Public warning: Stay away from pyramid schemes!

LEGAL experts have warned people to desist from dealing with unregistered investment schemes that operate as money pyramids because they would have little recourse as the schemes eventually collapse.

This comes as another such money pyramid scheme, Capital Base, collapsed in Mutare this week, leaving thousands of people counting their losses.

Our Mutare Bureau reported yesterday that those who lost out thronged Capital Base's offices demanding their money back after realising they could not benefit from the scheme.

Those duped are from a cross section of society among them lawyers, magistrates and prosecutors.
The directors of Capital Base, who are due to appear in court, are pushing for their case to be heard outside Manicaland, fearing they would not receive a fair trial since some of the court officials lost their savings.

Civil servants, vendors, commuter omnibus operators and some indigenous companies were also caught in the crossfire as the scheme collapsed.

Legal expert Mr Terence Hussein yesterday said those who want to invest should do so with schemes that comply with the Collective Investments Scheme Act of 1997.

The law was passed after illegal schemes or money clubs that operated as money pyramids collapsed in the 1990s, leaving prospective beneficiaries thronging police stations to report the fraud.

"Government through Parliament then reacted swiftly to this development and passed a law in 1997 to protect the people," said Mr Hussein.

He said in terms of the Act: "Before anyone could tout, advertise or set up a scheme whereby people would contribute to a common fund for purposes of getting a return for their money, they should have to have that scheme registered in terms of the Act."

"If not registered, then it is illegal and those running it should expect to face the wrath of the law."

"My advice to the public is that before joining these schemes they should first check if they are registered." Mr Hussein said police should enforce the Act and ensure that the public is protected from such fraudulent activities.

Another legal practitioner, Mrs Nyasha Blessing Muzuva, said the schemes were illegal and according to the Banking Act, a licenced bank was the only institution that could accept deposits from the public.

"The public involved (in the activities) are actually at a risk because their money is not secured and most of these people are just being duped," she said.

Mr Misheck Hogwe of Hogwe, Dzimirai and Partners said: "It may be difficult to identify any piece of legislation that criminalises such conduct, but it looks like some kind of 'investment' where the investor gets some return or interest on the investment. So, to that extent I would expect that such conduct be regulated by the monetary authority".

Police said most of the schemes were illegal, but they were still carrying out investigations.
The con-artists use Econet's Ecocash platform to get the gullible to transfer money to their account.

Econet has since distanced itself from the money pyramid schemes and has sent an SMS to its clients warning them of the illegal activities.

The Herald yesterday established that those behind the illegal money pyramids are urging their "clients" to, through SMS, ignore the Econet message and continue with their investments. It seems people are not deterred by the warnings not to join the schemes as some of the offices from where the schemes are operating were a hive of activity yesterday.