Panellists discuss Ponzi and pyramid schemes during the Financial Services Commission’s Money Matters BVI virtual panel discussion on Sunday. (Photo: FACEBOOK)

The economic hardships created by the Covid-19 crisis have prompted some desperate residents to put their money in illegal Ponzi and pyramid schemes that can promise as much as a 20 percent return on investment, according to a panel of experts who spoke during a virtual panel hosted Sunday by the Financial Services Commission’s Money Matters BVI programme.

However, a “pyramid scheme or a Ponzi scheme isn’t an investment,” and participants often lose all of their money, warned FSC Director of Enforcement Brodrick Penn.

In such schemes, he said, there is “an emphasis on recruiting other people to recruit other people to join to try to make these things as sustainable as possible, as opposed to with an investment, you put your money in and you let the investment work for you,” he said.

Ponzi and pyramid schemes, he added, are often promoted by acquaintances, but they don’t offer a “genuine product or service.”

Instead, he explained, they rely on a model that recruits members by promising them payments for enrolling others into the scheme. However, when the pyramid collapses, as most inevitably do, those on the bottom could be left cheated out of thousands of dollars, with little recourse to help from law enforcement, according to Detective Sergeant Elvis Richards of the Royal VI Police Force.

“It’s always difficult to investigate these types of matters,” Mr. Richards said. “If they end up losing, sometimes people do not want to report because of shame.”

In the VI

At times, he added, hundreds of people in the VI are involved in such schemes, and unless police locate the ringleaders it is impossible to prosecute all of them.

“People are trying to make quick monies, and I’ve seen an upsurge in this investment … where people say, ‘I am working, and I have my last $100 or $400.

I’m going to participate in the scheme to get a higher yield.’” Mr. Penn added, “The very nature of the pyramid structure requires you to bring in people and then those two people to bring in two people. So very often, people come in for the opportunity for the return, etcetera. And frankly they are victims, but then they unwittingly become perpetrators.”

Elise Donovan, CEO of BVI Finance, said it isn’t just economic pressures that may make VI residents liable to fall for risky schemes.

“I think we are very much a faith-based community and we believe in receiving our blessings, and blessings, by definition, are receiving gifts,” she said. “And so I think they sometimes prey on people who are susceptible to the concept of God multiplying our blessings.

[This] does not necessarily mean that we should not evaluate risks.”

Dwayne Thomas, deputy director of financial investigation at the FSC, said that although the agency routinely warns the community about illegal schemes, it sometimes struggles to dissuade residents who feel pressure to invest from trusted family, friends and fellow churchgoers.

“When you look at schemes that have been perpetrated in the US and other countries, persons who perpetrate these schemes don’t know [their victims],” Mr. Thomas said. “The difficulty I’m having in the BVI is when I start to ask my personal friends to come in. [Greed] takes over to the point where I really don’t care who I asked to come into the scheme once I get my money out of it.”

Multi-level marketing

He added that multi-level marketing schemes such as Amway, which also exist in the territory, operate much like Ponzi schemes even though they sell products.

“It’s a condition-based multi-level marketing mechanism that you get commission based on your sales and commission for recruitments,” he said. Fighting illegal schemes, according to the experts, can involve education campaigns on the part of the government, as well as the help of influential people in the community who previously may have been reluctant to speak out.

“Whether they be in the churches or whether they be in the community; whether they be in the clubs or wherever, they influence people in terms of somebody’s going to listen to you,” Ms. Donovan said.

She added that she doesn’t believe that most people who perpetrate the schemes are inherently greedy.

“Based on what I’ve heard, people feel that, ‘If I have a blessing, let me share it with my loved ones,’” she said.

She urged potential “investors” to think twice about who could suffer in the long run.

“You’re putting your family and putting your friends at risk,” she added. “So if you thought of disintegration of your family’s financial situation, [think of ] the disintegration of your friend’s financial situation.”


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