Crowd1 should be probed
NETWORK MARKETING FIRM: BELIEVED BY SOME TO BE A PYRAMID SCHEME
By not investigating, the National Consumer Commission does Crowd1 and its members a disservice.
From the outside, the National Consumer Commission (NCC) doesn’t seem to be taking the controversy around Crowd1 seriously. Crowd1, a Spanish company run by Swedes, claims to be a network marketing firm. However, it has been accused of operating as a pyramid scheme that generates income from signing up new members rather than selling products.
The NCC, which under the Consumer Protection Act is the lead regulator when it comes to bringing such schemes – which are illegal – to book, has not even started investigating Crowd1.
The firm claims no wrongdoing and that it sells educational products. It has, however, been prohibited from operating in Namibia by the Bank of Namibia.
In South Africa, the Financial Sector Conduct Authority (FSCA) has warned against doing business with the company as it is providing an unregistered financial service.
For its part, the South African Reserve Bank’s (Sarb) Prudential Authority has said it is investigating whether it is acting as a financial service provider in taking deposits from the public.
While these local regulators have taken some action, the NCC has been silent on Crowd1.
Hints, clues, signs
It’s not as if it has not been informed about it.
It might have missed its glitzy launch at the Gallagher Convention Centre on 23 November last year, when well over 6 000 people from around the region attended.
It might also have missed the subsequent creation of several local Crowd1 Facebook groups that now have members numbering in the thousands.
But it could not have missed the Bank of Namibia’s statement on 24 February, banning Crowd1 from operating there.
And even if it missed the Bank of Namibia’s announcement, someone should have pointed out the statement put out by the Direct Selling Association of SA in March, welcoming the bank’s move.
When Moneyweb asked the commission last month if it was looking into Crowd1, it said it wasn’t as it had not received any complaints.
The NCC did concede that it does not need a complaint from the public to investigate, and could do so if it wanted to.
When Moneyweb contacted the NCC last week to see if it was investigating, it did not get back to us.
This was despite the FSCA putting out a statement on Crowd1, saying it is not a registered financial service provider, and the Sarb’s Prudential Authority saying it is investigating it.
Crowd1 has always claimed it that it is not a pyramid scheme.
Given the cloud over it, an inquiry by the NCC could easily clear this up.
By not investigating, it does both Crowd1 and its members a disservice.
An investigation could open the way for it to operate in SA without the air of mistrust around it – if it’s found to be what it says it is.
The need to know
If the NCC finds it to be a pyramid scheme, the people participating in Crowd1 will know they are taking part in a criminal scheme. But as things now stand, no one has any clarity.
By staying on the sidelines, the NCC leaves open the way for ordinary people to possibly lose a lot of money.
Many South Africans have already invested substantial amounts of money in Crowd1.