A joint law enforcement operation has closed down on a sophisticated pyramid scheme that robbed over 230,000 unsuspecting investors of millions of Rands amid the COVID-19 lockdown.
The National Prosecuting Authority (NPA), Financial Intelligence Centre (FIC) and the National Consumer Commission (NCC) gave details on the “Up Money” pyramid scheme at a press briefing on Tuesday, August 4.
The scheme was probed by the NCC after an East London resident laid a complaint.
Acting NCC Commissioner Thezi Mabuza said a subsequent investigation revealed that Up Money (Pty) Ltd (Up Money) contravened the Consumer Protection Act by promoting and causing members of the public to join and participate in a pyramid scheme.
“Following a request from the NCC and the analysis by the FIC, Up Money’s bank statements, the agencies established that directors of the entity, between 4 May and 2 July 2020, made 221 976 deposits, of R180 each, into an FNB business account,” Mabuza said.
The deposits, she said, totalled R42 million.
“Over R40 million was deposited through points of sale and purchases at various retail stores. An amount of R3.5 million was transferred from the FNB account into another account held by another company called UniitCo,” Mabuza said.
The two companies, she said, are linked through directorship and business address. An Up Money director is also the sole director of UniitCo.
Between 24 May and 23 June, UniitCo paid for the purchase of three luxury vehicles, namely an Audi TT, a Hummer H3 and a Jaguar XKR Coupe.
The vehicles, Mabuza said, were not registered as company assets, but registered in the name of a director.
In the wake of this, the AFU sought and was granted a preservation order by the Johannesburg High Court to freeze bank accounts worth more than R18 million and a number of luxury vehicles.
Criminal Prosecutions looming
Deputy National Director of Public Prosecutions and head of the Asset Forfeiture Unit (AFU) of the NPA, Advocate Ouma Rabaji-Rasethaba, told reporters that criminal prosecutions will get underway.
“The criminal charges may include fraud and contraventions of various sections of the Prevention of Organised Crime Act (POCA). The sections might be racketeering, money laundering, fraud, theft, assisting another to benefit from proceeds of unlawful activities and acquisition, possession or use of proceeds of unlawful activities, as well as assisting another to benefit from proceeds of unlawful activities,” said the Advocate.
The application by the AFU is part of the interventions by the NCC and the FIC to salvage more than 228 900 investors, who were defrauded in the multimillion Rand scheme.
Use of social media and recruitment
Rabaji-Rasethaba said the pyramid scheme, which mainly used social media to recruit members, was neither registered with the Reserve Bank, a registered stokvel, nor a financial services provider.
“New participants were required to pay a once-off joining fee of R180. This qualified them for a meat pack. The new members were then required to recruit five other new participants. This process was termed level one,” she said.
The original investor would then help the five he or she recruited to sign up their five new members each. This would then ensure that the original recruiter moved to level two, whose benefits were a meat pack, groceries and R500.
When those on level one were moved to level two by their recruits, the original organiser was pushed to level three.
The new participants made up the base of the pyramid and provided funding for participants who were recruited earlier.
Those who joined earlier were pushed to the top by the new recruits.