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Ponzi Scams on the Internet

21 October 2005

News Release

Ponzi Scams on the Internet

The Securities Commission is warning New Zealanders against the overwhelming number of investment scams being hawked on the internet as High Yield Investment Programmes (HYIP’s).

Pureinvestor and People in Profit Systems (PIPS) is one such scheme identified by the Commission and other regulators around the world. One of its companies, PIC Trust is incorporated in New Zealand but appears to have no presence here.

PIPS is being investigated by the Central Bank of Malaysia, where its founders are based. Also, it has been subject to scrutiny by regulators in Australia, United States of America and the United Kingdom.

“These are usually ponzi scams in which money from new investors is used to pay returns to earlier investors to give the illusion that the scheme is successful. When the supply of new investors dries up the scheme collapses and the fraudsters have already spent the money or banked it offshore”, says Commission Chairman Jane Diplock.

The websites are sophisticated, visually impressive, and interactive. They provide chat forums for virtual communities of investors who swap tips and rate schemes. Inevitably, hot tips give way to alarm as the returns dry up.

Anyone tempted to invest in these online HYIP’s should consider these points.

- Are the promised returns credible or even possible? One recent scheme promises “20% every 15 minutes”. Others appear less outrageous but are nevertheless impossible to sustain.

- Do you understand how the scheme works? There is often very little information, or explanations are vague and confusing.

- Who do you contact if returns stop being paid? Many fraudsters use a false name and address, so you won’t be able to find them and nor will the regulators.

- Does the scheme use electronic currency? If so, how will you know whether the balance in your e-account represents real money?

- Does the scheme require you to send money overseas? When you do, New Zealand authorities can’t help you get it back.

New Zealand investors in PIPS should contact the Commission in the first instance.


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