Residents are being warned to steer clear of the latest ‘get rich quick’ schemes currently being circulated on social media.
Enterprises asking people to invest small amounts for big returns are the latest trend in Antigua and Barbuda, and some other OECS countries.
But micro-finance initiatives such as pyramid schemes – some purporting to be similar to the traditional ‘box’ – are in fact a type of fraud, experts say.
A pyramid scheme is a system of making money based on recruiting an ever-increasing number of “investors”. The initial promoters recruit investors, who in turn recruit more investors, and so on. The scheme is called a “pyramid” because at each level, the number of investors increases.
Speaking on Observer radio yesterday, Derek Benjamin, a senior financial analyst at the Office of National Drug and Money Laundering Control Policy (ONDCP), said while some people claim to have received cash promised to them, others will find themselves out of pocket.
“They’re using a term which we are familiar with to give us a level of comfort, but the truth is it’s not a box; we all know how a box operates,” he explained.
“A pyramid depends upon continual recruitment. There are only so many persons in this world who would be willing to join so you will get to a point of basically depletion. There’s no one else to join.
“At the last stages, the last set of persons wind up putting in 500 dollars and getting nothing back.”
He said there is no local legislation criminalising such ventures, although they could potentially lead to lawsuits.
Still, the chance of getting one’s money back is tricky.
“In many countries in the world, pyramid schemes and Ponzi schemes are illegal, no matter what form or fashion they are in.
“In Antigua and Barbuda, I don’t think we have actually placed those schemes directly into legislation and deemed them illegal. However, they would be some level of fraud.
“You can try to take legal action but it’s hard to directly hold someone accountable. Sometimes, they are called ‘gifting groups’. If you are in a group where you are giving a person a gift, you cannot afterwards claim fraud,” he added.