Question:
I have invested in a company operating a SMS competition line. To my disgust I found out that they invested the money in a pyramid scheme. The company claimed that they were swindled. How do I go about claiming my money back?

Answer:
Unfortunately you did not provide an email address so I could not contact you for further information. There was a SMS-related pyramid scheme that was in the media recently called Six 23 Network and it robbed hundreds of Durban and Johannesburg churchgoers of millions of rands.

It is estimated that R100-million went into the pockets of the originators of the scam. The scheme was designed to help 'Christians' — how many times have we heard that? The pastors were duped by other pastors and in turn got their congregation involved.

However, after reading numerous reports on this scam, it is clear to me that these supposed 'men of God' were actually the foot soldiers of old Nick — they knew that what they were doing was wrong but the cash was just to good to give up.

Police probe

The outfit is currently under investigation by the police. Depending on the outcome, the authorities will try to get the money back to investors, but don’t hold your breath. It could take years before that happens, and even then you may not get all of it back. Even Ferraris sell for less in a liquidation sale.

Reports reveal that one Durban pastor has bought a house worth R1.3-million for cash, a BMW 330ci and VW Golf GTI for his son. His wife drives a Volvo S40.

KZN police spokesperson Superintendent Vincent Mdunge said they were aware of the schemes. "We talk about these things on public radio stations and newspapers but people still become victims and are easily tempted." If you were a victim, you must report the fraud to the commercial crimes unit of the police so your name is recorded for distribution should monies be recovered.

Whose fault is it?

Some investors are pointing fingers at the Wireless Application Service Providers' Association (Waspa). Their aim is to uphold public perception of these services and to protect against bad practices.

A code of conduct, representing the interests of its members and consumers, was established and SMS businesses have to adhere to this code (www.waspa.org.za). Some investors feel that they should have prevented Six 23 Network from operating.

However, while it is easy for a business to say they will comply and to go through the motions of looking legitimate, even regulatory bodies are powerless if the ultimate intention of the business is to defraud. In any event, investors knowingly put their money into a cash-making scheme rather than into a SMS competition, so their actions fell outside of the regulatory body.

Their financial records?

If your scam was not related to this and you invested in a legitimate registered business like a Pty Ltd, you basically bought shares in an unlisted business and therefore took the risk that the investment would work. But did you do your homework to find out where the money was going? Did they have a track record? And did they have a set of financials?

If you handed your money over to a bunch of guys with a pipe dream, then you assumed that risk. I know it sounds harsh, but the reality is that if you take risks without knowledge, you are bound to come unstuck.

Regulatory bodies are there as a guideline and an aid to consumers; some even have the authority to prosecute perpetrators, but they can't stop the consumer from making the mistake of investing in the first place. I have covered hundreds of scams over the years and there is always one guaranteed red flag — high returns for low risk.

Big promises

If you are offered a return on your investment that exceeds 15 percent per year and the offer is made by a charismatic figure that has little or no expertise in the field (what does a pastor know about SMS competitions and phone networks?) smell a rat.

Sadly more and more scams are being launched by people posing as Christians so, (and I never thought I would have to say this), be especially wary if someone approaches you for money with religious or Christian intent — the sting in their tail is toxic.