A Ponzi scheme by another name: The case of Invest200

Ponzi schemes are operated by tricksters and sometimes seemingly legitimate businesses that will invite you to invest in a money-for-profit scheme. The operator promises you unrealistically large returns on your investment in a short period of time, in some shape or form, which is just what Invest200 market material promises potential investors.

1920 photo of Charles Ponzi, the namesake of the scheme, while still working as a businessman in his office in Boston. (Boston Library - NYT - Wikimedia Commons)

And just like all the pyramid structures before it, the Invest200 proposition relies on enticing a steady flow of investors, whose money will go to pay off promises made to initial cash pushers. But, as history has proved many times over, these schemes will inevitably collapse, as it is impossible to find enough new investors to keep the funds flowing.

And it seems that Invest200 is nearing that tipping point. But more on that later.

Business Maverick was first made aware of the Invest200 offering through family and friends – most under severe financial pressure during the Covid-19 lockdown – via a WhatsApp marketing ploy. Under the guise of “donation-based crowdfunding” the proposition promises a quick bang for your buck. All you have to do is join the party and bring your friends.

The WhatsApp message states:



It is backed up by some fancy infographics and branding. But Business Maverick’s – and industry experts we checked with – understanding of donation-based crowdfunding, where somebody is trying to raise money to fund a social need like a kidney transplant, is not what the illustration below depicts. Usually, there is no real return other than making a contribution to society. And that is not what Invest200 is proposing below.



 

And that is just the first of many red flags on a proposition path strewn with them.

Invest200 is not a registered business with the Companies and Intellectual Property Commission (CIPC), or licensed as an authorised financial services provider by the Financial Services Conduct Authority (FSCA). Those are easy facts to check. It was also confirmed by the owner of the operation, Delmarie van Zyl, via a telephone conversation.

The South African Reserve Bank, which investigates such scams, clearly states on its website that: “Accredited Financial institutions are regulated and supervised, by either the South African Reserve Bank, National Consumer Commission or the Financial Services Board. There are strict rules and controls that govern investments with these institutions, whereas unregulated and unsupervised persons and groups don’t follow these rules and your money is at great risk with them. An investment for the future must be a decision for long-term commitment. Be confident that your money is safe.”

As a non-registered entity on any platform, there are thus no requirements for Invest200 to be audited or its financial statements to be submitted or made public. It also doesn’t sit well that the banking details provided on the downloadable PDF information sheet is a personal Capitec savings account in the name of Van Zyl.

Van Zyl told Business Maverick that people who participate in the scheme do so at their own will, and are made well aware of the rules prior to participation. “We didn’t hold a gun to their head,” she says.

“We are fully transparent. We don’t market ourselves as a stokvel club, as we are not registered as such.”

Their proposition on Facebook reiterates that fact. But denying that they are a Ponzi scheme should be taken with a pinch of salt. What is on offer has all the markings of a Ponzi scheme.

The screenshot of the page below is pretty clear on what is on offer, and has since been deactivated following Business Maverick’s conversation with Van Zyl. So has the website.



The poor (yet ignorant) sales agent, whom Business Maverick contacted under the guise of a prospective client, pitched the profit proposal as if he was working for a reputable bank, yet could not explain what the underlying investment strategy was, even promising that capital would be returned if no new contributors emerged.

When our “alias” attempted to ask the same questions on the Facebook page, it was asked to be removed:



How Van Zyl explained the endeavour to Business Maverick is a tad different to what the marketing material implies: they are simply administrators of WhatsApp groups where a principal remunerates them for vetting proof of payments of his/her subsequent recruits. Only the administration fee goes into Invest200’s bank account.

She further added that the groups are administered by herself and one other person, whose intent was to help people. “But they have to do their part,” she says.

According to another – now former – Facebook post, Invest200 wrote that: “We made some changes to our system and created larger and combined groups to give everyone a fair chance. Larger groups might seem more complicated, but it really is not.

“What do you prefer? Smaller groups and no one recruit or larger groups where you have the help and assistance of more than 30 people to get people in?

“Invest200 Plus is a team effort. And that is what we expect from each and every one – effort.

“This has helped a lot of people during these difficult times, and it will continue to help people in the future...”

What was an interesting revelation – remember the reference to a tipping point above – was Van Zyl’s intention to offload the enterprise to a willing buyer.

“I have two other businesses and a family to manage, the effort has become a burden too much to bear.”

She also added that her fellow administrator had to return to work.

But the main point Van Zyl was adamant to get across was that Invest200 was not a stokvel, and the reference to crowdfunding was to make that clear, and also that all her business dealings were legitimate.

But you be the judge. And if you don’t trust your own judgment, the SARB provides a few tips on how to avoid being scammed out of your hard-earned cash:

• When choosing a money-making opportunity, do your homework thoroughly.


• Get advice from registered financial advisers; this is available free of charge with no obligation.


• Take your time, you didn’t save it overnight.


• Be particularly cautious of “opportunities” that promise to make you wealthy in a very short period.


• Beware of a “secret formula” that will only be shared with select investors.

Van Zyl threatened legal action to any participant of her scheme that puts her “good name” into disrepute.

So, the best way forward for anyone is to remain safe, and not be sorry later. And the rule of thumb to go by, as all the financial advisers Business Maverick approached about this scheme unanimously agreed on was: if it seems too good to be true, it probably is. BM