessary actions to protect the interest of investors.

All seems well on the website of Powder River Gas Corporation. They even appointed a new operations manager a few days ago.

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