Pyramid investment scam warning
Have you been approached by a friend promising to turn a £3,000 investment into £24,000?
If so, the chances are you are being invited into a pyramid investment scheme - and you'll lose all your cash.
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Hearts scheme
The spectres of the "Hearts" and "Women Empowering Women" schemes have re-surfaced in Gloucestershire.
Under the scheme people are asked to invest an amount of money and then rope in a certain number of people to also invest the same amount.
They in turn each have to recruit the same number of investors and so on.
Gloucestershire County Council is today warning people that pyramid investment schemes are illegal.
Under law introduced in May 2008 anyone establishing, operating or promoting such a scheme is acting illegally.
The schemes became an illegal banned practice with the introduction of the Consumer Protection from Unfair Trading Regulations 2008.
Eddie Coventry, Head of Trading Standards, commented: “We are grateful for the public making us aware of the existence of these schemes.
"Pyramid investment schemes work by recruiting in small communities and work place contacts through friends, colleagues and neighbours.
"But the schemes are doomed to failure as the supply of new recruits is quickly exhausted.
"The people at the bottom of the pyramid face a high risk of losing their investment and not getting any return.
"For this reason these schemes are now illegal.
"We would urge anyone invited to take part in such a scheme, not to part with their money and we would welcome information from members of the public about where the schemes are operating.”
If you have been approached by someone offering a pyramid investment opportunity, email web@glosmedia.co.uk and we will investigate.
You can also share your experiences using the story comment facility below.
NOTES:
· The Consumer Protection from Unfair Trading Regulations 2008 lists 31 banned practices, which includes establishing operating or promoting a pyramid investment scheme.
· Previous examples of Pyramid Investment Schemes include schemes going by the name of Hearts and Women Empowering Women. It was reported that many people lost money through the operation of such schemes. Such schemes were not unlawful at the time but became illegal through the above new regulations.
· Pyramid Investment schemes need an unlimited supply of new participants to make money. Since the supply will always be finite, the pyramid must collapse eventually and most participants will lose their money.
· Example - If eight people each invest £1,000 each in a scheme and then progress through the levels of the pyramid, they will each expect to receive £8,000 when they reach the top.
· Each participant needs another 8 investors, bringing the number of people needed to 64, in the scheme to get their money back and make a return. The next level needs 512 people and the next 4096 for the existing members to realise a return. Eventually, the supply of potential investors must be exhausted, leaving the majority of people in the scheme receiving nothing in return for their money.
· People involved in the running or promotion of such schemes can face penalties of up to a £5000 fine or 2 years imprisonment.
16 Comments
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by Lynx, Wales Uk
Sunday, February 08 2009, 12:50AM
“This scheme is operation in South Wales. It is very simple. For a business to be legal there HAS TO BE A PRODUCT or SERVICE. The value of that product or service MUST not increase as it gets sold. and it is ILLEGAL to get paid for recruiting people. However, every business in the world that works is a pyramid. dont confust ordinary business or multi level/network with illegal schemes and scams. There is normally one CEO, several directors, managers and staff...Duh ! pyramid.... lets get real... Pyramid businesses OK. or we wouldnt have any businesses. Pyramid Scams and schemes and ponzi schemes are totally illegal and will get shut down. Hope that helps. P.”
by Not a muppet like chris below!, Cheltenham
Monday, December 01 2008, 10:11PM
“Well Chris I guess you sum up one of the two types of people who are involved in pyramid schemes.
1: very gullible and will probably lose their money.
2: very greedy and selfish and probably one of the con men at the top!
I'm guessing your a number 2.”
by Chris, Unknown
Thursday, November 27 2008, 7:31PM
“I agree with Chris's comments "The reason the government wants them banned is because they dont make a penny off it" & that the public should be allowed to make their own decition. We are all adults here!
I am currently on one of these gaming charts and have already had three payouts! Who cares what anyone else thinks. Selfish? Yeah maybe but you only live once!”
by russ, gwent
Wednesday, November 19 2008, 1:07PM
“went to meeting in caldicot,and they were continually on about and pushing for new introductions. doesnt take a brain surgeon to work out, its drying up, and they are running out of people”
by Eric the Egyptian, Egypt
Monday, November 17 2008, 4:20PM
“I think this says it all!!!! (from consumer direct website)
Why Chain gifting/Pyramid Schemes cannot work for most participants
If eight people invest £3,000 each in a scheme and then progress through the levels of the pyramid, they will each expect to receive £24,000 when they reach the final top. For each of those eight people to receive that amount, it will be necessary for 64 people to have each invested £3000.
Each of those 64 investors will be expecting to collect their £24,000, but that would mean that 512 people would have to have invested. Subsequent investors would need 4,096 participants, then 32,768 participants, then 262,144 participants and so on. In simple terms, each participant needs another eight investors in the scheme to get their money back and make a return.
The supply of potential investors will dry up, leaving the majority of people in the scheme having paid out a large sum and receiving nothing in return.”
by mitchg, Bristol
Monday, November 17 2008, 4:20PM
“This has been doing the rounds in Bristol especialy the Hanham area for at least 18months, i know of quite a few who have "Invested" and i know some who have been paid out. One thing in common with this is they are all based in and around pubs and their customers. I have been and my friends have been invited several times with the stories oh yes it works we got our money my money is coming etc. But this needs you to resale it to friends and family i wonder how many friends and family members i would have left if they dint manage to resale it and lost thier £3000 so i alays say "no thanx" i rather have friends and family then to keep loking over my shoulder sheepishly. I want to sleep at night.
I have heard so many times "so and so walked in with their cash put it on the table".. and guess what the greed kicks in and so do the gullible”
by Jim, Gloucester
Monday, November 17 2008, 4:10PM
“Pyramid scheme's are a waste of money. My triangle scheme is much better value for money. Simply send me £3k of your money and I'll give you hand full of magic beans.”
by Not so Gullible, Cheltenham
Monday, November 17 2008, 3:51PM
“Sounds like Chris is doing a bit of back tracking to me. One minute he is saying thanks for giving it the publicity, and saying have a go. The next he is saying he wouldn't part with his money, Umm!!!!!!!”
by jon bonjovi, cheltenham
Monday, November 17 2008, 3:10PM
“Anyone who thinks they will get their money back is sadly lacking in grey matter! the only people who win are the ones at the top. Just do the maths, to get your money you need 14 people and each of them needs 14 people each and so on.. duh!!”
by Alfredo, Cheltenham
Monday, November 17 2008, 3:03PM
“I have some pebbles that protect against tiger attacks. Since I bought them three years ago I've not had one tiger try to attack me. I only need one, so I have 9 that i can sell on. Yours for £500 ...”