Pyramid scheme victims get refunds
HUNDREDS of would-be investors who fell victim to a money pyramid scheme that went bust three weeks ago after NewsDay exposed the scam, have received refunds.
The scheme, in which Chiredzi ward 4 councillor Liberty Macharaga (Zanu PF) was alleged to be at the centre, saw over 2 800 people losing nearly half a million rand in investment money.
Macharaga was reported to have been running various WhatsApp groups called Money Crew that attracted hundreds of investors from the town.
Various messages and audios were circulated in WhatsApp groups luring investors to join the scheme.
Macharaga later apologised to all investors saying he got involved in the scheme out of ignorance.
“We all make mistakes in life. A friend convinced me and I joined, but I was later advised that as a community leader, I should not be involved in such a scheme. I was wrong joining the scheme and it’s not a secret as a leader, I am wrong. My due apologies to the community. I accept my mistakes and I am already moving on. I don’t owe anyone money now and we are at peace,” he said.
However, Crowd 1 representative, Joel Sitole, who is based in Johannesburg, South Africa, said they had since established that unscrupulous people were using their company name to con people of their hardearned cash.
He, however, said his was a marketing company.
“Multi-Level Marketing (MLM) works in a similar way to pyramid schemes but they are quite different, and for this reason, legal. It’s crucial to know the distinction between the two since many businesses that appear to use MLM may, in fact, be involved in pyramid selling.
"Like pyramid schemes, MLM depends on recruiting new members to become distributors of a product or service. As an MLM consultant, contractor, or distributor (they are varying names for essentially the same role), you make money by selling products or services to other MLM participants,” Sitole said.
“You also make money by signing up other MLM participants to become a part of your programme. There are usually bonuses for the number of products you sell and the number of new members you recruit.”
He described pyramid schemes as fraudulent schemes.
“Participants attempt to make money solely by recruiting new participants into the programme. The hallmark of these schemes is the promise of sky-high returns in a short period of time for doing nothing other than handing over your money and getting others to do the same,” he said.