Losses due to pyramid schemes rise in Australia

Maria Nikolova

Australians reported having lost $58,800 as a result of the activities of pyramid schemes in the week to January 21, 2018.

The number of reports about pyramid schemes surged 200% in the week from January 15 to January 21, 2018, compared to the preceding week, the latest data from Scamwatch, the body run by the Australian Competition and Consumer Commission (ACCC), shows.

Australians report having lost $58,800 in the week to January 21, 2018, according to the data.

Source: Scamwatch.

To put the numbers in context, let’s note that losses due to pyramid schemes amounted to $29,905 in December 2017. The amount lost due to such fraud is nearly two times bigger in the week to January 21, 2018.

Usually, people pay to join a pyramid scheme. The scheme relies on members convincing other people to join up and to part with their money as well. In order for everyone in the scheme to make a profit there needs to be an endless supply of new members. The promoters at the top of the pyramid make their money by having people join the scheme. They pocket the fees and other payments made by those who join under them. When the number of new members dries up, the pyramid falls apart.

Scamwatch warns the public that it is against the law to promote or participate in a pyramid scheme. The organization advises investors not to fall for risky ‘get-rich-quick’ schemes and not to let anyone pressure them into making decisions about money or investments.

In 2017, Australians reported losses of more than $31.15 million due to investment scams. The losses are up 32% from the $23.63 million reported lost by Australians hit by investment fraud in 2016. Overall, during 2017, Australians submitted 1,978 reports concerning investment fraud. November was a record-setting month with respect to amount lost as a result of such fraudulent activities – $4,321,946, followed by August ($3.95 million).

Scamwatch has recently alerted the public of an increasing number of Bitcoin-related scams. The organization received a total of 77 reports about Bitcoin-related scams in the week to October 29, 2017, up 126% from the preceding week. A typical example of such a scam is an SMS saying that a person has a certain number of Bitcoins in his/her account and then asking the potential victim to check (log into) the account.

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