Spot investment scams

Scammers often deceive people into investing their hard-earned money into so-called Ponzi or Pyramid schemes.

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These schemes promise big returns, but the profits for early investors come from new investors, not legitimate business ventures. Once there are more investors than new recruits, the scheme collapses, and everyone loses their money. Scammers lure victims with guarantees of high returns and no risk, but they’re not clear about the investment itself. They boast about insider knowledge, exclusive connections, and unique offers, but it’s all part of the fraud because none of it is true.

How to spot a pyramid scheme

  • The promoter promises high returns over a short period and you are also told that your returns will increase with the number of people that you recruit to the scheme
  • A fee or initial investment is required to participate in the scheme
  • A tiered investment structure exists to incentivise larger investments into the scheme (e.g. silver, gold and platinum membership)
  • There is general secrecy and no details are made available regarding where the funds will be invested or in what. Very general terms will be used to describe the scheme
  • These schemes operate on trust and an invitation to invest can often come from someone close to you, such as a family member, community leader or religious figure
  • They make use of closed user groups with an increasing trend towards messaging across WhatsApp, presumably due to the belief that the app offers end to end encryption and therefore anonymity

How to spot a Ponzi scheme

  • The promoter promises very high returns with no risk in a short space of time
  • The promoter is usually secretive about the details of the investment
  • Often, high returns are paid initially and then investors are tricked into investing even more money
  • The promoter disappears and returns dry up. Usually, the scheme collapses soon thereafter

Tips to Slam the Scam

  • Be careful of investments that guarantee you high profits with no financial risk, quickly
  • Be safe and ensure that an investment company is licensed by the Financial Sector Conduct Authority (FSCA). It is a big red flag if the investment product is not offered by an authorised financial services provider
  • If it sounds too good to be true, it’s most likely a scam