Sarb investigating Crowd1

Looking into whether it acts like a financial services provider.
Sarb warns against getting involved in non-licensed financial service firms. Image: Moneyweb

South Africa’s financial regulatory authorities are taking a serious look at Crowd1, the controversial Spanish company that claims to be a networking marketing firm.

The South African Reserve Bank (Sarb) Prudential Authority says it has been investigating Crowd1, part of Impact Crowd Technology group, since last month – looking specifically into whether it is a deposit-taking organisation. 

Crowd1 told Moneyweb last month that it makes its money through the sale of products such as education packages. It disputed findings made by regulators like that of the Bank of Namibia that it is actually a pyramid scheme, with most of its revenue derived from getting existing members to sign up new members.

Read: Consumer Commission not looking into Crowd1

Crowd1 has grown rapidly in South Africa following its global launch late last year. While the exact number of people involved in Crowd1 in SA are hard to come by, there are several local Facebook groups, with members numbering in the thousands.

The Prudential Authority is not investigating whether it is a pyramid scheme, but rather if it is acting like a bank or financial services firm in taking and holding people’s money.

The Prudential Authority decided to start investigating the group after receiving several complaints from the public regarding its activities in SA.

Although the investigation is ongoing, the Prudential Authority, which governs banking, says it has “not issued any licence in terms of a financial sector law or in terms of the Financial Sector Regulation Act to Crowd1 for any financial product, financial service or market infrastructure provided”.

The regulator did not specifically tell investors not to be involved in Crowd1 it but did stress in its statement that the public should be careful when it comes investing in unregulated companies.

Consistent warnings

“The Sarb has consistently warned members of the public against investing with unregulated entities and to remain vigilant through conducting due diligence assessments on any entity to make sure these entities and the products that they offer are authentic and registered with the relevant authorities.”

It noted that: “A person may not provide a financial product, financial service or market infrastructure except in accordance with a licence in terms of a specific financial sector law, the National Credit Act or the National Payment System Act.”

In an earlier statement, the Financial Sector Conduct Authority (FSCA) backed up the Prudential Authority’s view, saying: “In general, we do not advise the public to ever invest money in a financial entity/organisation that is not registered with us. Any investment or business opportunity that is offered to the South African public [that is not regulated by the Companies Act] must be offered by an authorised financial services provider.”

For its part, Crowd1 has stressed that it is not a financial services provider.

NCC: Will it investigate?

Although the Prudential Authority is investigating whether Crowd1 is breaking South African financial laws, it’s still unclear if the National Consumer Commission (NCC) is looking into it.

Last month, the NCC said that it wasn’t, despite moves by several regulators around the world declaring it a pyramid scheme, which is deemed illegal under the Consumer Protection Act.

Under this act, the NCC is the lead agency when it comes to dealing with pyramid or Ponzi schemes.

Moneyweb asked the NCC if it has reconsidered investigating Crowd1 but had not received a response by the time of publishing.

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I am surprised that this conversation is only taking place right now. Once again the NCC shows their incompetence and inability to act. In desperation people who signed up for something will leave most out of pocket. FSCA, NCC and SARB should have moved on this long time ago.

Next stop….Karatbars and Lifestyle Galaxy Bitcoin MLM schemes.

Except that the FSCA had to retract it’s statement on Karatbars after finding that the company merely sells gold bullion via an affiliate program.

If you are hell-bent on investing in gold, do it by way of physical gold not some promissory virtual coin nonsense. I am not a gold bull but at least sort of understood the hunkering people have for a physical thing that they can literally sleep on but also take overseas in hand luggage.

That’s what we buy from Karatbars…physical gold…in our hands…which is our asset holdings.

The gold-backed-crypto is just cash flow for transacting in gold for everyday needs…groceries, petrol, entertainment etc because it’s easier to use a crypto-debit-card than it is to use physical gold.

Its a pyramid scheme. Loads of schemes around.people are desperate and get caught in this.

If everyone now decides to sell all their bitcoins, every last one, will there be enough money? I see bc as a ponzi scheme.

You raise an interesting point. Apparently all banks will also fold if all depositors ask for their money back at the same time. Perhaps our banks are the biggest “legal” ponzi scheme, they use Peter’s money to pay back Paul….. 😉

Well no, that is not how banking works under Basel rules. There can easily be a run on physical cash, but not in a reasonably well run country a run on money per se. One cannot expect every bank to have notes on demand – the robbers would have a ball

Sjoe, you sure you know how the bitcoin thing works? Its not like handing them in for a deposit you know. If everyone is to sell, then there are no buyers and then the price is nil. It would be explained nicely within the “how markets work” handbook. If that equates to ponzi, me thinks there are loads of ponzis around all over the place as that is kinda how everything works.

“You cannot claim to have sustainable business model when the product of the business model is teaching others how to use the business model.”
Garf

First sign of a scam is when my young niece sends me a WhatsApp msg telling me to get involved! There are certain schemes that just look wrong if you have an IQ greater than your foot size so the regulators should stop it now and investigate later as poorer people, especially in these desperate times, will lose their money.

Very similar to when a hairdresser ask you if they should buy crypto currency…..

can we please kill MTI now – that is one HUGE scam1

the other day i saw an ad on gumtree,also something like crowd1,and in the ad the guy states : this is not a scam.once they mention that you know its one.lol

As I understand it, Crowd1 depends on a member finding a number of other people to sign up and pay an up front fee.
What happens when there is no one left to sign up?
Ergo: this is a Ponzi scheme

What about Mirror Trading International?

All the regulation in world does very little to protect people against their own greed and stupidity. After all neither of which are illegal ……

End of comments.

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