Cape Town - The National Credit Commission (NCC) is investigating a cryptocurrency scam that has left thousands of investors financially bankrupt and devastated.
Planet Mining Pool (PMP), which described itself as a leading global one-stop blockchain cloud mining platform, closed down without warning after less than a year in operation.
Investors said they lost "substantial amounts" of money in the scheme which promised almost double returns in 20 days for an investment as little as R375.
However, investors said they were encouraged to reinvest the returns by buying "bigger machines for bigger returns".
The NCC said it was also aware of and looking into other get-rich-quick schemes, including:
* UpMoney, Mufhuwa, Obelisk, Relish, Genesis Mining and TKL (live work scheme).
“The commission would like to once again warn consumers that these schemes are prohibited under the Consumer Protection Act,," said Spokesperson Phetho Ntaba.
“The act prohibits anyone from joining, recruiting, participating in a pyramid, multiplication, or chain letter schemes.
“Once a person participates, that person has contravened the act and there is no money to be recovered," said Ntaba.
It was "unfortunate that consumers reported these scams only when they realised that there were no forthcoming benefits, whereas the signs were always there".
“Once it seems too good to be true, it probably is too good to be true. Where authorities recoup any money, that money becomes proceeds of crime," she added.
Research conducted by two academics and published this week also shed more light on the scams.
"During times of economic difficulty and uncertainty fraudsters lure unsuspecting consumers into get-rich-quick schemes, offering an avenue to make easy money by investing in a lucrative financial opportunity," said Assistant Professor in Finance and Financial Planning, Bomikazi Zeka, and UCT's Associate Professor in Development Finance and Insurance, Abdul Latif Alhasa.
They said every now and again there seemed to be a “get-rich-quick” scheme circulating on WhatsApp or on social media that seemed legitimate, but was not.
On the PMP Mining WhatsApp group and PMP Victims Facebook page, a dozen other "new scams" were being introduced as being "better" than PMP and promised to pay quicker and more.
Such schemes included WebMine, PMB, Bitworld, Konquers Coin, Wealth Investments, and HappyMining.
“ ’Get-rich-quick' schemes are one such trap. The schemes are a form of financial fraud. The people running them take money through deception: the misrepresentation of information and identity. They promise financial benefits that don’t exist,” said the research.
Zeka and Alhasa said over the past 30 years there'd been some massive fraud schemes.
In the early 1990s, MMM Global, one of the world’s largest and most notorious Ponzi schemes -- defrauded up to 40 million people, who lost an estimated $10 billion.
Ponzi schemes had since resurfaced in different forms in South Africa, Nigeria, Zimbabwe, Kenya, Ghana and several other African countries, according to the academics.
They offered these five tell-tale signs of financial scams:
1. They offer exaggerated and above market returns within a short period of time, with the promise of little to no risk.
2. New members are constantly recruited to join the scheme, to pay existing members.
3. There is urgency to join the scheme and no clarity on how the scheme works.
4, The scheme is not registered with or regulated by any recognised authority.
5. The scheme uses the testimonies from existing members who’ve earned big bucks to promote the scheme. This is a tactic to create the impression that you too can earn returns in the double digits.