On 14^th June, 2019 the Economic and Organised Crime Office (EOCO) was able to stop a looming danger when it released a press statement, “Loom is a Scam”. Gladly, no one reported to the Office for losing huge sums of money through “Loom”. “Loomers” escaped being scammed even though some were not lucky enough and fell victim to other dubious Ponzi investment scheme.

It is amazing how others thought the warning against Loom was a means to deprive them of making extra money. On 15^th June, 2019 a press statement hit various news tabloids from “Looming National Members” disputing the warning EOCO had put out there that “Loom is a scam”.

The Economic and Organised Crime Office was not perturbed about the outburst of the few since it is the mandate of the Office to detect and prevent the commission of economic and organised crime. The Office indeed must be commended for their prompt intervention with Loom.

In 1995, the famous Pyram and R5 investment fraud schemes also caused people to lose huge sums of money.

It is unfortunate that people still fall for such schemes over and over again. We all attest to the fact that the economic situation is hard for everyone thus increasing the need to earn something extra. However, the need to earn more should not be a reason to take advantage of others. This need should also not lead unsuspecting people to fall into Ponzi /Pyramid scheme.

PONZI SCHEME

In a Ponzi scheme, you invest with a type of Fund Manager or Investment Broker who promises to invest your money in a legitimate business which will earn you a high return. You might have little to no information about the underlying investment that is earning such high yields. The hook in a Ponzi scheme is simple: invest X amount of money and receive Y amount at regular intervals.

PYRAMID SCHEME

In some Pyramid schemes, there is the selling of a legitimate product. Usually, they look remarkably like a legitimate multilevel marketing (MLM) business opportunities. This could be a unique carbonated drink or a herbal mixture that is only available to members of the circle. Oftentimes, you will be required to buy a certain amount of product before you will be eligible to get certain bonuses.

Often in a pyramid scheme, in order to join, you are normally required to make a huge financial commitment in terms of start-up cost to tie you down. This means you have no choice but to recruit more people and earn a portion of their commissions. You earn a commission on what you sell. The person who recruited you also earns a percentage of your commission while you also earn a commission on the sales of everyone you recruited; the one who recruited you also earns a commission on the sales of everyone you recruited; the earning potential is nigh limitless.

In practice, investment fraud schemes normally integrate elements of both Ponzi scheme and Pyramid scheme and are difficult to classify.

Here are some warning signs of a pyramid/ponzi scheme:

• You pay to join or buy a product to join.

• You are offered a chance to join a group or team where you need to recruit new members to make money. Pyramid/Ponzi schemes want you to recruit more people.

• Some pyramid/ponzi scheme promoters disguise their true purpose by introducing products that are overpriced, of poor quality, difficult to sell or of little value. Making money out of recruitment is still their main aim.

• Promoters of a pyramid/ponzi scheme may try to recruit you with pitches about what you will earn.

• Promoters make extravagant promises about your earning potential. STOP. Such promises are false.

• Promoters emphasize recruiting new distributors for your sales network as the real way to make money.WALK AWAY. In a legitimate Multilevel Marketing (MLM) program, you should be able to make money just by selling the product.

• Promoters play on your emotions or use high-pressure sales tactics, maybe saying you will lose the opportunity if you don’t act now and discouraging you from taking time to study the company. Leave by the nearest exit. Any company that tries to pressure you to join is one to avoid.

• Distributors buy more products than they want to use or can resell, just to stay active in the company or to qualify for bonuses or other rewards. If you see this happening, keep your money.

• The promoter makes claims like ‘this is not a pyramid/ponzi scheme’ or ‘this is totally legal’.

• Promoters overly assures you of consistent payment of interest component on investment or returns.

• Such businesses are normally not registered at the Registrar General’s Department, neither are they licenced by the Securities and Exchange Commission and regulated by Bank of Ghana to operate in Ghana.

• Such investment schemes have cumbersome processes, investment plan/strategies. Avoid investment you do not understand.

Reference

Australian Competition & Consumer Commission Scamwatch (n.d.). Retrieved on 18/06/2020 from https://www.scamwatch.gov.au/types-of-scams/jobs-employment/pyramid-schemes#how-does-this-scam-work

Federal Trade Commission. Consumer Information. Multi-Level Marketing Businesses and Pyramid Schemes. Retrieved on 18/06/2020 from https://www.consumer.ftc.gov/articles/0065-multi-level-marketing-businesses-and-pyramid-schemes

How to Detect a Ponzi Scheme – 3 Sure Tips (2019). XYCareers. Retrieved on 22/06/2020 from https://xycareers.com/how-to-detect-a-ponzi-scheme/

Source: Public Affairs Unit Desk