Many network marketing companies operating Ponzi schemes – SEC

The Security and Exchange Commission (SEC) Ghana has cautioned the public against activities of some network marketing companies in the country.

Deputy-Director General of SEC, Mr Paul Ababio told TV3 in an interview that most of these companies are operating fraudulent schemes.

His comments come in the wake of the revelation by the Economic and Organized Crime Office (EOCO) that Chinese Companies Chy Century Heng Yue Group Limited and Sairuir-Commerce Ghana Limited are operating Ponzi schemes.

EOCO had said in a statement on Tuesday, February 2 that “The Company which is registered as online trading and marketing services also solicits and takes/receives funds through investment packages from its customers with a promise of guaranteed returns/margins of various percentages over a fixed short period of time.”

It added “The Company operates a Ponzi/Pyramid scheme and the general public is cautioned to desist from investing and patronizing Chy Mall.”

“Therefore, anyone who transacts business with them does so at “their own risk.”

Further cautioning the public against activities of companies like these, Mr Ababio said “Network marketing has often been affiliated to pyramid schemes.

“It is a pyramid, so the guys are at the top then everybody below it is making less and less. And the last people inside it often times, put in quite a lot and don’t get much out of it.”

“It is like, you are getting at one level and when you recommend other people you get what they call day out. In a sense, those who are recommending other people are also expected to be selling some goods but the more people they recommend the more money they make so they may not actually be selling the goods themselves.”

“So, there is a combination and often times you might find that they operate with similar principles because the underlining item is what are you selling.””