Get rich quick scam warning issued
The Ministry of Commerce, Industry and Labour [M.C.I.L.] has issued a warning against illegal pyramid schemes or “get rich quick” scams.
The notice, delivered by the Ministry’s Chief Executive Officer, Pulotu Lyndon Chu Ling, follows an order by the Central Bank of Samoa to shut down Smart Finance Limited, a Savai’i-based investment company.
Last month the Samoa Observer revealed a total of 730 investors had ploughed money into the scheme, before the company was ordered by the Bank to “refund” its investors.
“The public is hereby reminded that pyramid schemes and similar schemes that buy or sell investment opportunities are prohibited in Samoa,” Pulotu said.
“Such pyramid schemes are illegal and get rich quick scams that may cost our friends and family their hard earned tala. These schemes promise financial returns to members should they add more membership to the schemes; however in becoming a member a fee is paid up front for registration.”
Pulotu cautioned that despite high upfront fees, consumers are promised that they will make guaranteed returns.
According to Pulotu, it is an offence under section 65 of the Competition and Consumer Act 2016 to operate a pyramid scheme.
“For a person to promote and operate a scheme for supply of goods and services for reward if that scheme constitutes primarily an opportunity to buy or sell an investment opportunity as against an opportunity to buy or supply goods or services,” the C.E.O. said.
“Where that scheme is unfair to the participant because the financial rewards are dependent on the recruitment of additional participants and that a number of participants in the scheme must be recruited to produce financial rewards to participants is not attainable to other participants.
“And chain letters schemes operating under the above mentioned conditions are also prohibited.”
Smart Finance was operated as part of J & J Electronics. Its owner, Busuyi Johnson Olarewaju, defended what he said was a legitimate investment vehicle, which was managing funds of up to $100,000.
Mr. Olarewaju said that the business operated on a model of promising investors guaranteed returns.
“If you come with $170 [...] according to our new profit table right now you receive $15 weekly for 24 weeks and that will be $360,” he said.
“And if you come in with $340 you will receive $30 weekly for 24 weeks; the more people you bring in the more profit you get.
“We are a legitimate company, we are an investment company.”
Mr. Olarewaju denied that his business model was a classic pyramid scheme model, or a classic fraudulent system of making money based on recruiting an ever-increasing pool of "investors."
[The schemes eventually collapse when the recruitment of new investors stops.]
“The Central Bank has determined that Smart Finance Ltd needs to cease their investment operations [and] activities, until they have sought proper Central Bank licensing requirements for these investment activities," the Bank said in a statement announcing Smart Finance's shutdown.
“The Central Bank advises the public who have invested in these Smart contracts to seek a refund of their investments.
“The Central Bank would like to acknowledge our Commercial banks and Money Transfer Operators as well as members of the public who assisted with our enquiries.
“We will continue monitoring these accounts until everyone has received their refunds and to ensure that all legal requirements are met by Smart Finance.”