GET RICH QUICK – OR MUCH POORER
In hard economic times, con artists get craftier – so beware schemes that promise unrealistic profits
These fraudulent schemes have been around for years and keep popping up in new guises. The most recent example is called Me-Coin. As Gareth Collier of Crue Invest explains, the crooks convince you that you can earn an income with a digital bitcoin account. You’re promised 5 % interest a day. So if you invest R1 000 you’ll have R4 116,14 after 30 days, and after 365 days you’ll be worth about R51,6 billion! Don’t believe a word of it.
WHY THEY FAIL
Pyramid schemes’ success depends on the number of “members” recruited. For example, Collier explains, the first eight investors are each supposed to recruit eight new ones. If they all succeed the second level will have 64 members – each of whom must recruit another eight investors. So on level three there are 512 people who each have to recruit another eight. If this continues there will be 16,7 million members on level eight. The scheme crashes as soon as new investors dry up and existing ones start withdrawing their money.
HOW TO SPOT THE CROOKS
Investors are always promised easy money – big returns for little work. Investors get their money from investments made by new recruits. Beware if you’re asked to pay for expensive courses, training packages or marketing material as a condition for joining. And at your first meeting they might try to tempt you to join with the promise of a gift, such as a free holiday.
Anyone who’s gullible, desperate or greedy. Greedy people simply can’t resist the promise of quick riches. Others might be trying to escape poverty. Research shows the average victim is an optimistic, married man in his late fifties with a reasonable understanding of financial matters and confidence in his own judgment. Collier says this man will believe that while other people might fall for fraudulent schemes, he won’t. Interestingly, women don’t fall for these schemes so easily – they ask too many questions.