Consumer Commission not looking into Crowd1

Despite Namibia and the Philippines declaring it a pyramid scheme.
The exact number of Crowd1 members in South Africa is unknown, but there are several local Facebook groups with members numbering in the thousands. Image: Shutterstock

The National Consumer Commission (NCC) is not investigating Crowd1, despite several financial regulators like Bank of Namibia and the Philippines’s Securities and Exchange Commission prohibiting it from operating in their countries. 

The authorities in Namibia and the Philippines took this action because they believe the Spanish-based group, which claims to be a networking marketing firm, is in actual fact a pyramid scheme.

Bank of Namibia said in a statement on February 21 that its investigation into Crowd1 found that it had contravened Section 55A of the Bank Institutions Act, as it derived most of its revenue from getting exiting members to sign up new members, rather than selling a product.

“It is evident that the business model of Crowd1 Networking Limited is not sustainable and will result in members of the public, especially those at the bottom of the scheme, losing their money.”

It then called on those promoting and participating in Crowd1 in Namibia to “stop their business operations immediately” and that failure to do so would result in action being taken against them, in terms of the act, which could result in a N$1 million (just over R1 million) fine and/or a sentence of up to 10 years.

For its part, Crowd1 describes itself as a networking marketing firm that focuses on selling education products online.

Not so!

Impact Crowd Technology SL, the company that runs Crowd1, took issue with the bank’s findings. Crowd1’s chief of Africa expansion, Jonathan Ström, says he strongly opposes the findings of Bank of Namibia and stresses that it is purely a network marketing business. 

“There is no sign-up fee in Crowd1, hence no revenue derives from the sign-up process,” Ström says.

He adds that all revenues in Crowd1 come from product sales, where the education packages represent one of its product lines.

“100% of Crowd1’s revenue comes from the selling of our products.”

Ström says lawyers from Crowd1 contacted Bank of Namibia and asked to receive a copy of their investigation so it can get insight into the claimed charges and the evidence behind.

He also pointed out that Bank of Namibia had not made contact with Crowd1’s management while conducting its investigation or before publishing its findings.

While the exact number of Crowd1 members in South Africa is unknown, there are several local Facebook groups with members numbering in the thousands.

No one’s complaining 

Although other financial service regulators have taken action against Crowd1, the NCC said in a statement that there is currently no investigation into it. 

Investigations are usually launched by the NCC when it receives a complaint from consumers, but the commission can start an investigation if it deems there is a “reasonable suspicion that there is possible contravention of the Consumer Protection Act”.

Under South African law, networking marketing, which is a form of tiered selling, is legal. However, pyramid schemes, where the business model is based on getting existing members to sign up new members, are illegal. 

According to the Consumer Protection Act, the NCC takes the lead, ahead of the Financial Sector Conduct Authority, the South African Revenue Service, the Financial Intelligence Centre and the South African Reserve Bank, when it comes to dealing with pyramid or Ponzi schemes.

If the abovementioned financial authorities come across these schemes, they have to pass on their suspicions to the NCC.

Once the NCC concludes its investigation into a possible pyramid or Ponzi scheme, it passes it on to the commercial crime unit of the South African Police Service, which would then make an assessment on whether criminal charges should be made.

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Not even the best salesman will be able to sell a Ponzi scheme to knowledgeable and sceptical investors. For sustainable growth, a Ponzi scheme is reliant upon a receptive and eager client base. A Ponzi scheme appears automatically among an eager or enthusiastic community. It is as if there is a void or a vacuum, that is filled by the Ponzi scheme. This is why, when one Ponzi scheme is closed down by authorities, another one arises in die same community.

People’s deep-rooted psychological needs motivate them to participate in Ponzi schemes. They purchase a dream to escape from their circumstances. They buy hope and sanity. It is a coping mechanism. They are shopping at the wrong place though.

The merchandise that the members of the Ponzi scheme are looking for, is sold by the church, not by the Ponzi scheme.

Not quite Sensei. Tannenbaum’s “success” was due to a number of high profile people (that PnP guy – forget his name; Summers?) “investing” with him. But they knew it was a Ponzi scheme and banked on him having to pay out the stupidly high returns at least once to establish credibility. They would scoop these and walk away. Some did, some didn’t.

Yes, the Tannenbaum case, the Bernie Madoff case and the Herman Pretorius case are not examples of the Ponzi schemes that I am referring to. These were very sophisticated schemes that fooled even investment professionals. The people who have lost money in those schemes were high-profile individuals and highly intelligent people. Those schemes were quite elaborate and some even provided proof that they were regulated. Those type of schemes can catch even the most astute investor.

Your average Ponzi scheme is very crude though.

Loads of these schemes going round.also people looking for ‘silent business partners’.lol

if the GFC did not happen Bernie Madoff would have still been operational quite happily.
the greatest Ponzi scheme of them all is the Fractional reserve monetary system but because it is run by the government it is legal.

I think it is stupid for our government to not want to play an active role in fighting this Ponzi “pandemic”.
Millions of Rands are leaving our shores through these Ponzi schemes. That is money that could be circulating within our Country and boosting our economy.

End of comments.

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