Commerce Commission Investigating Potential Pyramid Scheme Operating Throughout New Zealand, Issues Warning To Public

The Commerce Commission is investigating a potential pyramid scheme operating in various communities throughout New Zealand and warning consumers to be wary of money-making opportunities that are “too good to be true”.

The Hawke’s Bay-based scheme involves several social media groups and promotes a business opportunity involving health supplements platform LiveGood. Marketing occurs through Facebook, Instragram and TikTok and, when joined, participants are added to groups including Freedom Lifestyle Revolution, The Official Diamond Rush, and other New Zealand-based Facebook groups linked to this scheme.

Commission Deputy Chair Anne Callinan says the scheme, which promotes an ‘affiliate compensation plan’, carries the hallmarks of a pyramid scheme – scams designed so individuals primarily make money through the continuous recruitment of others, rather than through the sale of genuine products or services.

“While the investigation is in its early stages, we believe we have a duty to publicise this potentially illegal scheme so Kiwis are aware of the risk of becoming involved,” Ms Callinan says.

“It is important that any potential harm is limited.”

The Commission notes the scheme has relatively low-cost joining fees, meaning many participants have multiple memberships.

We would encourage anyone who has come across the scheme to exercise caution and seek advice before investing into it.

"It is crucial people do their due diligence before becoming involved in schemes of this nature – if something seems too good to be true, there’s a good chance it is,” Ms Callinan says.

The Commission asks people with further information or concerns about this scheme to contact us, or report a concern.

In addition, the Commission has also received concerns about a separate, Wellington-based scheme. While our interim view is this is not a pyramid scheme, the Commission is re-iterating a warning issued by the Financial Markets Authority in relation to it.

The scheme originates internationally and was initially known as TXEX, but has several other names, including: UICEX, CR GLOBAL, Signal Trader, BG Wealth Sharing Group and DSJ EX. A full list of known names has been published by the Financial Markets Authority.

The scheme encourages people to invest in cryptocurrency investment trading platforms, and they are informed they will receive a significant return on investment.

“Schemes present themselves in different forms, with different investment requirements and methods of promotion. These schemes entice people by promising high returns quickly and an opportunity to create ongoing wealth, which is typical of these scams,” Ms Callinan says.

The Commission will provide updates on the investigation into the potential Hawke’s Bay-based pyramid scheme in due course and is unable to provide further comment at this time.

Background:

What is a pyramid scheme?

A pyramid scheme can take many forms, but has the following essential elements:

It offers a financial return based on the payments made by new recruits

The return is dependent primarily on the continued recruitment of new members, not sales of a product or service

The primary motivation of many participants is the opportunity to make money by recruiting others.

Further information is available here: https://www.comcom.govt.nz/consumers/dealing-with-typical-situations/pyramid-schemes/

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