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The Securities & Exchange Commission of Zimbabwe has noted with concern the sprouting of various schemes that offer investors an avenue to make “easy money or online income”.
Most of these schemes are pyramid schemes in which participants profit almost exclusively through recruiting other people to participate in the program.
Pyramid scheme fraud involves an unsustainable business which rewards people for enrolling others into a business that offers a non-existent or worthless product.
The scheme often offers extraordinary profits for little or no risk. One such scheme is the MMM Global which is believed to have ripped off investors in Russia, South Africa, Lesotho, among others. The scheme promises investors unrealistic returns of at least 30 percent.
In Zimbabwe, pyramid schemes are not regulated and research has shown that people who often invest in these schemes become victims of fraud, where more often than not they lose their money at the end.
When investing in any product or scheme, investors should be aware of the following characteristics of a pyramid scheme:
l Promises of high unrealistic returns in a short time period. Be wary of pitches for exponential returns and “get rich quick” claims. High returns and fast cash may suggest that commissions are being paid out of money from new recruits rather than revenue generated by product sales.
l No genuine product or service – Exercise caution if there is no underlying product or service being sold to others, or if what is being sold is speculative or appears inappropriately priced.
l You are offered a chance to join a scheme or a program where you need to recruit new members to make money.
l Easy money or passive income – Be wary if you are offered compensation which is not commensurate with the service provided e.g. recruiting others, and placing advertisements.
Pyramid schemes are not sustainable and always collapse eventually at the expense of most investors. Protect yourself by shunning any “opportunity” bearing warning signs of a pyramid scheme. Always invest in products/schemes that are regulated.
Online Reporter