Public warned about pyramid schemes
The Office of Consumer Affairs is warning people to be vigilant about pyramid schemes.
Fraudulent financial scams, often pitched as legitimate business opportunities, can appear to be an attractive ways to “get rich quick”, according to a press release from Consumer Affairs.
A spokesman stated: “Typically with pyramid schemes, participants are often asked to make payments.
“The two payments often are a participation payment to sign up, and a recruitment payment, promised when a member recruits others.
“There are two important facts to remember: firstly, the company has no risk as they get paid every time someone joins, no matter where they fall within the scheme.
“Secondly, as these schemes are membership-driven they inevitably collapse and new members can lose a lot of money. As with any business venture, investigate the business, the key people behind the business and its products.”
People are urged to be particularly wary of slick sales pitches.
The spokesman continued: “Get as much information as you can, including copies of their sales literature, business plan and marketing plan. If the plan is designed so that your income is derived solely from signing up people and receiving a commission on new recruits rather than selling the product, it is likely fraudulent and a pyramid scheme.”
Under the Consumer Protection Act 1999, Part III section 11b (ix) it is an offence to operate or promote these schemes in Bermuda. Violation of the Act carries a $15,000 fine and/or imprisonment for up to 12 months.