Pyramid scheme falls

2011-03-16 00:00

INVESTORS in an apparent pyramid scheme in Pietermaritzburg fear they have lost their money, and police are appealing for them to lay a charge against the operators.

Kutuku Multi Sales and Construction started on January 22 and drew in more than 4 000 investors, who were promised a R30 000 return on a R6 000 investment or R9 500 for R2 000 after a month. The investors need to recruit more members to continue earning.

It is alleged that some investors benefited when the scheme started.

However, many were not paid, and on February 9, scores of angry investors staged a sit-in at the scheme’s office on the ninth floor of the Absa building in Langalibalele Street, demanding to be paid the promised returns.

Police escorted the protesters out, but they came back the next day, hoping to get an explanation from the co-owner, Thandi Bhengu.

Bhengu is a chief accounting clerk in the provincial Education Department and runs the business with her husband, Simphiwe Bhengu.

“All I want right now is my R2 000 back,” a furious investor who was promised a return of R9 500 was heard shouting during the gathering.

Other investors said they borrowed money to invest. One said she borrowed money from a taxi driver to join the scheme, but has now been charged R4 000 interest, which she is struggling to repay.

“I had hoped to repay the money once Thandi pays me for my investment. The taxi driver is now demanding his money back,” the desperate woman said.

A close friend of Bhengu came to her defence, telling the people they should have known it was a risk. “There was no legal agreement that was signed and people knew that it was a risk from the onset. That’s why people call it bhanoyi ( airplane ) , because it can crash at any time.”

Bhengu later told The Witness she will reimburse people on March 21, but they will only get R1 400 instead of the full amount.

She said she could not continue with payments after she discovered that some investors were paid fraudulently, which left the company in a financial crisis.

The Companies and Intellectual Property Office (Cipro) has revealed that the company was deregistered on July 16, 2010.

Bhengu said she was in the process of registering it.

“I have helped people to be financially stable. They even named me Vusimizi (family builder) because I have helped families out of poverty. People are now driving expensive cars and living in good houses because of this.”

Her husband also defended the company.

“As Kutuku we did nothing wrong on our side. It’s the people who defrauded us,” he said.

Absa Investment general manager Craig Pheiffer said it is illegal to give advice about equity or offer any financial services if you are not registered with the Financial Services Board.

“People are lured to these schemes because they want to make a quick buck, are greedy and ignorant. We always tell people that if it sounds too good to be true then it’s probably is,” said Pheiffer.

Police spokesperson Warrant Joey Jeevan urged unhappy investors to report the matter to the commercial crimes unit.

The Education Department declined to comment on Bhengu’s involvement.

Iona Minton, financial education consultant and financial journalist, describes a pyramid scheme as an investment that makes money from investors, not from selling a tangible product or service.

The principals often promise huge returns and pay the first investors quickly. The people at the top of the pyramid are paid out of later investors’ money. Pyramid schemes are illegal.

In contrast, a stokvel is a legal savings club where people come together and agree to save a fixed amount each month in a bank account.

There are no promises of spectacular wealth or growth.

There is a risk that if it not formalised, the member entrusted with the money can decide to go on a spending spree.

If you are offered an investment, you can phone the Financial Services Board’s call centre to check if the company is registered. Call 080 011 0443 or 080 020 2087.


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