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SkyBiz scam victims still able to claim redress

New Zealand victims of SkyBiz scam still able to claim redress

New Zealand victims of an internet pyramid scam, SkyBiz.com, may still qualify to share in a US$20 million court-ordered redress fund with the original date for claims of 31 July 2004 being extended indefinitely for the foreseeable future.

Commerce Commission Director of Fair Trading Deborah Battell encourages consumers involved who have not yet made a claim to do so. Consumers who invested in SkyBiz.com should visit www.skybiz-redress.com for more information on the fund, including how to make a claim.

“It is most unusual to be compensated after being misled into such schemes,” Ms Battell said.

The redress fund followed a settlement with the Federal Trade Commission (FTC) in the United States in 2003. The FTC has put together a comprehensive programme to encourage consumers from around 30 countries to submit claims.

The SkyBiz scheme involved the sale of website programmes or ‘WebPaks’, and the Commission understands more than 13,000 of the products were sold in New Zealand. Individuals were recruited over the internet to promote the sale of these WebPaks, with vast profits promised. 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.

The FTC pursued the international SkyBiz company in the courts of Ireland and Bermuda and assisted law enforcement agencies in Canada, South Africa and the United Kingdom. The Commerce Commission also liaised closely with the FTC, and prosecuted one of the New Zealand promoters. Ms Battell reminds consumers not to get involved where there is a hint of a pyramid scheme.

“These schemes are becoming more sophisticated and it is harder for consumers to detect that they are in fact pyramid selling schemes. These are specifically prohibited by the Fair Trading Act because of the risk of people being misled about potential financial gain.”

”Consumers should be extremely wary if they are asked to sign up to schemes that involve two main aspects: promises of considerable future returns; and where signing up other people appears to be more important than the product or service being sold.

“Consumers should always consider getting professional independent advice (from an accountant, lawyer or a bank) before investing money in any scheme. They should not rely on statements from people who claim to have made money from the scheme. If it sounds too good to be true, it probably is,” Ms Battell said.

Background In June 2001, the US Federal Trade Commission (FTC) 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 FTC, the defendants urged participants to invest in more than one ‘Web Pak’ to maximize their earning potential.

The FTC 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 then the FTC had also 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 which provided US$20 million for consumer redress and barred all the defendants from participating in pyramid schemes or misrepresenting the amount of sales, income, profits or rewards.

In March 2003, Gregory Ian Dawson was fined $4,500 plus $1630 costs in the Auckland District Court having pleaded guilty to breaching the Fair Trading Act in relation to his involvement in the US-based SkyBiz scheme between 1999 and 2001.

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