Pyramid schemes: Same trick, different victims

26 Jul, 2020 - 00:07 0 Views
Pyramid schemes: Same trick, different victims

The Sunday Mail

Tendai Chara

They say you can fool some people some of the time, but you cannot fool all the people all the time.

However, it seems there are some people who are always fooled all of the time.

Fraudsters never run out of victims who are usually driven by expectations to become rich without breaking a sweat.

They usually offer hard-to-resist deals that promise lucrative returns from small sums that would have been seeded by those willing to take part in the schemes.

The victims are often assured of hefty pay-outs if they recruit new members.

It is a scam that continues to be repeated over and over again — and with the same result.

“I was introduced to the guys (pyramid scheme) early this year by a friend who had successfully received returns from his investment. I then invested part of the money that I was supposed to pay for my university fees. Nothing has come my way thus far despite earlier promises of 100 percent profit within 24 hours,” bemoaned a student who only identified himself as Tendai.

Pyramid schemes typically rely on sketchy business models where top-level members recruit new ones that are supposed to pay costs upfront.

Although they vow to pay out 100 percent profit to members overnight, the schemes are invariably fraudulent and are considered illegal in most countries, Zimbabwe included.

There are called pyramid schemes because there is normally a small group of initial investors at the top who require a large base of other investors to support the scheme.

After a brief hiatus, pyramid schemes are alive again.

Most of them are presently being pushed through social media platforms.

Some of the fraudsters have become so bold that they approach people in supermar

kets and other public places.

However, one of the “companies” that are most visible on social media and has taken the country by storm is reportedly based in Singapore.

In recent weeks, the company has been aggressively marketing itself on platforms such as Facebook and Twitter.

One of the tweets read: “Hi everyone. I hope I find u (sic) well during this time of the national lockdown. We all have to hustle and hustle hard. Join (company name withheld) and earn from the receipts you get from your purchases each time you shop.”

Below the tweet is a video that supposedly explains how one can make quick money by simply recruiting three people who will then pay a monthly “subscription fee” of US$99.

On social media, the operation is described as “the most exciting talk of the moment”.

But while Zimbabweans are excited about “investing” in the supposed Singapore-based company, New Era, a Namibian newspaper, recently reported that the Bank of Namibia had declared the company an illegal pyramid scheme.

Online sources claim that Ryan (last name withheld), who is listed as the company’s chief executive officer, was the operations director of another collapsed company called Saivian.

According to the sources, the company, which was declared a pyramid scheme, collapsed in 2017, with Ryan proceeding to start this new company.

It is further alleged that the company is essentially a clone of the collapsed pyramid scheme.

Among some of the companies that are calling for Zimbabweans to invest in what pundits call “suspicious” quick-returns schemes are Zimbocash, Cash-in-Crew, Crowd1, among others.

WhatsApp-based pyramid schemes (WhatsApp stokvel) are also said to offer profits of not less than 60 percent in 24 hours.

It, however, often ends in tears.

Recently, two brothers, Romeo and Tinashe Samhungu, appeared before a Harare magistrate facing charges of swindling unsuspecting victims of large sums of money through a pyramid scheme.

The brothers, who made an undertaking to pay 100 percent profit to anyone who would have invested into their mobile money merchant code, advertised their scheme on social media platforms.

“Pyramid and Ponzi schemes are ways through which intelligent people take money from vulnerable people. Such scams are characteristic of countries that are facing economic challenges. People are so desperate for money to an extent that they can practically believe everything,” notes economist and banker Mr Persistence Gwanyanya.

“Money does not grow on trees. The truth of the matter is that, in the end, the so-called investors will lose their money,” he adds.


But why are people falling victim to the same old tricks?

Dr Sandra Bhatasara, a sociologist and University of Zimbabwe lecturer, said several factors such as desperation and religious beliefs are major contributors.

“We can tackle this issue from many dimensions. One of them is related to the economic climate. People are desperate for money and as such, can be easily swayed. The other dimension is spiritual, where people are promised financial breakthroughs by prophets and traditional healers,” Dr Bhatasara said.

Apostle Emmerson Fundira of the Jehovah Sharma Ministries believes that some people fall victims because of greed.

“The Bible says a fool and his money will soon part ways and that the love of money is the root of all evil. Those that seek to make quick and easy money will surely and quickly lose their hard-earned cash,” Apostle Fundira said.

Pyramid schemes and multi-level marketing companies have an almost similar set-ups. But one of the easiest ways of distinguishing between the two — pyramid scheme and a multi-level marketing company — is that the latter involves actually selling goods and services.

Pyramid schemes are not new in Zimbabwe. They once hit the country hard in the 1990s and resulted in people thronging police stations with inquiries on how they could recover their money after their schemes collapsed.

In 1996, hundreds of prospective “money makers” were swindled out of millions of dollars by dozens of bogus savings clubs.

The following year, scores of learners at a high school in Seke, Chitungwiza, were allegedly swindled of hundreds of dollars by some teachers at the school who were running money clubs that eventually collapsed.

Apparently they were asked to pay money to the teachers with promises that they would harvest three times their initial investment in a month.

The Reserve Bank of Zimbabwe (RBZ) has been regularly warning members of the public to be wary of the unregistered money-spinning schemes.

In August 2016, the central bank specifically singled out MMM Global Zimbabwe– whose founder was once convicted and jailed in Russia for defrauding thousands of investors in a Ponzi scheme  — for offering an unregulated and unlicensed service.

MMM stands for Mavrodi Mondial Moneybox and was founded in 1989 by a Russian named Sergey Mavrodi, who was declared bankrupt in 1992. Former US investment advisor Bernard Madoff, arguably the most notorious Ponzi scheme artist, was sentenced to 150 years in prison on June 29, 2009 for operating a multi-billion-dollar illegal operation.

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