1.What are MLM/Ponzi schemes?

• MLM (Multi-Level Marketing): A business model where participants earn money by selling products and recruiting others to join their sales network. While legitimate MLMs focus on product sales, some operate as illegal pyramid schemes, where income depends primarily on recruitment rather than sales.
  
• Ponzi Schemes: Fraudulent investment operations that pay returns to earlier investors using funds from newer investors, rather than profits from legitimate business activities. These schemes collapse when new investments dry up.

• A pyramid scheme is a fraudulent investment that offers returns solely through the recruitment of other participants into the programme. The following are some of the red flags of a pyramid scheme: 
  • Emphasis on recruiting new participants to join the programme. The programme requires individuals to make a financial contribution to start and requires recruitment of new members making the same contribution to ensure high payouts. 
  • There is a promise of a high return or payout on the initial contribution over a short period of time. This high return is only possible through the recruitment of new participants. 
  • No genuine product or service is offered; and 

• A complex structure that ensures that early contributors are paid first using the initial financial contributions of newer members. Members are encouraged to recruit new members to move to a different “level” or part of a circle. When there are fewer or no new members, the scheme collapses and losses are incurred for individuals who joined the pyramid scheme. 
  
  
• How do people protect themselves from such schemes?
  
  
  • Be Skeptical: Avoid investments promising high returns with little risk.Research: Contact the Regulatory Authorities (Financial Services Authority (FSA)/Financial Intelligence Unit (FIU) to inquire about legitimacy and licensing. Avoid engaging in business with unlicensed entities which are not subject to oversight from a competent authority. Also, use other online search tools like Google and FINRA’s BrokerCheck and Securities Exchange Commission’s (SEC) EDGAR database to verify legitimacy.Ask Questions: Ensure you understand the investment and its strategy.Avoid Unsolicited Offers: Be cautious of cold calls or unsolicited pitches.
  • Report Suspicious Activity: If you suspect fraud, report it to authorities like the FSA and the FIU.
    
• What are the laws surrounding such schemes?
  • In St. Vincent and the Grenadines, the Financial Services Authority (FSA) Act 2011 along with the Mutual Funds Act require persons engaging in such business to be registered/licensed. These enactments prescribe sanctions for non-compliance.
  • The Consumer Protection Act 2020 prohibits the promotion, operation or participation in pyramid schemes and will carry a penalty on summary conviction, of a fine of ten thousand dollars and imprisonment for two years for the offence.
    
• What recourse do people have who have been caught up in such schemes?
  • Stop Investing: Cease further involvement immediately.
  • Document Evidence: Gather all related documentation.
  • Report to Authorities: Notify regulatory bodies like the FSA and FIU.
  • Seek Legal Counsel: Consult a lawyer experienced in investment fraud.

• Restitution: Victims may pursue civil litigation or file claims in criminal forfeiture proceedings to recover losses.

The general public is strongly advised not to engage in business with unlicensed/unregistered financial services providers. Pyramid schemes should be avoided as they are not a legitimate way of investing. The Regulatory Authorities are advising the public to remain vigilant and report any fraudulent activity. 

If you are aware of or have been the victim of a fraudulent investment scheme in Saint Vincent and the Grenadines, we encourage you to contact the Royal St. Vincent and the Grenadines Police Force at cid@rsvgpf.vc, the Financial Services Authority at

‘info@svgfsa.com’ or the Financial Intelligence Unit via email at ‘admin@svgfiu.com‘. Law enforcement authorities are actively investigating this matter, in conjunction with their regional counterparts, and will keep the victims abreast of any developments.