Consumers urged to look out for “Ponzi schemes”

The Competition and Consumer Affairs Commission (CCAC) on Friday advised members of the public to be wary of pyramid and Ponzi schemes that are being disguised as legitimate investments.
According to CCAC, the warning is in the wake of several enquiries made to the Commission about the investment “scams”. The Commission said it was informed of approaches that were made to persons with the “get rich quick” through investing in these groups that will earn them multiple times their investment.
“Part of the scheme is for them to also engage in continuous recruitment of persons to join this pyramid scheme. Consumers need to note that, essentially, the foundation on which the pyramid scheme is built is the problem. Any plan that offers commissions for recruiting new members will inevitably collapse,” the CCAC said on Friday.
The consumer body noted that the real casualties in the collapse are always the people at the bottom, with the people at the top of the pyramid protected. They made reference to Part V of the Guyana Consumer Affairs Act, No 13 of 2011 that speaks to the issue of “Pyramid selling” as it clearly states: a person shall not promote or operate a pyramid selling scheme and any person who contravenes the subsection of this Act commits an offence.
The Act spells out that the term “pyramid selling scheme means a scheme that (a) provides for the supply of goods or services or both for reward; (b) that, to many participants, constitutes primarily an opportunity to sell an investment opportunity rather than an opportunity to supply goods or services: and (c) that is unfair, or is likely to be unfair, to many of the participants in that – (i) the financial rewards of many of the participants are dependent on the recruitment of additional participants; and (ii) the number of additional participants that must be recruited to produce reasonable rewards to participants is either not attainable, or is not likely to be attained, by many of the participants.
Meanwhile, the United States Federal Trade Commission (FTC) highlights several tips that should be considered when making a decision to be involved in these schemes. They noted that persons should avoid any plan that includes commissions for recruiting additional distributors. It may be an illegal pyramid. Beware of plans that ask new distributors to purchase expensive inventory.
“These plans can collapse quickly and may be thinly-disguised pyramids. Be cautious of plans that claim you will make money through continued growth of your downline – the commissions on sales made by new distributors you recruit – rather than through your sale of products. Beware of plans that claim to sell miracle products or promise enormous earnings. Just because a promoter of a plan makes a claim doesn’t mean that it is true! Ask the promoter of the plan to substantiate claims with hard evidence”, they explained.
They also added that persons should beware of “decoy” references paid by a plan’s promoter to describe their fictional success in earning money through the plan. FTC is encouraging that persons do not pay or sign any contract in an “opportunity meeting” or any other high-pressure situation. Persons should insist on taking their time to think over a decision to join.
“Talk it over with a knowledgeable friend, an accountant or lawyer. In the case of the “investment” Ponzi schemes, consumers should be reminded about an advisory issued in October 2019 by the Guyana Securities Council warning persons about fraudsters fleecing unsuspecting persons by asking them to invest in business in the securities market but are not licensed to do so by the Council,” the CCAC underscored.
In this case, consumers are advised to check with the Securities Council before making any investment. The CCAC explained that consumers should do thorough research before becoming entangled in any scheme. They advised the general public that persons who may have been scammed should contact the CCAC to investigate.