Fast Money Schemes mostly Pyramid Schemes are on the rise in the Pacific. Many Pacific Islanders becoming blindfolded and now living in fantasy world with dreams of becoming millionaires overnight. So their pursuits of becoming millionaires are costing them their entire wages, salaries, savings or even their retirement savings with little or none returns. Some even have lost their lives pursuing it. So where are these people investing?
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| Rise of Pyramid Schemes in The Pacific . Photo by PNGeHow |
Many Pacific Islanders are now investing in foreign Pyramid Schemes which are quickly becoming unsustainable. Read below what the Pacific Media is saying.
Report for Pyramid Scheme in Solomon Islands
Millions have been ‘invested’ in pyramid schemes in Solomon Islands. The result? Court cases and endless squabbles.
“My father sold a piece of our land and put the money in one link, we have not seen any money returned, my father is now a very sick man and I feel sorry for him,” recounts a young man during a private conversation.
Pyramid schemes are popular because of its high return on ‘investment.’ But as more members are needed for promoters to pay out early ‘investors,’ at some point, there will not be enough people to sign up, leading to its inevitable collapse.
The Central Bank of Solomon Islands (CBSI) has given numerous awareness campaigns, education and advice on the dangers of investing in these get rich quick money schemes, but people still fall for such schemes.
Currently the Financial Institution Act 1998 is inadequate, giving pyramid scheme operators room to maneuver. Many of these scammers have been found guilty, but for lesser offences where penalties are not enough to act as a disincentive for future scammers.
Unless strong laws are in place, pyramid schemes will continue to rise, and millions will be stolen from ordinary Solomon Islanders.
Such schemes prey on the vulnerable and poor, often times people we trust will be the ones that pull us into investing.
Next time, especially for those playing with the idea of investing in such schemes, the old adage should ring true, that “if its too good to be true, it is very likely a scam.”
Pyramid Scheme in PNG
There are many money Scammers in Papua New Guinea and thus Bank of PNG Governor Loi Bakani, warns of these scammers. Mr. Bakani urges people not to listen to scammers on the streets claiming that they have money parked at the PNG Central bank.
Bakani said he had been receiving many text messages and calls from people enquiring about their money or to meet them.
“I never texted you or sent these texts,” he said.
“There are people who impersonate either myself or others to talk you into giving them money.
“You see these people hanging around at public places and parks at Boroko.
“You will meet them and this guy with a folder.
“He is tricking you to collect money.
“He is living in a hotel and flying around while you are still waiting for your money.
“We just want to emphasise that you will wait and wait and die, but you will never get your money back.
“These are the kind of scams that come in different forms.”
Bakani said the biggest scam was U-Vistract in Bougainville which was slowly dying out.
He said the most-recent scam was the timber rights’ purchase (TRP) where people were claiming that prior to PNG’s Independence in 1975, under the TRP, the administration at that time deducted some money and invested in treasury bonds.
“We do not have those Treasury bonds here,” he said.
“After Independence and we took over, those kind of things were never transferred to us.”
He said hundreds of letters came into BPNG from people claiming to have investments with the bank.
“It has reached a point where some of them are confronting our staff, threatening our staff,” Bakani said.
“They come from all regions: Highlands, New Guinea Islands, Momase and Southern, mainly Gulf.”
Bakani said Bank of Papua New Guinea did not do banking for individuals or groups but was a bank for Government only.
“Any individuals claiming to have investments that are being withheld by us, or are telling their people that they are waiting for us to give them their money back, re all false claims,” he said.
“It is a scam, fraud. Do not easily fall victim to these kind of people who are promoting scams or fraud.”
There are other reported cases in other Pacific Islands Countries.
What a Pyramid Schemes?
There are many different kinds of pyramid schemes, but the two most basic ones are product-based and so-called naked pyramid schemes.
Naked Pyramid Scheme
In a naked pyramid scheme, no product is sold. Here's how it works:
1. One person recruits 10 other people to participate in a "no-fail investment opportunity."
2. The 10 recruits each pay the recruiter
K100.
3. The recruiter now tells them to go out and recruit 10 more people to do the same.
4. If each recruit is successful, they'll all end up with K900 in profit from a K100 investment.
Sounds simple enough, but here's the problem: Let's say the initial 10 recruits each find 10 more people. Those 100 new recruits will have to find 10 recruits each to make K900. That means they have to find 1,000 people willing to sign up for the program. And if they somehow find 1,000 people, that next level of the pyramid will need to sign up 10,000 to make a profit. Eventually, there won't be enough recruits at the bottom of the pyramid to support the level above it. That's when the pyramid topples and everyone at the bottom loses their investment.
Product-based Pyramid Scheme (Ex. Global Aim)
A product-based pyramid scheme is the same concept disguised as a legitimate direct sales opportunity. Here's how it works:
1. A distributor recruits 10 salespeople who each pay K500 for a starter kit of products to sell.
2. The distributor gets 10 percent of each starter kit that's sold.
3. The distributor also gets 10 percent of each product that any of his recruits sells, including more starter kits.
4. The recruits are told that the fastest way to make money isn't by selling products, but by recruiting more people to buy starter kits.
5. The people at the top of the pyramid get commissions from everyone in their downline, the many levels of recruits below them on the pyramid.
The problem with most product-based pyramid schemes is that the products themselves don't sell very well, or have very slim profit margins. So the only way to make money is to find more recruits. Eventually (and surprisingly quickly), the market becomes saturated. There are too many people trying to sell the same unattractive product and there's no one left to be recruited.
It's mathematically impossible for everyone to make money in a pyramid scheme. For example, if each recruit needs to find 10 more people to recoup the cost of his or her initial investment, the eighth level of the pyramid would have to recruit a billion people to make back their money. And the next level would need 10 billion, nearly twice the population of the Earth .
In fact, pyramid schemes don't work unless somebody loses. Those at the bottom of the pyramid are essentially defrauded by those on top. It's a mathematical fact that no matter how many people join a pyramid scheme, 88 percent of the members will be on the bottom level and will lose their money [source: Pyramid Scheme Alert]. Pyramid schemes are illegal because people don't lose their money due to normal market forces, but because the system requires them to lose so that a few at the top will win.
Studies show that in a naked pyramid scheme, 90.4 percent of people lose their money, while in product-based pyramid schemes, that number jumps to a shocking 99.88 percent [source: Taylor].
So Take this home: Beware of Pyramid Schemes. Do not invest in Pyramid Scheme
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