The WhatsApp stokvel scheme that has been around for a while has now morphed into a “WhatsApp gifting circle”, but it is the same get-rich-quick scam, just under a different label – and just as dangerous and illegal.

People are recruited to join a WhatsApp stokvel or gifting group by paying a joining fee. The idea is that by “gifting” an amount of money – it ranges from R200 to R1 000 – you join the group and in return you recruit two more people into the group.

As you recruit you move up the chain and when you are at the top of the list of what is usually six people it is your turn to be paid. So, if you “gifted” R1 000 then you would potentially be paid out R6 000 when you reach the top spot. This is very simply a pyramid scheme – it requires people to keep joining in order to keep the payments going.

Pyramid or Ponzi schemes work by recruiting investors, who in turn get promised payment or returns if they recruit more people. The reality is that the person at the top of the scheme collects all the money, and those being recruited further down rarely see what was promised to them.

The first few people to join or invest reap the rewards and the rest, typically, lose money. Therefore it is illegal because it is basically a form of theft.

While these schemes implode quite quickly when people struggle to recruit other members, in some cases the con starts right away and the administrator disappears with all the money and the group collapses.

Breaking the law

If you are recruiting people onto a WhatsApp gifting group, understand two things. Firstly, it is illegal under Section 43 (2) of the CPA Consumer Protection Act to participate in a pyramid or multiplication scheme or to promote or recruit other consumers to participate and it is a punishable offence. So, you could find yourself facing prosecution.

Secondly, on an ethical level, you have a responsibility to the people you recruit. You are asking them to put their money in to boost your position but with no guarantee that they will ever see a cent back. You have made promises to them in return for gifting to you. When it collapses are you prepared to give them back the money you made?

Another WhatsApp get-rich-quick scam involves individuals who claim to be representatives of or affiliated with Allan Gray asking via WhatsApp for people to make investments. The individuals are offering short-term investments with a 100% return on investment. Allan Gray has confirmed that the WhatsApp profiles do not belong to them and are not affiliated with any part of their client offering.

The Financial Sector Conduct Authority issued a warning that the individuals using the WhatsApp profiles are operating without authorisation and fraudulently using Allan Gray’s name to solicit funds from consumers. The FSCA urges anyone transferring money to bank accounts to be extremely cautious and always obtain proof that the bank account they are dealing with is registered in the name of the entity to which it claims to belong.

The bottom line is don’t give your hard earned cash away to people on WhatsApp, Facebook or any other social media platform.

And as always, remember that if it sounds too good to be true, it certainly is.

This article first appeared in City Press.