WhatsApp gifting: Expert weighs in on how to get help
Colin Stevens from the Financial Sector Conduct Authority (FSCA) gives advice on how to identify a pyramid scheme and what to do if you have been scammed.
For the past few weeks, social media has been flooded with WhatsApp gifting promotions and complaints.
While some are claiming to have made thousands of Rands from it, many more are crying foul.
The joining fee ranges from R100 to R1,000 and people are promised a 500% profit. For instance, those who join with R100 are promised to get out R600.
Colin Stevens from FSCA says many people are joining because of the COVID-19 crisis that has led to some losing their jobs and others having their salaries reduced.
"The WhatsApp phenomenon is spreading like a wildfire on social media and has special traction due to the financial uncertainty caused by COVID-19. These are offered as helping each other, gifting, stokvels, investment, but they all have at least two things in common: recruitment of members and promise of quick and easy money," he says.
Even though some might call the WhatsApp gifting a stokvel or investment group, Stevens says it doesn't meet the requirement to be classified as such.
READ: A warning to those part of "Whatsapp Stokvel"
"Sometimes these are also called stokvels, but one must pose the question, do stokvels pressurise you to become a member? Stokvel members stay for the long run and don’t jump from group to group. Stokvels also have registered associations which the law requires.
"Therefore, before joining any so-called investment group, consumers must ask themselves: Am I paying money to then recruit others so I can be paid? If yes, then the scheme is probably a pyramid; also, is the person asking me to 'invest' registered? If not, then we are probably dealing with a scam; Are the returns high and quick, then it probably is a scam," he adds.
Stevens says "an investment product can only be offered to the public by an advisor licensed and registered by the FSCA to sell that product."
How to identify a pyramid scheme
The question of whether WhatsApp gifting is a scam has been an on-going debate. Those who have been paid claim it is not a scam, because they have received what they were promised.
But, is payout the only identification of a scam?
Stevens says there are several things that indicate whether something is a scam or not.
"A pyramid scheme is a system into which people buy in exchange for a pay-out at a later stage when new members are introduced into the system. One normally pays a 'joining' or 'admin' fee to become a member of the scheme. The people who recruit the new members are paid out from the new members’ joining and admin fees," says Stevens.
"The main identifier is the fact that they all use [the] recruitment of members and the promise of quick and easy money.
"The new money coming into the scheme is not used to derive profits but is merely used in order to pay out the existing members of the scheme: repayments are paid from new capital and not from profits generated," says Stevens.
He warns that "as soon as people stop joining the scheme it will start to fail and eventually collapse."
READ: Is the new ‘WhatsApp Stokvel Group’ a scam?
How to receive help when you have been scammed
"Pyramid schemes, according to [the] Consumer Protection Act 68 of 2008 43(2), are illegal. Victims of these scams can lay charges of theft, fraud, reckless trading, forgery and uttering, tax evasion, contravention of the Gambling Act, contravention of the Companies Act, and contravention of the Banking Act against the founders or anyone who should have recognised that it was a pyramid scheme," says Stevens.
However, he warns that "the chances of getting one’s money back is however almost nil and proving fraud in court is also difficult and cumbersome."
Stevens concludes that "the best advice is to rather not fall for something that is in any case too good to be true. Prevention is better than cure."
READ: Beware what you share on WhatsApp
Pyramid schemes can be reported to:
- The SARB, through the Prudential Authority(PA), if there is an illegal deposit-taking with regard to the Banks Act. So the PA must investigate if pyramid schemes have an element of illegal deposit-taking.
- The National Consumer Commission.
- Financial Sector Conduct Authority
Contact Centre: 0800 20 (FSCA)3722
Email: [email protected] ; [email protected]
Website: https://www.fscamymoney.co.za/