Up Money directors’ assets frozen

The bank accounts of the directors of pyramid scheme Up Money, which disguised itself as a grocery stokvel, have been frozen. It is believed that 230 000 investors fell prey to the scheme.

The Deputy National Director of Public Prosecutions and head of the Asset Forfeiture Unit (AFU) of the National Prosecuting Authority (NPA), Advocate Ouma Rabaji, announced on Tuesday that the NPA is laying criminal charges of fraud and contraventions of various sections of the Prevention of Organised Crime Act. It directly labels Up Money a pyramid scheme.

Read: Investment scams pop up like mushrooms

“The sections might be racketeering, money laundering, fraud, theft, assisting another to benefit from proceeds of unlawful activities and acquisition, possession or use of proceeds of unlawful activities,” Rabaji said.

The high court granted the AFU preservation orders to freeze bank accounts worth more than R18 million and attach a number of luxury vehicles belonging to the directors, Jade Matsemela and Sipho Martin Mdlhuli (an Audi TT, a Hummer H3 and a Jaguar XKR Coupe.)

This after the National Consumer Commission was alerted to the pyramid scheme by a complainant from East London.

The directors have not been arrested as yet, nor has the scheme been suspended.

How it works

The scheme, which is not registered with the SA Reserve Bank and is neither a registered stokvel nor a financial services provider, mainly used social media to recruit members for R180, which qualified participants for a meat pack.

On joining, participants would have to recruit members who were then required to recruit five new participants.

The original investor would then help the five they recruited to sign up their five new members each so that they could move up to level two, at which point they would receive a meat pack, groceries and R500.

“When those on level one moved to level two by their recruits, the original organiser was pushed to level three. When here the investor received level two benefits plus R3 000,” Rabaji explained.

The scheme received R42 720 501.82 between May 4 and July 2, of which R12.5 million was splurged at various retail stores and on buying the three luxury motor vehicles.

Participants also at fault

In a pyramid scheme, ‘Peter is robbed to pay Paul’. It is one of the oldest investment scams and originated in the 1920s when fraudster Charles Ponzi paid out investors through money received from other investors.

NCC acting company secretary Joseph Selolo said those who participated in Up Money are also going to be charged.

“We will be taking action against all promoters and participants of the scheme that went to social media to promote [it],” Selolo said.

He reiterated that the law clearly states that no one shall participate in, join or promote a pyramid scheme.

“Everyone who joined and promoted Up Money has committed unlawful conduct by joining the scheme. Therefore, in our prosecutions, we will be prosecuting everyone,” Selolo said.

He said the participants might be fined 10% of their annual income and they will not be compensated for money lost in the scheme, because they willingly participated in unlawful activity.

He said the money will be used to fight crime.

Listen to Nompu Siziba’s interview with Nancy Bambo, head of market content at Momentum Securities on Ponzi and pyramid schemes: