Crowd1 is an app-based multilevel marketing platform with Swedish backers. It is being marketed specifically in South Africa and Nigeria as a way to reach “financial freedom”.
Members or affiliates pay between R1 800 and R45 000 – in euros – for “education packages” that allow them to become a seller in the Crowd1 network.
While members will be given access to potential future revenue from selling external companies’ digital products, it appears that the main revenue stream for affiliates is currently recruiting and selling education packages to new members.
It is this structure, which some claim resemble a pyramid scheme, that concerns the South African authorities and has seen the platform banned by the Bank of Namibia, and the Philippine Securities and Exchange Commission, and Norway’s lotto authority warning against it
The Namibian authorities said: “Crowd1 does not sell tangible products or render any service of essential value. But the primary source of income for Crowd1 is the sale of membership packages to new members.”
The National Consumer Commission (NCC) confirmed that it was investigating the business to determine if there were reasonable grounds to launch a formal probe in South Africa.
According to the NCC, should the investigation reveal any contravention of the Consumer Protection Act (CPA), it will decide who to prosecute.
Under the act, participating in a pyramid or multiplication scheme, or promoting or recruiting others to participate, is a punishable offence.
The SA Reserve Bank is also conducting an investigation after the Financial Sector Conduct Authority (FSCA) referred it to the Prudential Authority at the Reserve Bank.
In its statement, the FSCA said: “Any investment or business opportunity [not regulated by the Companies Act] that is offered to the South African public must be offered by an authorised financial services provider.”
In a response to a query from City Press, Crowd1 said: “We don’t offer any kind of financial product. It is as simple as that.
“I was surprised when I saw a statement from the FSCA. Our legal team is in contact with them to clarify our business model, and what we are and what we are not.”
The FSCA confirmed to City Press that, to date, no one from Crowd1 had been in touch with the regulator.
In a follow-up email, Jonathan Strom, the chief executive of African expansion for Crowd1, said: “As far as we are concerned, there is no basis whatsoever for the false claims and accusations against Crowd1 other than to disrupt its business activities.
“We are registered with all the relevant authorities, based on the business model and the products we sell.”
What is the product?
For a network to dispel concerns that it may be a pyramid scheme , it must demonstrate it has a viable product for sale. In other words, a customer buys the product to use, not just to become a seller. Think about a Tupperware party. You buy the product to use, and the seller knows the price of the product and the potential commission they could earn from selling it.
You can become team leaders and recruit people to help you sell the products, but the underlying product has a value that is quantified.
City Press spoke to Swedish journalist Johanna Ekström, who writes for Swedish business news site Breakit. She has been following the Crowd1 story for a while. As part of her investigation, she purchased an educational package.
“As soon as our Crowd1 account is activated, a large digital clock starts counting down. On the screen, we see that we have 14 days to recruit four new members. If we succeed, we will, according to the company, get back the payment of €99 (R1 880) and another €26 in what Crowd1 calls a ‘fear of loss’ bonus.”
According to Ekström, the training package is made up of a series of short videos about property investing and, in her opinion, it has no real educational value.
Swedish newspaper Svenska Dagbladet spoke to Crowd1 founder Jonas Werner, who denied it is a pyramid scheme, but admitted: “A ‘major portion’ of Crowd1’s revenue currently comes from the sale of what the company calls the training package, which is the way into Crowd1’s network.”
During a webinar by a South African Crowd1 promoter, we were told that higher level packages contained Tony Robbins programmes valued at $250 (R4 170). Robbins is a US author, coach and motivational speaker.
It is not clear why one would not just sign up directly for one of Robbins’ programmes.
The focus of the sales pitch was not on the educational value of the package being sold, but rather on how much money you can make from selling educational packages to other people.
According to Ekström, in an article published in Breakit, Johan Staël von Holstein, who is referred to as the CEO of Impact Crowd Technology (ICT) – the affiliate of Crowd1 that supplies its digital products – stated at a recent Crowd1 event: “The reason the company attracted people to pay to become part of the platform before there were any products to sell was they needed a large number of potential sellers to develop products to actually sell.”
On July 4, Crowd1 and ICT announced new products for the South African and Nigerian markets – a leisure travel marketing network called LifeTrnds, an armed response app called SAfer and Tribute, an online e-commerce site selling perfume in Nigeria.
In response to a query from City Press to provide information on the revenue and business model, Crowd1 sent a one-page document on each of the three new businesses. It contained limited information – mostly just flattering quotes from CEOs. There was no information provided on the business model, costings or revenue projections.
It states that LifeTrnds is a booking platform for the Crowd1 community, and Crowd1 members will have access to more than 2.5 million hotels and resorts worldwide at competitive prices. But no booking site currently exists. According to Crowd1 the offers are for Crowd1 members only and can only be accessed via the Crowd1 website.
The information about the security service SAfer claims to be linked to 170 security companies and “offers the most advanced personal safeguarding solution available nationwide in South Africa”.
“It is South Africa’s fastest armed service to households, companies and private households 24/7, 365 days per year,” it claims.
There is a SAfer app on Google Play and reviews so far show a problem with registering. City Press has enquired about which security companies it is linked to but the only response was “these ones are both national and also local.” A security expert with a large security firm in the Western Cape told City Press he had not heard of SAfer, but said there had been a proliferation of such apps in South Africa with big claims but little substance.
The pamphlet on Tribute states: “Tribute’s lifestyle products will be ordered online through Tribute’s e-commerce platform and delivered with home delivery or they can be picked up at Tribute’s local office in Lagos [Nigeria].”
At this stage, the site has no e-commerce element and only has a set of images of a few bottles of perfume. According to Crowd “tribute.ng is undergoing some changes on their website and will be opened up for e-commerce within the next couple of days”.
Who is behind Crowd1?
One of the names behind Crowd1 is Swedish IT entrepreneur Johan Staël von Holstein. It is his involvement that has caused so much hype. He has been mentioned as the CEO of Impact Crowd Technology (ICT), the Spain-registered company that Crowd1 at one point claimed to own.
However, it is unclear what his actual role is, as the ICT website refers to him as “future CEO”. Crowd1 informed City Press that “Staël von Holstein is the future CEO of ICT Group and a consultant for Crowd1 in order to handle the structure and company setup for ICT. It has been a longer process than expected due to the Covid-19 pandemic, but finally, we’re almost there.”
In a recent interview with Swedish newspaper Svenska Dagbladet, Staël von Holstein was quoted as saying: “ICT is in the process of taking over Crowd1. That process is not complete. Crowd1 has been a little overambitious in saying it’s clear, because they want to push ‘good news’ all the time.”
According to the newspaper: “He also says he does not have access to information about how much money the network has so far withdrawn, and does not claim to be responsible for Crowd1’s network.”
While promoters of Crowd1 claim he has listed three “unicorns” – companies that are valued at more than $1 billion (R16.7 billion), the reality is not as flattering.
Staël von Holstein was behind the successful listing of Icon MediaLab during the dot.com bubble in the late 1990s. However, once the bubble burst, the company share value dropped by 95% and was suspended from the Stockholm Stock Exchange in December 2001.
In 2008, he founded MyCube, which was supposed to rival Google as a search engine. It raised more than $8 million, but filed for voluntary liquidation in 2012. His most recent venture, My Name Club, was launched with much fanfare in 2015.
It was a network platform that connected people based on their first names. Staël von Holstein claimed that the platform had signed up 1 million members in just 56 days and that it would reach 10 million members within a year.
It was never clear how My Name Club would turn the users into revenue, but, within a year, the business had collapsed. In an interview in September 2016 with Swedish business site Breakit, when asked about the closure of the platform, he said: “It’s just temporary and it’s because we’re developing the site. The one we had before was a beta version to show that we could bring in members and we have 1 million members.”
The business didn’t reopen.
Crowd1 founder Jonas Werner, who is also listed on the ICT website as its founder and chief sales director, has a checkered past with multilevel marketing schemes. According to Swedish media site Trijo News, Werner was involved in a company called Synkronice-Springlo, which was accused by its own members of being a pyramid scheme after getting “many mainly young people to invest the equivalent of $500 with a promise of big profits”.
After Werner left the alleged pyramid scheme, he started working for another network in the same industry, Opn-Sitetalk.
This company also made headlines after dissatisfied members claimed it was pyramid scheme. In 2016, the company became a part of Onecoin, one of the most notable pyramid schemes in recent years. It was the subject of a BBC documentary.
Update August 31: At the time of publishing this article City Press was informed in an email from the FSCA that they were not aware of any contact made by Crowd1. It was only post the publishing of the article that the FSCA informed City Press that they had provided the incorrect information and that Crowd1 had responded to queries received from the FSCA on June 26.