By Mwandishi Beb.
“A pyramid scheme is an unsustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public.”
Pyramid schemes or ponzi schemes work on one principle: you introduce a person who pays a nominal or subscription fee from which you earn a commission. That means the more you dupe to join the more you earn. It therefore works by recruiting people.
Most of these scams do not undertake any tangible transactable business. However, because of regulation, they are masked as saccos (like the Kenya Business Sacco and Deci which collapsed), service provision companies (like social biz connect which purports to do digital marketing). They are therefore registered as legit businesses to have a mask to operate. However any proof of these businesses does not exist!
Critical questions to ask to qualify an entity as ponzi schemes are:
- What business is being transacted. Is there any proof? All businesses have documentary proof in form of contracts and invoices. Services or goods traded are visible and seen and known.
- How does one earn his or her earnings? Is it through sales or recruiting new members? If its the latter, then its a ponzi or ptramid scheme.
- Who are their founders? Whats their credibility?
- They promise huge, unrealistic and frequent returns. Businesses have cycles of growth. Purporting to have a weekly cycle of returns is outright duping.
The limitation with pyramid is it rewards more those who joined earliest. The top guys are the ones who benefit more at the expense of those who are at the bottom of the pyramid.
No pyramid has lived to stand. All businesses are going concerns. Pyramid schemes are not. And with the adverse mentioning of some of these in public and in social media pages, these are enough red flags to worry about.
Does Social Biz Connect ( also known as Internet Marketing Africa) fit to be a legit business? What is being transacted? Where is proof of the business being done in terms of documentary proofs? Where is the business located? Why does one have to be registered and pay a subscription or registration fee for one to join? Why does it insist on recruitment as a way of earning commisions?
Here are some links that raise red flags on Social Biz Connect: