Pyramid schemes cash in on crisis


Tribune Chief Reporter

THE Securities Commission of the Bahamas has reissued warnings against falling victim to Ponzi and pyramid schemes which promise large payouts after a person pays a sum of money under the guise of an investment plan.

The commission said it was made aware there is an increasing presence on social media and other internet sites of advertisements or invitations to members of the general public to join purported financial programmes in which an individual pays a certain sum of money to join, then in turn must solicit and encourage other individuals to join in order to receive a large cash pay-out.

The schemes, originated in the US, have made their way to The Bahamas, where people are particularly vulnerable due to the financial downturn caused by the COVID-19 pandemic.

Sharon Wright, whose name has been changed to protect her identity, said she fell victim to the scheme, known as the “flowers in bloom gifting circle”.

A relative introduced her to the concept, who insisted that she only needed an initial payment of $200. Once that was paid, she would also have to recruit two others to join, and then she could expect to receive $2,400 in return.

It’s been eight weeks since then, but Ms Wright is still waiting to learn when she’ll cash out with the money she was promised.

“It seemed a little suspicious to me. I was hesitant at first,” she told The Tribune yesterday. “But this relative told me he’d been ‘blessed’ from this circle a few times. He said it was a concept introduced to him from friends in the US. They say it’s helping African-Americans and black communities to get their own chunk of wealth.

“I followed his instructions, he said to give him my money and to get some others to join, which I did do. They put everyone’s names in this flower and the more people join, the closer you get to a payout until eventually you get paid. Then they require you to put money in again to ensure it continues.”

But the scheme has hit a snag, Ms Wright said.

“He’s said we need more people. Until that happens, we are all in the same position in terms of getting a payout. So here I am eight weeks later out of $200 and waiting on phantom money.”

Asked if she regretted the decision to participate, Ms Wright said she had mixed feelings.

“No one forced me. I didn’t have to but I did. It’s a lesson learned.”

According to the Securities Commission, a group calling itself ‘Foundation Family Sou Sou’ based in the United States, has launched a financial programme they claim is linked to traditional African sou sous, similar to Bahamian asues.

The financial programme has been deployed in The Bahamas under the names ‘Fire Starter’, ‘Magnolias Jr’, ‘The Winning Team’, ‘Ujamma Family & Friends Share Plan’, ‘242 Financial Partners’ and ‘Everybody Eats’. This programme, in its various forms, carries the same characteristics of fraudulent Ponzi and/or pyramid schemes.

“… Ponzi and Pyramid schemes are very harmful to the unsuspecting public as invariably, any payouts for all people joining these schemes depends solely on funds coming from the people who join afterwards,” the commission said.

“So, without new investors, money for payouts very soon becomes insufficient. Therefore, under no circumstances are these schemes to be viewed as bona fide investment programmes as they tend by their nature to involve fraud.

“The commission hereby advises that the activity of any of the names listed above, or their agents or consultants, should be viewed as very high-risk and unsafe.

“Therefore, members of the public are advised to avoid these schemes for themselves and to not engage in soliciting persons to join such schemes. Persons who decide to join do so at their own risk. Anyone who is concerned about having transacted with the above-named entities, their agents or their consultants, should contact the police.”

Pyramid schemes are scams where promoters claim they can turn a small investment into large profits within a short period of time. In reality, participants make money solely by recruiting new participants into the programme. The scheme gathers momentum until it crashes. Fraudsters behind these schemes typically go to great lengths to make their programmes appear to be legitimate multi-level marketing (MLM) schemes, but the schemes eventually fall apart when it becomes impossible to recruit new participants, which can happen quickly.

A Ponzi scheme is similar to a pyramid scheme, the primary difference being that a Ponzi scheme involves the scheme’s operators persuading other persons to invest sums of money with the scheme, purportedly involving an investment vehicle of some kind, in return for a greater sum of money or payout; the scheme’s operators normally claim that there is little to no risk to the initial sum invested. However, there is no investment, no investment vehicle and no investment product.