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Ngā Tāngata Microfinance Calls For Tougher Penalties For Pyramid Scheme Promoters

Ngā Tāngata Microfinance (NTM) is calling for tougher penalties for those caught promoting pyramid schemes. Such business models are illegal under the Fair Trading Act 1986.

This call comes after the Commerce Commission issued a ‘stop now’ notice to a serial pyramid scheme promoter undertaking the illegal activity via social media channels in New Zealand.

The Commission is currently investigating what is known as ‘the Lion’s Share scheme’ and warning people against joining the scheme or buying into it while the investigation takes place.

"The pyramid model is a ‘theft’ model" says Dr M. Claire Dale, founder and chair of Nga Tangata Microfinance. "To email perpetrators with a "Stop" notice is to slap them with a wet bus ticket."

"The profits of pyramid schemes always flow upward, as the ‘pyramid’ image suggests, to the scheme initiators. The pyramid requires a constant inflow of investment from new members to survive. Rather than a traditional business model of expanding the business through sales, bringing benefits to every tier of the operation, a ‘pyramid’ model is based on those at the top of the pyramid siphoning off all new investment, and there is not even, necessarily, a product. Inevitably, new investors dwindle, and only those at the top of the pyramid, the original investors, win: they capture the investments of the later participants who lose everything," says Dale.

"Typically, it’s vulnerable people who are targeted by these types of scams and are lured in through sophisticated techniques on the promise of an eventual cash windfall," Ngā Tāngata Microfinance general manager Natalie Vincent says.

However, despite the law, few scammers running pyramid schemes here are prosecuted, and when they are, penalties are light.

"Current penalties and the history of light fines are a weak deterrent for greedy people looking to exploit their fellow citizens. The evidence of the proliferation of such illegal schemes shows that the soft legal response is not effective," says Vincent.

"There is no place for pyramid schemes in New Zealand. The soft approach taken by the Commerce Commission does not protect our most vulnerable people who are preyed on by these schemes which promise to lift people out of strife but instead do the opposite."

Offences under section 24 of the Fair Trading Act 1986 can attract a fine of up to $600,000, yet despite the evidence of culpability, recent investigations and subsequent prosecutions have resulted in warnings or small fines only.

"In order to deter promoters of illegal pyramid schemes from robbing our most vulnerable communities of their hard earned, and often inadequate income, we urge the Commerce Commission to immediately pursue the highest possible penalties for this type of gross offending," says Vincent.

Historic judgements

- In 2000, Tauranga-based Maximus Intermediaries swindled $3.1 million out of 12,000 people. The High Court ordered the operators to pay back the money, which was the heaviest judgement that had ever been imposed on pyramid scheme operators. It is thought it was unlikely that Maximus victims would ever get their money back.

- In 2019, the Commerce Commission issued four warning letters to the operators of the Women’s Gifting Circle. No further action was taken.

- In 2014, three men were fined a total of $60,000 for promoting the TVI pyramid scheme. The Auckland District Court appointed payments of $65 a week on each offender.


Ngā Tāngata Microfinance is a not-for-profit organisation providing fee-free and interest-free loans to New Zealanders experiencing tough circumstances, alongside wrap-around financial literacy support.

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