Imitation ‘sou-sou’ savings clubs becoming newest scam

The Federal Trade Commission is warning consumers of the risks of a new money scheme that is spreading across social media and has become popular in the Black community.

Money savings clubs called “sou-sou” boards that originated in West Africa and the Caribbean have since transformed into the latest pyramid scheme to hit the region. These models are resulting in people investing — and often losing — up to thousands of dollars under a loose promise of getting back as much as eight times the amount of money in return.

According to several sources who have participated in these schemes but did not want to be identified, as well as multiple social media posts that discussed the rules of the game, participants are being asked to invest anywhere from $100 to $1,350 with an assurance to make a profit within just a few weeks.

The catch is that the only way to keep the money circulating within the group is to recruit more people into it, which often leaves the well dry before everyone involved gets paid out. The collection of money combined with mostly empty guarantees of a profit have all the makings of an illegal pyramid scheme in which those at the top, or members who sign up early, are rewarded with large payouts while those who are last to join usually aren’t as lucky.

Traditional sou-sous, however, are not meant to turn a profit for their members. Rather, they act as a collective savings account that is rotated among trusted family members or friends, according to LaKeisha Wolf, a Hazelwood resident and executive director of Ujamma Collective in the Hill District.

Ms. Wolf’s nonprofit practices collective and cooperative economics — the basis for its Tanzanian namesake and the theory behind a sou-sou — in an effort to circulate money within local African and African American communities. She said the Americanized model of sou-sou has been tainted in capitalistic motives that are sucking people in during a time when many are struggling.

“What’s happening now is a different form of gifting,” Ms. Wolf said this week. “It’s unfortunate because it is not the true sou-sou. Whoever resurrected this practice and put it into our community decided to misuse a name and tradition that is actually meant to benefit African and African American people. It’s putting a bad taste in people’s mouth for what sou-sou and ujamma really is.”

An authentic sou-sou is organized by a circle of people

looking to save money together, while each member gets an advance on their savings. For example, if five people decide to put in $5 for five weeks, each person would get a chance to spend the total $25. As long as each person contributes $5 each week, everyone will have invested the $25 that they spent.

The advantage, Ms. Wolf says, is that members get to cash out on a savings sooner than they would if they saved the money alone. Historically, sou-sou methods were the key to survival for people in West Africa and the Caribbean who used the savings to invest in their communities.

Karen Hobbs, assistant director in the Division of Consumer and Business Education for the FTC, warned of the danger of joining an imitation sou-sou scheme in an Aug. 10 blog post on the FTC website.

“In a sou sou, you don’t earn interest, never get out more than you paid in, and there’s no reward for recruiting people to join,” Ms. Hobbs wrote. “So, it’s not surprising that scammers are pitching fake sou sou savings clubs and opportunities like “The Circle Game,” “Blessing Loom,” “Money Board.” These kinds of illegal pyramid schemes are the exact opposite of a sou sou: They promise you’ll make more money than you put in and depend on recruiting new people to keep money flowing into the fund.”

The state Attorney General’s office told the Pittsburgh Post-Gazette, as of Tuesday, it had not received any complaints from sou-sou board participants.

Ms. Wolf said because of the name of her organization and its association with sou-sou traditions, Ujamma Collective has been getting several phone calls and emails from people who have participated in the latest pyramid schemes and had not been paid out.

She said she empathized with people who may have been scammed during a time of international hardship due to COVID-19.

“I felt bad because I know that there are a lot of good people participating and there are a lot of people that just want to have a come up,” Ms. Wolf said. “This is not an indictment against everyone in it. I think folks generally believed they were participating in something that was going to benefit them and the people they loved.”