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Last week, The Ministry of Trade and Industry warned the public to be wary of engagement with Century Heng Yue (CHY) Ltd, saying it was luring people into a pyramid scheme.

This is however not the first pyramid scheme to be reported in the local market as cases have grown in the recent past.

As a section of Rwandans seek to make investments and engage in productive economic activity, it’s easy to fall prey to pyramid schemes guised as investment opportunities.

Recent examples of other pyramid schemes that have been found to have operated in the country previously include Amway Group Ltd and Master Global Partners Ltd where six suspects were arrested in November 2019, for running multi-level marketing scams (pyramid scheme).  In September 2018, World Ventures, a firm that had been branding itself as a multi-level travel company was also deemed as a possible pyramid scheme by the government.

Below are key ways to identify a pyramid scheme.

To make money you are required to recruit members

Growth and returns is largely premised on the number of members you recruit on the platform as opposed to sales. Often, there are registration fees or initial investment for new members received by the organization.  The initial members receive hefty payouts from fees of people in lower ranks rather than the selling of services or products.

You are required to buy things or services you do not need

You are forced to buy other things you don’t want or need just to stay in good standing with the organization or to receive promotions.

Motivation through stories of lavish lifestyles of initial members

It is common for pyramid schemes to seek to inspire new members through testimonies of the lavish and prosperous lives of initial members in a bid to entice new members to be actively involved in promotional activities. Others boast of having global renowned celebrities as their members in a bid to portray the entities as legitimate. The phrase, "even so and so is our member” is not uncommon in pyramid scheme recruitment process.

 The pitches are high energy and little on the business model

The pitches and presentations made to attract members are often largely about prosperity, riches, fortunes and accomplished dreams as opposed to business opportunities and models to be used.

It is not uncommon for new recruits to leave feeling inspired and motivated after the presentation but uncertain about the entity’s business model and approach.

Registration and activities inconsistencies

When one conducts due diligence, it is not uncommon to find that the said firm runs business activities in aspects that it is not registered under. It is therefore advisable to conduct due diligence on the registration of business one seeks to enter to confirm the legal registration.