“It has been hard to measure the full financial impact this scheme had on the victims as it was cash based.”
Frances Saimone and Patricia Pousini pleaded guilty in the Manukau District Court to charges related to the promotion of a pyramid scheme.
Saimone, the overall leader of the scheme, was fined $33,306 for her involvement and was ordered to pay reparation of $1500, shared between two of the victims.
Pousini, who was one of the main promoters of the scheme, was fined $10,200 for her involvement.
A third individual, Feleti Halafihi, was found guilty of failing to provide information regarding the scheme and fined $9000.
The scheme
The cash-based gifting scheme promised participants a return of up to $6000, the Commission said.
The scheme was promoted as a “family and friends” group and linked to the tradition of gifting in Pasifika communities, as a way to support each other.
6K was largely promoted at in-person events and through videos and social media posts on Facebook.
Saimone had sought to legitimise it, telling participants, “we are not a pyramid scheme, first of all because a pyramid [sic] is illegal … gifting has been around since Adam and Eve”.
The Commission said participants could “gift” $750 individually or form a “syndicate” and invest their pooled resources to gift $750 if they could not afford to do so alone.
Participants who made the initial $750 investment in any given 21-day cycle (initial investor) were required to recruit two new participants in the first week.
Those two new participants were each required to invest or gift $750 to the scheme, and recruit a further two new people themselves, and so on.
A total of 14 new members, either directly or indirectly, had to be secured over 21 days, otherwise the initial investor received a smaller return.
Those who lost money in the scheme said they joined to escape poverty and saw an opportunity to secure a better future for themselves and their children.
Liava’a said pyramid schemes often thrive in close-knit communities, including churches, because of the trust which exists within these groups.
“This was an important case for us to take. One of the Commission’s enduring priorities is to protect vulnerable consumer groups in New Zealand.”
Pyramid schemes are illegal under the Fair Trading Act. The Commission said pyramid schemes are unfair to the majority of participants, with only the few initial people at the top of the pyramid likely to make money.
Such schemes usually involve making some form of upfront payment and are primarily based on recruiting new members rather than selling goods or services to make money.
Earning a financial reward is entirely based on the constant recruitment of others, which is likely to be unrealistic for participants, the Commission said.
As a result, pyramid schemes always run out of recruits and eventually collapse, with most participants ending up losing their money.
