NZ victims of SkyBiz scam to share in US$20m

New Zealand victims of SkyBiz scam to share in US$20 million redress fund

New Zealand victims of an internet pyramid scam, SkyBiz.com, may qualify to share in a US$20 million court-ordered redress fund, following a settlement with the Federal Trade Commission in the United States.

The Federal Trade Commission pursued the international SkyBiz company in the courts of Ireland and Bermuda and assisted law enforcement agencies in Canada, Australia, South Africa and the United Kingdom.

The New Zealand Commerce Commission has also liaised closely with the Federal Trade Commission and in March last year took action against one of the New Zealand promoters of the US-based scheme, Gregory Ian Dawson. Dawson was convicted of breaching the Fair Trading Act and fined, but was not in a position to pay compensation.

The SkyBiz scheme involved the sale of website programmes or 'WebPaks'. Individuals were recruited over the internet to promote the purchase of these WebPaks, with the lure of vast profits.

Commerce Commission Director of Fair Trading Deborah Battell said that new recruits to the scheme were required to sell WebPaks to at least two others in order to qualify to receive compensation. However, further down line sales of at least nine WebPaks were required before the recruit was eligible to receive any of this compensation.

Ms Battell said that over 13,000 WebPaks had been sold in New Zealand.

Consumers who invested in SkyBiz.com will be notified by email from the court-appointed fund administrator that they may qualify to share in the redress fund. For more information on the fund, including how to make a claim, visit www.skybiz-redress.com . Claims will be accepted until 31 July 2004.

Background

In June 2001, the US Federal Trade Commission filed a suit alleging that the defendants promoted a work-at-home business opportunity making claims of quick riches. In sales presentations, seminars, teleconferences, website presentations, and other marketing material, the defendants touted the opportunity to earn thousands of dollars a week by recruiting new 'Associates' into the program.

The cost to join the SkyBiz Program was as much as US$125, supposedly used to buy an 'e-Commerce Web Pak' but in reality it was to purchase the right to receive compensation for recruiting additional participants. According to the Federal Trade Commission, the defendants urged participants to invest in more than one 'Web Pak' to maximize their earning potential.

The Federal Trade Commission alleged that the claims that consumers who invested in SkyBiz would make substantial income were false; that failure to disclose that most people in pyramid schemes lose money was deceptive; that the defendants provided the means and instrumentalities for others to deceive consumers by providing speakers and promotional materials that made the false and misleading claims; and that SkyBiz was actually an illegal pyramid scheme.

The case was scheduled to go to trial 6 January 2003. By that date, the Federal Trade Commission also had pursued the case in the courts of Ireland and Bermuda, assisted law enforcement agencies in Canada, Australia, South Africa, New Zealand, and the United Kingdom, and partnered with consumer agencies in Hawaii, Michigan, North Carolina, Oklahoma, Wisconsin, and Wyoming.

The defendants agreed to a settlement.

The settlement provided US$20 million for consumer redress and bars all the defendants from participating in pyramid schemes or misrepresenting the amount of sales, income, profits or rewards.

For more information on the New Zealand Commerce Commission's case against Gregory Ian Dawson, visit http://www.comcom.govt.nz/publications/display_mr.cfm?mr_id=1145 (Promoter fined $4,500 for involvement in SkyBiz multi-level selling scheme, 31 March 2003)

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