Dozen pyramid schemes under probe by regulator

By Duruthu Edirimuni Chandrasekera

More than a dozen pyramid schemes are on the Central Bank (CB) radar after the regulator got the Attorney General to file criminal cases against three such prohibited schemes recently.

As the schemes were contravening Section 83C of the Banking Act cases will be filed against ‘Fast3cycle International (P) Ltd.,” ‘Sport Chain App, Sport Chain ZS Society Sri Lanka,” and ‘Onmax DT’ which have collectively defrauded Rs. 8 billion in the country.

Additionally, Global Lifestyles Lanka, (P) Ltd, Best Life International (P) Ltd, Sonrich (P) Ltd, Success International (P) Ltd, MTF F (P) Ltd, Smart Win (P) Ltd, Lanka PTC and Click, Treta Exchange or Mithrobo, Win Win Lanka (P) Ltd, and ledgerblock.net are being probed by the regulator, highly placed sources told the Business Times.

The CB started special investigations regarding the complaints received against all these schemes.

The investigations have revealed that most of these investors are well aware of the risks involved. “It is quite shocking,” one CB official said. Easy money lure investors into these programmes, he added.

He added that these cases for prosecution takes over 15 years and the promoters are aware of this fact. As such, in some instances one promoter may have two or three such companies. “The investigations have revealed that the promoters are aware of this and they basically have two or three such multi-level marketing schemes or pyramid schemes,” the official said.

A compliance professional said that these schemes which started with gold coins promoted by GoldQuest about 15 years ago, have grown into areas that cannot be immediately identified as pyramid schemes. The GoldQuest saga saw many people invest in the company’s multi-level marketing schemes in Sri Lanka and many Asian countries through a combination of introducing members to the network and buying limited edition coins and medals, jewellery and time pieces sold through Internet networking.

Thousands invested in the pyramid-styled scheme until Business Times and other media highlighted the dangers of such schemes which led to the CB probe where exchange control violations had reportedly taken place since these items were purchased through the Internet in unauthorised deals.

“The promoters manipulate the loopholes in the system. That is why these schemes are mushrooming,” the official said. He said that in countries like Singapore, multi-level marketing schemes are also banned due to the confusion they create with the identification of pyramid schemes. “We need to implement cut and dry laws to combat this,” he said.

He said that at the rate these companies are sprouting, one sympathises with the dilemma of the regulator.

https://www.sundaytimes.lk/230402/business-times/dozen-pyramid-schemes-under-probe-by-regulator-515787.html