- BoB, CCA, and law enforcement agencies investigate suspected pyramid schemes
- Victims are unlikely to recover financial losses – fraud specialist
- US-based Ecoplexus distances itself from scam using its name in Botswana
With economic uncertainties growing by the day, unemployment rates spiking and budgets getting tighter, many vulnerable Batswana find themselves falling victim to Ponzi schemes, chasing after easy and get-rich-quick investments.
The latest in the surge of Ponzi schemes in the country is Ecoplexus, a scam that took social media by storm and had hundreds of Batswana pouring their savings into it with promises of very high returns and little or no risk. It alleged that the scheme was investing victims’ funds in products of Ecoplexus, a real and existing United States-based company that specialises in development of renewable energy systems.
Glaring red flags
While victims overlooked glaring red flags of the Ecoplexus scam, the founder of Consumer Watchdog, Richard Harriman, says Ecoplexus had all the tell-tale signs of a Ponzi scheme. “The most important clues are that they do not have real products even if they claim to,” says Harriman whose consumer movement boasts hundreds of thousands of subscribers.
“For example, Ecoplexus claimed to be a solar power technology company but that was not true. There is a real Ecoplexus in the USA but it had no connection to the Ponzi scheme targeting us in Botswana that had stolen the name to appear credible.”
Enormous pressure
According to Harriman, another clue is that there is enormous pressure to recruit other victims and to constantly upgrade their membership to a higher level. “That is where the money comes from – constant recruitment and increasingly large membership fees,” he says. “Of course, that cannot last as the number of people willing to risk their money gets exhausted.” Defining the scheme further, Harriman points out that a Ponzi scheme is similar in some ways to a pyramid scheme as they both have no real products, involve multiple levels of membership, and rely on recruiting more people.
“The only difference is how money flows through the network of recruits,” he says. “More importantly, both are illegal in Botswana, and promoting or joining either can lead to severe penalties. In a Ponzi scheme, part of the money each victim pays to join the scheme is passed to earlier recruits. However, most of the money is kept by the criminals running the scheme.”
Ecoplexus and influencers
With the Ecoplexus scam, social media was at the forefront of the operation, gaining popularity with influencers using their massive following on the platforms to recruit victims. Fraud specialist Setlhomo Tshwanelang believes that such people should be held accountable.
“They are a disappointment and should be held accountable legally and socially,” Tshwanelang says. “For example, the law is clear on promotion of Ponzi schemes and does not exempt influencers. But for such a law to be effective, victims need to report them to relevant authorities.” Harriman agrees, telling The Business Weekly & Review that anyone who promotes a pyramid or Ponzi scheme should face justice.
Regulators
“Luckily, the Consumer Protection Act imposes severe penalties on anyone promoting scams, including fines of up to P100, 000, prison terms of up to 5 years, or both,” he says. “We need to see the promoters facing those penalties. And we need to see them paying back any money they received to their victims.”
But are law enforcement agencies and regulators doing enough? In a recent joint statement, the Bank of Botswana (BoB) and the Competition and Consumer Authority (CCA) warned the public to desist from participating in the peddling of pyramid or Ponzi schemes, especially activities that offer “get-rich-quick” and unrealistically high returns in non-transparent, unlicensed investment vehicles. “Pyramid schemes and other illegal deposit-taking activities (such as Ponzi schemes or fraudulent investment vehicles) are unlawful in Botswana as the nature of these operations contravenes Section 3(1) of the Banking Act (Cap. 46:04) and Section 9 (1) of the Consumer Protection Act No. 5 of 2018,” the two institutions pointed out.
Failing fraud victims
However, Tshwanelang, who estimates victims lost between P3 million and P5 million in the Ecoxpleus scam, believes that banks and other authorities, in particular the Non-Bank Financial Institutions Regulatory Authority (NBFIRA), are failing fraud victims.
“For instance, the recent Ecoplexus scam was a brazen Ponzi scam from the get-go that had cloned an existing and legitimate business,” he asserts. “It had been running from November 2022 until the first week of May or so when it collapsed. “In those six months, NBFIRA never bothered to investigate or say a word about the trending Ponzi scam until May 16. That’s about a week and a half after, note, after the scheme had collapsed and run away with people’s money.”
Well-known bank
Significantly, he says, evidence shows that one of the renowned local banks was used or accounts linked to it were used to collect and move money for this Ponzi scheme. “One would be interested to know what their declared sources of income were in accordance with KYC,” says Tshwanelang. “Did those match the deposits? As hundreds of thousands and millions kept circulating for about six months, within those, what actions did the bank take? That shows the said bank, whose name I cannot mention, has loose controls in place.
But how can investors stay ahead of fraudsters? Do victims recover their losses? Harriman responds: “The only real protection we have against these scams is knowledge. Consumers need to be extremely skeptical about anyone who offers them miraculous ways of making money.” Anyone who invites you to join their moneymaking scheme “wants to make money from you, not with you”, he warns.
Low level schemes
Tshwanelang notes that most of the financial fraud operations trending in Botswana are not even emerging or really complex but are often a cycle of mundane and low-level schemes such as mobile-money-based scams, Facebook-related scams and lately Ponzi schemes, which are now able to reach out to a large number of victims due to technology.
“Investors need to have a questioning mindset and controls in place,” he emphasises. “They also need to investigate and run a background check. They should always ask themselves, why, when, how, where, and what? If it sounds too good to be true then it is likely to be a scam.” Tswanelang is doubtful that victims of the Ecoplexus scam will recover recover their money. He highlights that the rate of investigation and successful prosecution of financial fraudsters is very low. “Out of 10 losses, only one to three is likely to be recovered, provided the victim was quick to notify the bank and other relevant authorities,” he says.
Cryptocurrencies
Harriman, who runs the 196,731-member strong Consumer Watchdog group, concurs that it is complicated because most scammers do their best to get their earnings out of the country as soon as possible. Sometimes they do this by getting the victims themselves to send money overseas or to buy cryptocurrencies that the scammers can easily transfer and collect without a trace.
“In most cases, the money is gone forever,” Harriman points out. “It is slightly different with Ecoplexus because their victims deposited money into local bank accounts and some of it is still there in frozen bank accounts. Whether victims will get it back or not is impossible to say.” Meanwhile, the real Ecoplexus has since released a statement that it is aware of the scam operation in Botswana that has been raising money from individuals, implying that the money invested will go towards solar projects and that the company raising the funds is associated with it.
“To be clear, Ecoplexus Inc., which is a company formed in and headquartered in the United States, with business activities in the US, Latin America, and Asia, has no business in Africa and no relation to the activities occurring in Botswana,” the company says. “We regret that people may have been misled or lied to regarding links to Ecoplexus in the US, and are disappointed that unscrupulous individuals may have used the Ecoplexus name. Unfortunately, Ecoplexus Inc. has no legal recourse to prevent these activities from happening. We wish the best to the victims of this apparent scam.”
