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verything seemed logical and profitable when Umi Salmah first read the brochure of investment company Koperasi Langit Biru (KLB) in July last year. In the brochure, the company promised that members would receive no less than Rp 100 million (US$10,700) within two years and 9 months.

All members had to do was invest Rp 10 million in the company, which was led by so-called “charismatic cleric” cum businessman Jaya Komara, and let it use the funds to develop its cattle slaughterhouse business.

From the Rp 10 million investment, members would receive monthly profits worth Rp 1.7 million, of which Rp 1.3 million was distributed in cash and the remaining Rp 400,000 was to be paid in the form of two kilograms of meat and two boxes of mineral water. Members would also receive an additional bonus of Rp 12 million in the 10th month of their membership.

The junior high school teacher signed up and got her first payment the next month. At the end of the year, she had invested Rp 80 million and got relatives to join in as well. Some of them invested Rp 30 million to Rp 80 million at a time in the hopes of getting hundreds of millions in return.

She wholeheartedly trusted the company, although she did not really know how they used her money. The only information on the brochures was that the cooperative aimed to bring prosperity to Muslim community — membership was exclusively for Muslims — in Indonesia.

“I thought things were fine because the payments came on time,” she said.

Little did Umi know that KLB, which was formerly registered as PT Trasindo Jaya Komara, was another form of multilevel marketing (MLM) instead of a cooperative as stated in the name of the company.

MLM is a system that focuses on high profits and the creation of downstream distributors, while a cooperative is an enterprise owned by and operated for the benefit for those using its services.

Every month, instead of sending the payment via bank accounts, the cooperative stipulated its members had to come to its office in Cikasungka, Tangerang. “We also picked up the meat or other goods there. Sometimes they didn’t give us raw meat but exchanged it with other stuff like basic commodities,” she said.

Umi said that she had gathered more than Rp 30 million in monthly payments when the company suddenly stopped paying dividends in January this year for unclear reasons. The cooperative management only said that there were some “internal problems” and the members should patiently wait for few months.

Suspicions arose as the cooperative suspended payments until June and cleric Jaya became difficult to reach by telephone.

Media reported last week that hundreds of investors went to the office and demanded their money back. They raided the office and took the merchandise inside after failing to get what they wanted.

“I was shocked to learn that Jaya Komara has fled and left the office with no clear settlement,” she said.

According to the Jakarta Police, the KLB had attracted around 140,000 investors from across the country and had gathered Rp 6 trillion during 2011.

The police say they are investigating the company for embezzling money from its investors. The police have said that there were many irregularities in the cooperative’s business; include the usage of cash in all transactions. Officers from the Cisoka precinct confiscated computers, documents and receipts from the office as evidence. The National Police have taken over the case and named Jaya Komara a fugitive.

Financial planner Eko Endarto said that victims of the scam were not aware of, or simply ignored, basic knowledge of investment. “They put too much money, and too much trust, on something they didn’t really understand,” he said.

Eko acknowledged that people were easily blinded by investment firms that offered high profits within short periods of time. He said that investment scams attracted a large number of investors through word of mouth information or casual conversations among families.

“Ideally, people put their money in investments after they carefully analyze the risk and the future of the business,” he said. “What we found [in the KLB investment scam] was that people suddenly invested their money without knowing the real threats and opportunities.”

Eko said that the KLB scam was an example on how ignorance of basic investment principles had failed many people in the short term. “Investment is a long-term and well-planned design. We have to really understand the investment scheme before allocating our funds to it,” he said.

Eko said that the MLM system could result in high profits, but people had to compare it with bank-based investments like deposits. Should the MLM offer higher rates, investors must raise their awareness. “Rates that are really high are always suspicious,” he said. “Don’t be easily blinded by high rates of return. Check the legal basis of the investment company, know how the company uses the money and how the business works,” he said.

While the financial planner repeatedly highlighted the logic aspects of investment, members of KLB were likely “hypnotized” by the cleric Jaya’s charisma.

Jaya Komara reportedly hosted Islamic sermons at the cooperative’s office at least once a week. The sermons, which mostly discussed Islamic values, were attended by thousands of members. During the sermons, Jaya always convinced KLB members to have faith in the cooperative’s business, although the company rarely revealed detailed information.

Irul, another victim of the scam, said that he had never received any monthly payments after investing Rp 30 million last December.

“I invested because I want to buy a house. I hope the police can help us get fair compensation. It is a big amount of money for me and my family,” he said.