By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Bahamas will disintegrate into “a society of chaos” if unregulated investment schemes continue to flourish, a fraud examiner yesterday warning that the “mindset” needs to change.

Kendrick Christie, accountant and partner at Grant Thornton (Bahamas), told Tribune Business he was concerned by the spread of ‘get rich quick’ offerings that were becoming increasingly sophisticated.

A past president of the Association of Certified Fraud Examiners (ACFE) Bahamas chapter, he said the financial services regulators and authorities needed to “be more savvy” in detecting such schemes and respond faster in shutting them down.

Suggesting that they needed to better monitor social media, which was where these schemes often originated and marketed themselves to potential ‘investors’, Mr Christie said improved education and a change in Bahamian attitudes was even more vital.

He argued that too many Bahamians wanted to believe the returns promised by ‘get rich quick’ promoters were true, and turned a ‘blind eye’ to suspicions of fraud and wrongdoing.

Besides preying on unemployed and poverty-stricken Bahamians, Mr Christie said such schemes also tapped into the ‘something for nothing’ and ‘easy money’ culture prevalent in many segments of society.

He was speaking following the chaos that erupted last Friday when hundreds of Bahamians stormed the offices of Pineapple Express Asue Holders in a bid to reclaim their money, after the Securities Commission deemed it “unsafe and very high risk” because it had the characteristics of a typical pyramid or Ponzi-type fraud.

Mr Christie’s concerns were backed by Christina Rolle, the Securities Commission’s executive director, who yesterday told Tribune Business the regulator was “very concerned” by the frequency with which Pineapple Express-type schemes were emerging.

While no complaints about Pineapple Express had been received, Ms Rolle said via e-mail: “We can confirm that representatives from the Commission met with the principal of Pineapple Express Asue on August 22, and expressed concerns with respect to its operations.

“Based on information provided to the Commission, including explanations from the principal, Pineapple Express Asue appears to have the typologies of a ‘Pyramid’ scheme. The Commission is very concerned about the frequency of these schemes in our local market.”

The Securities Commission subsequently issued a ‘warning notice’ about Pineapple Express Asue Holders, and referred the matter to the police for further investigation (see Tribune main section).

Ms Rolle said the regulator planned to intensify its public education efforts to prevent Bahamians from falling victim to such schemes in futures, broadening its focus beyond its 2015 pamphlet on avoiding ‘scam and fraud’ to other media.

“With respect to these types of schemes, the public should first inquire whether the entity/individual is licensed to operate,” the Securities Commission chief added. 

“Also, potential participants should ask basic questions to the operators about how income is generated, and how the operators make money. It is good to check with financial services regulators, especially if there are concerns. Finally, if something sounds too good to be true, it normally is.”

Mr Christie, meanwhile, expressed particular concern about the impact ‘get rich quick’ schemes can have on already-marginalised Bahamians, who can ill-afford to lose even several hundred dollars in such offerings.

He warned that this would only exacerbate the Bahamas’ numerous social ills, and called on Bahamians to “live with principles” and “draw the red line” when they recognised that something was wrong and others could be defrauded.

“I think there’s a level of ignorance, but also a level of education that needs to happen,” Mr Christie told Tribune Business. “Some of the persons participating know what it is, and beat the door down to be the first ones in.

“I will be unequivocal here: I definitely do not support these schemes. They’re paying you from the deposits of other people. Any scheme promising you four-five times’ the money you put in is a fraud. You have to live with principles and draw the red line.”

Pyramid and Ponzi-type frauds typically promise or guarantee investors a high return, claiming they can turn a small investment into a much larger sum of money within a short period of time - but without saying how.

They use ‘new investor’ monies to meet the promised payments to investors who entered the scheme earlier, relying on attracting a high number of new participants on a daily basis to stay afloat. 

Eventually, when they are unable to attract enough money to meet the promised pay-outs, the scheme collapses. Pineapple Express was promising to pay $1,050 and $540 to Bahamians who invested just $200 and $100, respectively, while also charging $25 fees for ‘processing’ and ‘membership’. Payouts were supposed to occur after 14 days.

The company’s principal, Ms Munroe, in her last Facebook posting, denied any wrongdoing. She said: “I have done my best to help my community. The vision for Pineapple Express was never for selfish gain but to help Bahamians.

“In return I was ridiculed and my life was threatened. Please note that all of the funds collected were used to payout someone else [pyramid/Ponzi characteristics] in light of the vision ‘people helping people’. I am truly thankful that over 800 persons were paid in the $200 ‘asue’, and over 900 persons were paid in the $100 ‘asue’.”

However, it is unclear whether all investors have been refunded. Apart from Pineapple Express, The Tribune last week reported on the concerns of persons who had invested in a similar scheme, Golden Chess Asue Holders, which had allegedly closed down without making payments or refunds.

Mr Christie expressed concern that such schemes were “becoming more sophisticated”, giving the appearance of being legitimate businesses by establishing physical offices and application forms.

He added that the use of the term ‘asue’ effectively amounted to false marketing, as asues only return the savings persons have put in.

And “when the wheels fall off, because the deposits dry up and too many people flock to” such schemes, the promoters were able to quickly shut down and disappear without paying investors. And social media gave them the ability to reappear, under a different name, with similar offerings several months later.

Mr Christie said no legitimate investment businesses would guarantee the returns offered ‘get rich quick’ schemes, suggesting Bahamians were failing to equate ‘high reward’ with ‘high risk’.

“No one should be able to take deposits from the public, say they can’t pay you and then disappear,” he told Tribune Business. “We can’t allow that to happen. It creates a society of chaos.

“Persons who gain from these schemes are offset by the money that is lost, and more are losing that gaining. We have a lot of social problems in the Bahamas, and don’t need people defrauded and ending up on the fringes, because we will have even more social issues.”

Mr Christie said losses on ‘get rich quick’ schemes could have a negative ‘ripple’ effect on a family’s finances, especially in households where no or few people are working full-time.

While acknowledging that the Bahamas “does not have a monopoly on fraud”, the Grant Thornton partner questioned “whether the authorities are moving quickly enough” to take action against such schemes and close them down.

“The authorities have to see these trends,” he said. “I think they have to monitor social media, which is the way we communicate now. There are a lot of persons who get their news from that.

“The regulators have to be more savvy and use social media to get their message out. They need to establish a hotline where persons can call in.”

Mr Christie said scheme promoters also paid persons to be the ‘first investors’ and vouch for their offering, in a bid to entice Bahamians to participate.

In a close-knit society, with interlocking family relationships and where everyone knows everyone else, social media and ‘word of mouth’ have proven effective tools for sucking hundreds of Bahamians into unregulated investment schemes.

Mr Christie argued that there needed to be a ‘cultural mindset’ shift among Bahamians to counter such schemes, noting that he had entered into online debates with persons who either supported them or felt the promoters should be left alone.

“I think it’s a function of a lot of things,” he told Tribune Business. “It’s a function of society, and it’s really a sign of the economy and this gambling-type of mentality. A lot of persons on the fringes don’t want real work, but think if they can put in $100-$200 and get $1,000, they’ve got it made.

“There are persons not trying to work or get a job, and want a quick fix. There’s a Bahamian way about that; wanting a quick fix. They know it’s wrong, and that someone else is being defrauded, but want a quick fix. We have to work on changing people’s mindsets.”