Police arrest ponzi scheme fraudster

POLICE have arrested one Farai Chingombe, a 38-year-old founder of a pyramid scheme, for fraud.

‘Too good to be true’, and yet pyramid schemes have become an everyday reality for thousands of Zimbabweans.

People all over the world from all walks of life are fascinated by any idea or scheme of how to get rich quick or make easy money and Zimbabweans are no exception. There has been a resurgence of unethical financial investment schemes such as pyramid/ponzi schemes with social media being the main catalyst.

In a statement, ZRP national spokesperson Paul Nyathi urged members of the public against investing their hard-earned funds in shady schemes as they risked losing it to fraudsters.

Nyathi said four Hwange residents lost over US$18 000 between January and August this year after investing in shady schemes which promised unrealistically huge returns. The individual behind the scheme, identified as Chingombe, has since been arrested.

“The ZRP urges members of the public to be wary of fraudsters inviting them to invest their hard earned cash in ponzi-schemes,” said Nyathi.

“From January to August Aug 2021, four Hwange residents were duped various amounts adding to US$18 300 after being asked to invest in a crypto shares investments.”

A pyramid scheme is a scheme under which a person makes a payment to get the right to recruit others into the scheme for which he/she receives an income. The new recruits also make payments to get the right to further recruit others and in turn receive incomes for such recruitment.

Over a period of time, a hierarchy of participants resembling a pyramid is formed with the introduction of new recruits, and increased number of participants to the scheme.

A Ponzi scheme operates by paying earlier investors with funds collected from new investors. This is similar to a pyramid scheme in that both are based on using new investors’ funds to pay existing investors.

The greatest investors into these social financial communities that promise high returns on investments have been civil servants and vendors. Although many have fallen victim to large losses of cash, most people want to keep trying their luck with the money making ventures.

Most Zimbabweans have joined the online moneytrading pyramid schemes in a bid to cash in on the highprofits. These pyramid schemes promise huge interests within 24 hours to 30 days afterone makes a pledge.

Whatsapp-based pyramid schemes offer profits of up to 60 percent in twenty-four hours while others offer thirty percent return per month.

Philani Ncube, a chartered financial analyst noted that all the schemes are “dubious schemes meant to rob people of their hard-earned money. While the people who run these schemes claim that they are not pyramid schemes, an analysis of their operations shows that they rely on recruiting new members in order to pay old ones”.

The pyramid schemes eventually collapsewith people’s money and there is no way people can recover their investments.

Pyramid/ponzi schemes create a dilemma for regulatory authorities. The Central bank has always been issuing warnings to the public against get rich quick investment schemes under which existing investors are paid returns, not from genuine market investment of their funds, but from contributions made by new investors, until a point when the scheme can no longer attract new investors.

The Central bank has stated that all institutions offering financial services must be issued with licences before operations commence. This means that all entities carrying out banking activities (receiving deposits from the public) and not licensed as a banking institution are in breach of section of 5 of the Banking Act [Chapter 24:20].

In an unrelated issue, police in Harare are investigating circumstances surrounding a case of infanticide in which the body of a male foetus was found dumped in a drain wrapped in a sack at Block 1 Matapi Flats, Mbare.

Police urge anyone with information to contact any nearest Police Station.

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