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Jamaicans Warned to Stay Away from Ponzi Schemes

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Jamaicans love to invest. At least, that’s the impression you get during the volatile years when “get rich” Ponzi schemes like Cash Plus, Olint, and World Wise Partners, dominated the Jamaican investment landscape. Jamaicans are always on the lookout for the next big thing. The usual promise? Put in a small amount (or for the greedy, a large amount) and reap incredibly huge returns. But, as Jamaicans of old (“Ole time people”) would say “You can’t plant corn and reap peas!”

Ponzi Schemes Boom and Collapse

Despite warnings from financial experts, and others with common sense, thousands of Jamaicans fell prey to unregulated financial organisations (UFOs). The Carlos Hill-led Cash Plus was a case in point. Before his arrest in 2009, Carlos Hill through Cash Plus Ltd. bilked 40,000 Jamaicans out of more than J$10 billion. This was money that most Jamaicans scraped together, some through loans and mortgages on their homes, to pump into the scheme. They hoped to reap 100 percent on their “investments” within one year – at a fantastic 10 percent per month. This promise is incredible given the much lower average return on investments in the formal investment market.

The scheme, which was actually a pyramid, took money from new investors and paid the promised monthly amounts to their existing investors. For a while, the Cash Plus scenario seemed to work – particularly for contributors who were in from the start in 2002. Eventually, the pyramid collapsed under regulatory pressure from the Financial Services Commission (FSC) and after new investor contribution to the scheme dried up.

Not surprisingly, Cash Plus folded in 2008 leaving the 40,000 Jamaicans with nothing. That is $10 billion down the drain, evaporated.  It did not help that it took the justice system eight years (in 2017) to eventually free Mr. Hill of all the fraud charges laid against him.

This turn of events left victims with no prospect of ever seeing their money again.

Lives were shattered and dreams destroyed.

Fast forward to 2018.

Ponzi Schemes Rise Again

Jamaica is not out of the woods where Ponzi schemes are concerned. The newest ones to raise concern at the Jamaica Stock Exchange (JSE) relate to Cryptocurrency. The use of Cryptocurrency has gained traction even in Jamaica. By definition, cryptocurrency is a digital currency generated by encryption technology.  Central banks do not control these currencies.

Unfortunately, the Cryptocurrency landscape is littered with fraudulent schemes that induce internet users to part with their money to buy such currencies in the hope of receiving incredible returns. The JSE and the FSC warn Jamaicans to be on the lookout for OneCoin (similar to Bitcoin) that has already scammed “investors” abroad out of US$350 million.

Although Jamaica in 2013 introduced the Securities (Amendment) Act to combat the proliferation of unregulated financial organisations, financial laws have not evolved as fast as Ponzi schemes flourish.

How to Avoid Ponzis

The Jamaica Stock Exchange (JSE) publishes the names and information of registered brokers authorised to conduct securities business in Jamaica. You can easily access this list on the JSE’s website. Currently, thirteen registered brokers are in Jamaica.

It is, therefore, a good idea to consult this list of registered brokers before committing funds you wish to invest.

Also, be cautious of any financial entity or scheme that makes it too easy for you to open an investment (or any) account. Opening an account shouldn’t be that easy. By law, all financial institutions must require the following documents from persons wishing to open an account with it:

  1. Valid Identification
  2. Tax Registration Number (TRN)
  3. Source of Funds
  4. Proof of Address
  5. References

Financial entities require these documents so they can know their customers.

Furthermore, be cautious with any organisation that cannot give you information on their investment options. Such information is usually provided in writing in the form of an account statement about your investment holdings or a prospectus detailing the investment package.

Do you remember the expressions, “all is not what it seems” or “if it is too good to be true, it usually is”?  These are red flag guides for you in moments you doubt the authenticity of any hot promise. To be fair, if your gut instinct tells you to run from such risky arrangements, it is wise to follow it. For example, any entity (whether online or offline) that promises you that your investment is guaranteed, should be avoided like the plague. They may be Ponzi schemes.

Legitimate investment advisors will admit that every investment, no matter how small, carries risk. The standard practice of investment advisors who operate above board is to discuss risk with potential clients before asking them to make their first deposit.

So, you should be wary if your “investment advisor” does not require you to complete a risk assessment questionnaire to confirm your risk tolerance. This exercise confirms whether you are aggressive, moderate, or conservative in your risk-taking behaviour. Also, this exercise is mandatory!

Be wise (or learn wisdom)

In the final analysis, the onus is on you to exercise good judgement when deciding your investment strategy. Naturally, legitimate investment vehicles, such as through registered brokers for the Jamaica stock market, is the way to go.

Authentic investment advisors provide you with sound advice on investment strategies, options, and market conditions. They can also answer your investment and market-related questions.

Other warning signs that the FSC in one of its Investor Alert Bulletins raise are:

  • unlicensed dealers, promoters, and sellers
  • secretive and/or complex strategies and fee structures
  • using funds from new investors to pay off existing investors, with no investment in an underlying asset or product
  • indirect advertising – promotion through social media posts
  • pressure to buy right now – giving potential investor no time to think about the “investment”

The FSC continues to monitor the activities of unregulated financial organisations. Their website also offers you a way to contact the Commission if you are aware of such fraudulent schemes or are in doubt about the legitimacy of offers.

In the meantime, if you encounter an investment opportunity that is cloudy, foggy, and hazy – one in which you cannot make head or tail of the information surrounding it, there is only one thing to do.






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