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Even if you hate me for this - I can't stay silent any longer

by , 26 June 2020
Even if you hate me for this - I can't stay silent any longer
Some years ago I called out the Sharemax investment scheme.

And I got flack from advisors and investors invested in the company - collecting fat dividends.

But Sharemax crashed and burnt. And investors lost out big time.

I received hate mail, MMM Global investors laughed at me. You see, they were pocketing money from the scam. So their thinking was that it had to be legit…
Many investors lost all their money. The Hawks launched criminal investigations and the South African Revenue Service said it would come after MMM Global investors.
And today I need to warn you about yet another scam.
I’m doing this, full well knowing that I will get hate mail. Knowing that I could get harassed, like others sounding the same warning have been.
Before I give you the exact details on this scheme, let’s first have a look at the definition of a pyramid scheme.
Here's how you too could bank fast gains of  R5,190, R2,517 or even R1,141  from the smallest market movements -
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A pyramid scheme is designed to get your money – and recruit more suckers after you
That’s really the short of it.
The Oxford Languages Dictionary defines a pyramid scheme as:
“a form of investment (illegal in the UK and elsewhere) in which each paying participant recruits two further participants, with returns being given to early participants using money contributed by later ones.”
So basically a pyramid scheme requires ‘investors’ or ‘members’ to recruit new members. It takes their money and uses that to pay earlier investors. It then recruits new investors and uses their money to pay you.
I’m sure you can see where this is going.
As long as the pyramid scheme members recruit more ‘members’ it keeps getting enough money to pay earlier members.
But, as soon as new members dry up the scheme will go under because its cash flow won’t be enough to pay returns or commissions…
That’s when the pyramid scheme falls apart. And if you put money in a scheme like this you would lose most, if not ALL of your money.
So how do you make sure you’re not investing in a pyramid scheme?
Three common sense tests to avoid scams
Pyramid Scheme Warnings Sign #1 - When you get paid for recruiting new members
The biggest warning sign of a pyramid scheme is when your ‘income’ or ‘returns’ are based off of recruiting new members and them paying a joining fee.
Many pyramid schemes disguise the joining fee by calling it a platform fee, educational material etc. But in effect – when you pay to join and you don’t get an economically valuable product the red lights should flash
Pyramid Scheme Warning Sign #2 – Having to chronically ‘defend’ that it is not a scam
How many times do legitimate businesses need to defend that they are not scams? I don’t see a page on the JSE’s website saying “Why the JSE is not a scam”.
Simply put – having to immediately justify that something is not a scam – usually means it is a scam.
And with pyramid schemes you don’t need to be a financial analyst to know that something isn’t right.
How does the ‘opportunity’ generate returns for you? Are the answers about how the ‘business’ is operated clear and concise – or clear as mud?
Pyramid Scheme Warning Sign #3 – If they’re taking your money and investing it – are they registered to do so?
By law you cannot take people’s money and invest it on their behalf without being a registered financial services provider.
If they say you are buying ‘shares’ or ‘virtual shares’ in the business it can also be illegal as private companies in South Africa are not allowed to market selling shares to the public.
A CIPC certificate is not a licence to do the above. The company would have to be registered with the Financial Service Conduct Authority (FSCA).
Watch out for the latest “pyramid scheme” dressed up as an investment opportunity
So, the latest ‘opportunity’ that’s come knocking is called Crowd1.
At the moment barely a day goes by without me seeing the scam being marketed.
Often the story is that it is a “work from home” opportunity. Or it is “make an income by investing in online gaming and gambling”.
Another explanation I’ve often seen is something like this:
“Crowd1 (or Crowd1 Network Ltd) is a "mobile networking community."
It offers members the ability to create and maintain an online network business using different digital marketing platforms. Its so-called partners are gaming/gambling sites AffilGo and Miggster.”
According to its website, Crowd1 (or Crowd1 Network Ltd) is a "mobile networking community." It offers members the ability to create and maintain an online network business using different digital marketing platforms.
Sounds fancy, right? But the truth is hidden in the fine print.
Crowd1 just wants to be a platform that will redirect you to partner online gaming/gambling sites, namely AffilGo and Miggster.
If you want to join Crowd1, keep in mind that there are different membership packages available for you. The cheapest is the White starter kit which costs €99 and comes with owner rights which have a value of €100. Packages go up, and cost as much as €2499 if you want to purchase a higher up package.
Based on the amount of people you get to also join, and the package you “bought” when you joined, you will get a ‘weekly income’ from your ‘owner rights’.
From its own website the company states:
“How we make Money in Crowd1
1 - The only way of making immediate money into your bank is to recruit, share your business and invite people to Crowd1.”
So this ticks the first box for this being a pyramid scheme. You need to recruit people to make money.
Furthermore – The Bank Of Namibia has classified Crowd1 as a pyramid scheme already.
In its press release it found that: 
1. The core business of Crowd1 is to introduce new members
2. The primary source of income for Crowd1 is generated from recruitment of new members
3. Crowd1 does not sell tangible products or render any service of essential value, but the primary source of income for Crowd1 is the sales of ‘membership packages’ to new recruits.
It found this business model is not sustainable and contravenes the Namibia banking act.
The Securities and exchange commission in the Phillipines have also outlawed Crowd1. Norwegian authorities have also started investigations against the company.
The FSCA has also warned against Crowd1
The South African Financial Services Conduct Authority (FSCA) has issued a warning to the public against Crowd1.
Find its warning here.
In short it says: 
“The Financial Sector Conduct Authority (FSCA) warns the public against an entity called Crowd 1, which is not authorised to render the financial services it is providing. Crowd 1 is neither an authorised Financial Service Provider (FSP), nor is it a representative of an authorised FSP. There is also no record of this entity having applied for a license with the FSCA.”
It has also confirmed that the South African Reserve Bank has initiated an investigation into the scam.
My last word to you is: Watch out. A fool and his money are easily parted. And if you put your money into this scam – you will end up losing it as well. No matter whether you are making money now or not… The pyramid will eventually collapse. And the last ones in – will lose everything.
Here’s to unleashing real value,
Francois Joubert,
Editor, Red Hot Penny Shares 
PS. If you looking for 3 recovery stocks to invest in now, then check out my colleague, Josh Benton’s latest report here.

Even if you hate me for this - I can't stay silent any longer
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