yramid schemes are illegal and perilous ‘get-rich-quick’ schemes that can end up costing you a lot of money. You may hear about a pyramid scheme from friends, family or neighbours. Usually, pyramid schemes recruit members at seminars, home meetings, over the phone and via email or postal mail.
In a typical pyramid scheme, you pay to join. The scheme relies on your ability to convince others to join and to part with their money as well. In order for everyone in the scheme to make profits, there needs to be a continuous streaming of new members. However, in reality, the number of people willing to join the scheme, and therefore the inflow of funds will decline swiftly.
Some pyramid scheme promoters disguise their true purpose by introducing you to overpriced products, which are of poor quality and are difficult to sell. Making money through recruitments will remain their focus. The developers at the apex of the pyramid make their earnings purely through recruitments. When the scheme collapses, relationships, friendships and even marriages are compromised over money lost in the scam.
It is against the law to promote or participate in a pyramid scheme.
Following is a brief narrative of an active pyramid scam spreading swiftly in several parts of Sri Lanka where unsuspecting hopefuls are induced to invest their life savings in exchange for lucrative gains, instead of investing them in more formal and established institutions.
A recent incident in the Kurunegala and Kandy Districts was reported about a new income source where one pays a staggering Rs. 82, 500 and obtains membership with the intention of earning an effortless monthly income of nearly Rs 1.5-2 million. However, our inquiries into this concern revealed that it was an illegal pyramid scheme that rapidly dispersed in these areas. This novel scam swindles your hard-earned money in exchange for offers of a ‘guaranteed’ way of making fast money or a high-paying job for little effort.
The location where Pyramid lectures are held in Kandy
"It is noted that bank officials, teachers, police officers, private sector employees, members of the forces and many others who hold senior positions had fallen prey to this racket"
As at now, almost 80% of the people who had joined this scheme were from the Kandy and Kurunegala Districts. And at least half of the remaining 20% had attended the brainwashing lectures conducted by the racketeers. This depicts the alarming trend and the hasty spread of the scheme in these two districts. By Bank Act 30 of 1988, laws were enacted in order to curb such rackets, but they appear to be confined only to the books. The Central Bank from time to time warns through the print and electronic media of dangers in investing in these schemes. Above all, even the police appear to be helpless in thwarting this racket.
It is noted that bank officials, teachers, police officers, private sector employees, members of the forces and many others who hold senior positions had fallen prey to this racket. Some had even resorted to borrowing money on interest so that they could invest in the scheme. Another group of people had even pawned their jewellery to invest in this sham trade. On the one hand, several State employees who had obtained a loan of Rs 200,000 on a concessionary rate of interest had paid the initial Rs 82,500 to the Pyramid. Sources said a police officer who fell prey to this racket had paid the sum from his retirement benefits. The investors however claim that they received an article to that value. There was a package by one company providing a three-night full-board hotel accommodation in a hotel in Nuwara-Eliya. There are pyramid companies which carry on the business of buying and selling of goods in order to evade any legal action against them; certain loopholes allow these tricksters to thrive on targeting the susceptible. There is one company which provides a sale of goods ranging from sugar, tea, rice, spices, milk powder and electrical appliances. Their slogan is ‘Making life’s best.’
Membership fee - A staggering Rs. 82, 500/-
A lady who fell prey to the racket
Wasantha, a resident of Madagalla in Polpithigama, is at the helm of this company based in Kurunegala. He is known in the area for his ruffian nature.
The Narammala area is operated by an individual called Ratwatte, and his initial charge for new members who join the scheme stands at a thumping Rs 82,500. New members are compelled to make this payment and obtain their membership. Later, he is tasked to bring in another two members contributing to the continuity of the cycle. However, those at the helm initially receive Rs 3,500 monthly, which is subject to increase depending on the intake of new members and assures them an earning of a whopping 1.5 to 2 million a month, if they utilize their own sources.
Anyhow, there is a procedure that needs to be followed in order to join the scheme. While a person is unable to obtain direct membership to the scheme, he or she has to join through someone who is already a member. Adhering to this process, they build up their own security. Those at the top strive to protect the ones at the ground level of the Pyramid by doling out cash under the pretext of providing dividends, vehicles and houses. One such example is the incident we observed in Narammala. Shantha was employed in a reputed company that manufactured local goods. He quitted his job and joined the Pyramid. As his first customer, one of his own nieces from Giriulla had been lured to join the scheme. She had paid the initial membership fee of Rs 82,500. She was told that she would receive an article to that value. However, what she got was a solar power unit worth a mere Rs 8,500. She had however convinced one of her friends to also join her by making a payment of Rs 82,500. She was promised that she would receive the monthly income of Rs. 3,500. Shantha had informed the two young women that they could increase their income if they bring new members and broaden the network. Although that happened back in November 2015, to date they have not received any payment. When they demanded the money back, one woman had received a cheque for Rs 4.50 in April 2016. Shantha’s niece stated that her bank account had been credited with Rs. 3,500 on three occasions, when she should have received only two payments for enrolling two members. The additional Rs. 3,500 may have been credited to her account by Shantha for unknown reasons. According to Shantha, when one enrolls two new members, he or she receives a sum of Rs 18,000 whereas the niece had received Rs 3,500 only.
"As at now, almost 80% of the people who had joined this scheme were from the Kandy and Kurunegala Districts. And at least half of the remaining 20% had attended the brainwashing lectures conducted by the racketeers"
The niece of Shantha said she remembered depositing a cheque for Rs 118, 000 to Shantha’s bank account as payment from the Pyramid Company. Thus, it is evident that these racketeers are involved in a massive fraud. With their dynamic marketing campaign, they portray a fanciful fairytale in luring the gullible. An officer of the Kurunegala PC had parted with Rs. 32, 500 to make his life best and received only 30 LED bulbs which could be valued at Rs 2,500. He had not received a cent from this company.
Many ruses are used by the racketeers to market their scheme. One who can muster several as members receives a Hybrid car, and when that individual moves around in the village in a modern car, it is surely going to draw the attention of many who would also look forward to gaining membership by making the initial investment.
Lectures are conducted every weekend in hotels and temples in and around Kurunegala on the Pyramid scheme. The racketeers arrive at these sessions in luxury cars, of which some are unregistered. It is also surprising to note motorcycle helmets in the backseats of most of these automobiles. However, our findings ascertained that the racketeers who arrive at motorcar leasing companies by motorcycles travel in them to the venues where lectures are held. On a random check of these motorcars from the RMV, it was learnt that these vehicles had been obtained on lease from leasing companies in the Negombo, Ja-Ela, Minuwangoda, Katugastota and Gampola areas.
Assurance of a whopping 1.5 to 2 million monthly income
The cheque to the value of Rs 4. 50/-
From the reports it appears that this racket is operating on a large scale in the Ambanpola, Galgamuwa, Maho and Balagalla areas in the Kurunegala District. On average, one in every household had become a victim of this racket. Meanwhile, another racket known as ’Daily Cash’ is also being operating in this area. This scheme provides instant loans amounting to Rs. 50,000 to Rs 100,000 at village-level, and the innocent housewives had been victimized. They were enticed by the so-called benefits and had fallen into these debt traps. When they cannot settle the loans they are in the grip of the money lenders who deploy these women in prostitution in order to get back the money they had advanced. This was verified when we visited the interior villages of Ambanpola, Galgamuwa and Nikaweratiya. In our pursuit to establish the veracity of this situation, we visited the Ambanpola Police Station and inquired of the OIC about this concern. He pretended ignorance of women being forced into prostitution due to their inability of repaying the loans they took on the Daily Cash scheme. He further stated that no one had reported such a crime. It was rather strange that the information we were able to collect within 2-3 hours of our visit to Ambanpola had not received the attention of the Police OIC. It goes on to prove that the police are adopting a lackadaisical attitude towards this whole affair. Moreover, in our search we came across a retired police officer who was lured by an individual called Chandana residing near the Devale in Wadakada. He had parted with Rs. 62, 500, but received only Rs 1,200 in return. He is unable to say anything about the balance Rs. 61,000.
"However, our findings ascertained that the racketeers who arrive at motorcar leasing companies by motorcycles travel in them to the venues where lectures are held. On a random check of these motorcars from the RMV, it was learnt that these vehicles had been obtained on lease from leasing companies in the Negombo, Ja-Ela, Minuwangoda, Katugastota and Gampola areas"
The location where Pyramid lectures are held in Maspotha
There are many people, both young and old, who had become victims of this Pyramid scheme. One Bimal says he visited the Kurunegala Police Station and explained his plight to the OIC who had not even entertained his complaint, but brushed him away saying the scheme was lucrative enough for him to get along with. He said the police were asleep and that they did not care about what happened in the area.
The retired police officer had also lodged a complaint with the DIG of the North Western Province. When he had visited the police office, a senior officer had told him, “I cannot get scolded by the boss by reporting this matter. Hire some underworld gang and get those who don’t pay back your money a good return.”
It is true to some extent that the police are conniving with these racketeers as confirmed by them during their lectures, when they reiterate that senior police officers were their customers in the Pyramid scheme. A comparative study of the events with the inaction of the Kurunegala and Ambanpola Police proves what these racketeers preach. In a seemingly interesting similar incident, an Indian national who conducted a business of selling valuable motorcycles for Rs 100,000 had vanished from the country after defrauding many of a large sum of money. A police officer of the Kurunegala CID was also involved in that racket. When people are deprived of police assistance at a time of this nature, there is no alternative other than to invoke divine assistance.
We were also informed about a racket in foreign currency lending through a reputed bank in Sri Lanka, where one could lend money on an hourly basis and earn a large sum of money in return. This is also a scheme that has a profitable market in Kurunegala.
In conclusion, we wish to mention that we were able to attend one of these awareness lectures of the Pyramid held in Maspotha to enroll new members. There was a large gathering and the sessions are conducted publicly. Aren’t the police empowered to raid these venues or are we to believe that the police too are involved in this racket?
You are offered a chance to join a group, scheme, programme or team where you need to recruit new members to make money. The scheme involves offering goods or services of little or doubtful value that serve only to promote the scheme, such as information sheets. There are big up-front costs. The promoter makes claims like ‘this is not a pyramid scheme’ or ‘this is totally legal.’
Protect yourself. Do not let anyone pressure you into making decisions about money or investments - always get independent financial advice. Be wary of schemes or products that claim a guaranteed income. Consider whether the rewards you have been promised are dependent on product sales. If so, are the products of real value, sold at a reasonable price and something that there is actually consumer demand for? Remember that family members and friends may try to involve you in a pyramid scheme without realizing that it is one. It is against the law not only to promote a pyramid scheme, but to also participate in one.
Have you been scammed?
If you think you have provided your account details to a scammer, contact your bank or financial institution immediately.
Spread the word to your friends and family to protect them.