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Police warn of fraudulent investment scheme threat

Bermuda Police last night warned the public the Ponzi or pyramid-type schemes may be in operation or being promoted on the Island.

A Police spokesman said they were working with the Bermuda Monetary Authority and Consumer Affairs to investigate the possible schemes and also educate the public on this criminal threat.

Acting Superintendent Sean Field-Lament advised that in the current economic climate any promises of “get rich quick” investment opportunities should be regarded with great suspicion and to take heed of the old adage “if it is too good to be true than it probably is”.

“A pyramid scheme is a non-sustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public,” the spokesman said, adding: “A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organisation running the operation.”

Both pyramid and Ponzi schemes usually entice new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent.

Perpetuation of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going.

The spokesman said that ultimately, “Both systems are destined to collapse because the earnings, if any, are less than the payments to investors. Pyramid schemes are specifically mentioned in the Consumer Protection Act as being a criminal offence. Those promoting such schemes are reminded that the promise or forecast or even concealment of material facts which induces others to invest or deposit is a criminal offence and is punishable for a maximum of seven years imprisonment.”

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Published February 03, 2012 at 1:00 am (Updated February 03, 2012 at 6:21 am)

Police warn of fraudulent investment scheme threat

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