18 June 2003

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Pyramid schemes to be outlawed in Britain

Enticing as they may sound with promises of bumper monetary returns for a ‘small’ contribution, pyramid gift schemes are a vicious circle that have conned many a Maltese individual into believing that they are a short cut to prosperity.
These ‘gifting’ schemes are not illegal and monetary transactions are normally processed through conventional bank channels. However, in at least one country, the UK, confidence tricksters pioneering these schemes will soon have to face the music as government proposes legislation making pyramid ‘gifting’ schemes illegal.
Under the proposed law con men who set up pyramid schemes could be sentenced to up to six months in jail or be heavily fined.
British trade officials estimate that about GBP3 billion changed hands through pyramid selling schemes in the past two years and hundreds of thousands have fallen victim.
These schemes invite individuals to ‘invest’ a stipulated minimum sum, with the promise of a hefty pay out if they could persuade more people to join the scheme.
The original person will then move up the pyramid according to the number of new people that enter the scheme with the final aim being that of reaching the top pay out sum. In the overwhelming majority of cases the money never materialises.
The scheme collapses when, inevitably, the number of new ‘investors’ dries up, leaving thousands at the lower rung of the ladder out of pocket.
Pyramid schemes were a destabilising factor in the collapse of the fledgling post-Communist Albanian government after thousands of impoverished people were duped into investing in such schemes with the promise of wealth. When the schemes failed thousands lost their life savings bringing havoc to Europe’s poorest country.

Copyright © Newsworks Ltd. Malta.
Editor: Saviour Balzan
The Business Times, Newsworks Ltd, 2 Cali House, Vjal ir-Rihan, San Gwann SGN 02, Malta
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