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Suspected pyramid schemes under investigation

By Staff Writer
The National Consumer Commission (NCC) has revealed that it is investigating nine possible pyramid schemes. The announcement came after it said last week that it will be launching an investigation into MMM South Africa after allegations that it might be a pyramid or Ponzi scheme.
 
Trevor Hattingh, spokesman for the NCC, said: “The NCC is currently conducting a preliminary investigation into nine possible pyramid schemes, including MMM.”
 
These schemes are:
1. World Ventures
2. Kipi / My Deposit 24/7
3. Make Believe
4. NMT Investments
5. Instant Wealth Club
6. MMM scheme
7. DIPESA
8. Sikhese (PTY) LTD
9. Wealth Creation Club
 
A pyramid scheme, as described by the Consumer Protection Act, is an agreement, arrangement or scheme, which compensates people for the recruitment of others to the scheme, as well as for the sale of goods or services on behalf of the scheme.
 
The reason for the investigations
 
“Over the past three months the NCC has received several complaints from both the Financial Services Board (FSB) and the South African Reserve Bank (SARB) regarding possible pyramid schemes. The current situation is that the NCC is investigating the schemes, particularly looking at their business models and practices to establish if there is any contravention of the Consumer Protection Act (CPA) or its regulations,” explained Hattingh.
 
“A pyramid scheme in terms of the CPA is illegal, and fraudulent. The NCC is working together with the Specialised Commercial Crimes Unit of the South African Police Services (SAPS) on the matter. Criminal charges and proceeding will be instituted against the initiators of any pyramid or related scheme. If it is found through the investigation that any of the aforementioned schemes are indeed a pyramid scheme, then the NCC will register a criminal case of fraud with the SAPS, against the initiators thereof,” added Hattingh.
 
It is important for consumers to note that they have no legal recourse when a pyramid schemes collapses, “and they run the risk of losing all their invested money,” highlighted Hattingh.
 
The law
 
“The Consumer Protection Act discourages any person from directly or indirectly promoting, or knowingly joining, entering or participating in a pyramid scheme.  A member who knowingly participates, but demonstrates ignorance to the law would be committing an offence,” noted Hattingh.
 
Section 43 of the Consumer Protection Act deals exclusively with pyramid and related schemes. According to it, people may not “directly or indirectly promote, or knowingly join, enter or participate in” a multiplication scheme, pyramid scheme or chain letter scheme.
 
“A multiplication scheme exists when a person offers, promises or guarantees to any consumer, investor or participant an effective annual interest rate, as calculated in the prescribed manner, that is at least 20 per cent above the REPO Rate determined by the South African Reserve Bank as at the date of investment or commencement of participation, irrespective of whether the consumer, investor or participant becomes a member of the lending party,” explained the Act.
 
 

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