Hundreds lose cash in pyramid scheme

MORE than 600 people in Verulam lost their money after a well-know pyramid scheme collapsed on Monday, May 7.

The victims told the Weekly that the promoters of the scheme working in one of the buildings on Wick Street, lured the people promising them they would get rich quicker.

Sipho Mthembu (33) was one of the victims who had fallen prey to the pyramid scheme.

“The agreement was that each person has to invest R1 000 cash and after 10 days the money accumulate to R2 000. People were excited about it.

We recruited other people convincing them to invest with the business. I was also interested and decided to invest my money,” Mthembu said.

Last Wednesday was the day Mthembu and many others were expecting to get their money back.

Mthembu told the Weekly that he joined the scheme early this year.

“We were told that we will get paid on Monday [May 7]. On Monday we went back to their offices in Verulam.

We got such a shock when we saw that there was no one in the office,” Mthembu said.

Another victim Pretty Ngcobo (32) lost R4 000 cash that she invested before the scheme collapsed.

“These guys had an office near our offices in Wick Street.

“I heard about it early this year and decided to join.

“On Monday more than 600 people gathered outside the company’s office to collect their money,” Ngcobo said.

Ngcobo said that after she found out that the scheme collapsed, she went to Verulam SAPS to open a case.

“Attempts to open a case of fraud at the police station was unsuccessful.

“The police told us that there was no case to open because we [investors] volunteered and joined the scheme,” Ngcobo said.

The South African Banking Risk Information Centre (Sabric) urges 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 CEO Kalyani Pillay said: “Scamsters will go to great lengths to get victims to invest in these schemes through the use of social engineering tactics. They will even come up with convincing, fabricated statistics to make their offer look attractive, so always treat these kinds of schemes with suspicion,” Pillay said.

Signs to look out for a “Get Rich Quick scam”:

>It claims to pay out double-digit returns.

>It claims to be an opportunity of a lifetime.

>Returns or profits earned are dependent on recruiting more members to the scheme.

Tips to spot a Pyramid scheme:

>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 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 side step the formal banking sector where they could be detected.

>A tiered investment structure to incentivise larger investments into the scheme (e.g. silver, gold and platinum membership).

>Short investment periods – sometimes as little as 10 days with very high rates of return and strong encouragement to reinvest automatically.

>Closed user groups with an increasing trend towards messaging across WhatsApp, presumably due to the belief that the app offers end to end encryption and therefore anonymity.

Police spokesperson in Verulam Captain Henry Kisten said: “We had no cases reported of such nature, but the communities should not invest in such schemes.”

Lockdown For
Voting Booth
Russia has approved a Covid-19 vaccine. Would you take the vaccine if it were available in South Africa?
Please select an option Oops! Something went wrong, please try again later.
Yes I would
25% - 4173 votes
No I would not
31% - 5168 votes
I'd wait to see the outcomes first
44% - 7458 votes
Brent Crude
All Share
Top 40
Financial 15
Industrial 25
Resource 10
All JSE data delayed by at least 15 minutes morningstar logo