“While it is true that all investments are risky, an entity that is not an authorized financial services provider should be considered a very high risk. Its nature is often deceptive and is likely to result in losses for customers, which will not be recoverable.
That’s how the Financial Sector Conduct Authority (FSCA) said on Tuesday in a statement raising the red flag over the Crowd1 entity.
It comes after media reports that this entity, which calls itself a cross-border marketing firm operating online, has all the features of a pyramid scheme.
Several South African celebrities, such as Springbok rugby players Jacques Potgieter and Eben Etzebeth, are members of the scheme.
“Crowd1 is not an authorized financial services provider. There is also no evidence that the entity has applied for a license with the FSCA, ”the statement states.
A unit of the Reserve Bank is currently investigating the entity. The Bank of Namibia recently banned Crowd1 after it was found to be a pyramid scheme that would eventually collapse, reports Business Insider.
In terms of the Financial Sector Regulation Act, the FSCA is required to regulate and investigate any entity providing financial services.
He called on the public to do business only with financial entities registered with them and under the Companies Act.
Several Crowd1 South African members have strongly denied that there is anything obscure about the scheme and believe there is a misconception about what Crowd1 entails.
However, Magnus Heystek, a seasoned investment advisor, maintained that the scheme had all the features of a pyramid scheme.
According to him, people who join for a lump sum of around R2 000 are turning a rat’s eye because the entity does not resemble a traditional pyramid scheme. Still, he says it’s simply an online version of it.
“With the internet, the scheme spreads like a virus, but somewhere the bus will stop and people will lose money,” Heystek said.
The FSCA further asks the public to always be vigilant when approached by a person or entity presenting an investment opportunity.
“It’s also important to remember that if something sounds too good to be true, it probably is. It is wise to always consider respected financial institutions that can be held accountable for your money. ”