Financial authorities on both sides of the Tasman have warned people not to have anything to do with pyramid schemes, with Validus identified as a key concern.
The company, which was the subject of a Kaniva News expose in September, is described by the Australian Securities and Investment Commission as displaying the classic signs of a pyramid scheme which makes exorbitant and unrealistic promises to would be investors.
ASIC said Validus did not have an Australian Financial services license.
It said investors who have dealt with Validus should report it to their bank or other financial institution.
The Australian authority’s warnings have been echoed in New Zealand by the Commerce Commission, which said while it had not opened an investigation into Validus at the moment, it would continue to assess any information regarding Validus or any other suspected pyramid schemes.
Vanessa Horne, General Manager, Fair Trading, said anybody who became associated with a pyramid scheme should stop their involvement immediately.
“Do not encourage other people to join,” she said.
Under New Zealand laws, courts can fine individuals and companies up to $600,000 per offence if they are found guilty of breaching the provisions of the Fair Trading Act relating to pyramid schemes.
When we reported on Validus in September, we said that the New Zealand Financial Markets Authority had warned people not to trade or invest with the company.
The FMA said Validus was not registered as a financial service provider as required by the Financial Service Providers (Registration and Dispute Resolution) Act 2008.
“We strongly recommend that investors do not trade or invest with entities that are not registered and/or licensed in New Zealand,” the FMA said.
As we reported at the time, the Tongan community had already been affected by scams, including pyramid schemes in which people have lost hundreds of thousands of dollars.
Validus launched its operations with an event at the Trusts arena in West Auckland on August 5.
Validus went quiet after the FMA’s warning and Kaniva’s expose of their activities, but it appears the company is back with the same Tongan leaders and palagi representatives flying into Auckland from Australia.
They have held meetings and seminars and denied on Facebook that Validus was a scam. They invited people to join them for what they described as “an opportunity.”
Some promoters shared photos of what appeared to be an e-gift card and told their followers this was what they could get if they joined. One person promoted what she described as “Validus Active Wallets.” She praised a member who had eight accounts with Validus and received $2,337.65. The promoter said the member later had 24 accounts.
Promoters pushing the Validus scheme on social media appear to have become more cautious. In contrast with what they were saying before the FMA warning, they have now said there is no need for investors to register.
After the FMA warning and our expose, some Tongan promoters attacked Kaniva News, saying our report was malicious and an attempt to stop what had been created to help the Tongan people.
Some promoters changed their tactics and instead of claiming Validus would help people make money, began saying it was “an educational platform for cryptocurrencies trading not a financial advisor or investment company as clearly mentioned by its disclaimer.”
While it appears that the FMA warning affected Validus’s operations, it seems they are now determined to make a comeback after what they regard as a lack of further action by the Authority.
Pyramid schemes
Pyramid selling schemes are illegal in New Zealand. They make money by recruiting people rather than by selling goods or services and often mislead recruits about the likely financial returns.
Because the potential reward offered depends mainly on the recruitment of new people to pay into the scheme, many participants will always be at or near the base of the pyramid and will not achieve the promised return on their ‘investment’.
Members of the public need to be wary of joining schemes where the promotional materials contain testimonials of high earnings from people who are not easily identifiable (for example, “Since I joined this scheme I have made $100,000 without really trying,” RS of Auckland).
Similarly, where schemes make claims such as “this is not a get rich quick scheme” or “this scheme is legal”, the question needs to be asked – why is such a statement necessary? They may be intended to disguise the fact that the scheme is illegal or that the promotional material is misleading.
The Financial Markets Authority and the Commerce Commission have a dedicated page on scams and pyramid schemes in Tongan here: https://www.fma.govt.nz/library/investor-resources/founga-inivesimeni-kaka/
