THE WhatsApp Stokvel group that has been doing the rounds in the Greytown community is a pyramid scheme, this according to the National Stokvel Association of South Africa (Nasasa).Unsuspecting victims of the scheme are duped into believing that it’s a genuine saving vehicle.Residents who spoke to Echo said the first few people who deposited their R200 had received a payout of R1 000 back however, most of the people who have invested have not been paid. The scheme generates revenue by collecting R200 from new members.Nasasa Communications Officer Sabelo Mncwango said: “The WhatsApp Stokvel group where people are being asked to pay R200 is a pyramid scheme.“Scams and pyramid schemes are types of businesses that are likely to directly or indirectly harm the relations between businesses and consumers. They unreasonably prejudice or deceive consumers.”The South African Banking Risk Information Centre (Sabric) urged consumers to be sceptical of any investment that seems too good to be true, to prevent being deceived by so-called investments that promise quick, high and guaranteed returns.Sabric acting CEO Susan Potgieter said: “In South Africa, these schemes generally meet the criteria of either a traditional Ponzi or pyramid scheme.“Both schemes see returns generated for earlier investors through revenue paid by new investors, rather than from legitimate investments or business activities. At the point where there are more existing investors than new investors, the scheme collapses and all monies invested are lost.”“People who were expecting to make a good return on their investment not only get nothing, but also stand to lose most, if not all, the money they initially invested.“A promoter promises high returns over a short period and your returns increase with the number of people that you recruit to the scheme.“A fee or initial investment is required to participate in the scheme. “Participants are asked to recruit more investors and are rewarded for bringing them into the scheme.“The scheme has multiple levels of members, all collecting commission on a single transaction. There is no underpinning financial investment that generates growth.“Participants are sometimes taught how to circumvent detection methods. “They are often disguised as stokvels and may even use virtual currencies, like Bitcoin, to sidestep the formal banking sector where they could be detected,” said Potgieter, who added that short investment periods, sometimes as little as 10 days, with very high rates of return and strong encouragement to reinvest automatically is another sign of a pyramid scheme.“People should be aware of the fact that these schemes operate on trust and an invitation to invest can therefore often come from someone close to you, such as a family member, community leader or religious figure,” said Potgieter.The increasing trend to use WhatsApp closed user groups may stem from the belief that the app offers end to end encryption and therefore anonymity.