It is now illegal to participate in Ponzi and pyramid-type schemes in this country.
And if you are found operating one you can be fined $10 million or face ten years in prison after recent amendments to the Securities Act Chapter 83:02.
According to the T&T Securities and Exchange Commission, Section 165A has been inserted after the existing Section 165 of the Act to provide for the criminalising of any ‘prohibited schemes’, namely Ponzi and pyramid-type schemes.
“Under the amended Act, it is now a criminal offence to establish, operate, advertise or participate in these prohibited schemes. It is now also an offence to invite persons to join a prohibited scheme,” the TTSEC stated.
“The Act further provides that a person who establishes or operates a prohibited scheme is liable, if convicted, to pay a fine of $10 million or to imprisonment for ten years. It also states that a person who knowingly participates in a prohibited scheme is liable, if convicted, to pay $5 million or to imprisonment for five years.”
The TTSEC said for knowingly advertising or inviting another person to join a prohibited scheme, a person is liable, if convicted, to pay $2 million or to imprisonment for three years.
“Members of the public, who may have information about the operation of a prohibited scheme, are urged to contact the TTSEC or send the relevant information (audio or video files/documents/texts/images) via the ‘TTSEC Investor Protection App’, easily downloadable via the Google and Apple Stores,” the TTSEC stated.
Ponzi and pyramid-type schemes are referred to as “affinity fraud.”
Affinity fraud, according to investopedia, is a type of investment fraud in which a con artist targets members of an identifiable group based on things such as race, age, religion, etc.
The fraudster either is or pretends to be, a member of the group. Often, the fraudster promotes a Ponzi or pyramid scheme.
“A Ponzi scheme is essentially a pyramid scheme. These schemes are often disguised as transactions in new or poorly understood investment instruments, including different types of securities, foreign currency trades, precious metals and even exotic commodities. In a Ponzi or pyramid scheme, the promoter takes money from an investor and promises an extremely high rate of return, often times higher than what is currently paid by local banks or other financial institutions. At first, the promoter usually keeps his promise to earlier investors by paying them with money collected from latter investors,” it stated.
The TTSEC said such schemes depend upon the promoter’s ability to find an ever-increasing number of new “investors” by giving the impression that earlier investors have been successful. Within a short time, however, the required number of new investors will be difficult to find, and the promoter either disappears or has to admit that he cannot pay investors back.
