Consumer Commission lays charges against Up Money, attaches luxury vehicles

Activists are battling misinformation about coronavirus spread on social media platforms such as WhatsApp. AFP/File/Lionel BONAVENTURE

More than 230,000 investors were conned by the pyramid scheme, and bank accounts holding over R18 million were frozen.

The National Consumer Commission (NCC) has confirmed that WhatsApp gifting is illegal in South Africa under Section 43 (2) of the Consumer Protection Act (CPA), and as has been operated by Up Money.

The NCC said WhatsApp gifting was illegal due to it being declared as a pyramid scheme, which is neither registered with the Reserve Bank, a registered stokvel, nor a financial services provider, and mainly used social media to recruit members.

Earlier last month, South Africans were seen engaging in the Up Money financial scheme, with many of its participants insisting that WhatsApp gifting was not a pyramid scheme or financial scam.

National Stokvel Association of South Africa’s Andrew Lukhele warned that there were no rules governing WhatsApp operations, which increases one’s risk of losing large sums of money.

Speaking during a media briefing on the pyramid schemes, the NCC said WhatsApp gifting was a challenge to investigate due to people not lodging complaints against it.

“The challenge is that this gifting happens in closed communities and therefore people don’t normally lodge complaints.”

READ MORE: WhatsApp stokvels expose how Ponzi participants ‘more likely’ to defraud employers

Deputy National Director of Public Prosecutions and head of the Asset Forfeiture Unit (AFU) of the National Prosecuting Authority (NPA), Ouma Rabaji-Rasethaba, also confirmed that there would be prosecutions in relation to the Up Money pyramid scheme which defrauded more than 230,000 investors.

Rabaji-Rasethaba said the criminal charges may include fraud and contraventions of various sections of the Prevention of Organised Crime Act (POCA).

“The sections might be racketeering, money laundering, fraud, theft, assisting another to benefit from proceeds of unlawful activities and acquisition, possession or use of proceeds of unlawful activities, as well as assisting another to benefit from proceeds of unlawful activities,” she said.

She said the High Court of South Africa had granted the AFU preservation orders to freeze bank accounts worth more than R18 million and a number of luxury vehicles.

“These are associated with Jade Matsemela and Sipho Martin Mdlhuli, they are respectively the director and former director of Up Money (PTY) Ltd and Uniitco (Pty) Ltd.

“Three luxury vehicles were also attached, an Audi TT, a Hummer H3 and a Jaguar XKR Coupe. These cars were bought directly with funds from the Uniitco (Pty) Ltd (Uniitco) bank account,” she said.

Rabaji-Rasethaba continued to say that the application by the AFU was part of the interventions by the NCC and the Financial Intelligence Centre (FIC) to salvage more than 228,900 investors who were defrauded in the multi-million rand scheme.

She further said the pyramid scheme mainly used social media to recruit members.

“New participants were required to pay a once-off joining fee of R180. This qualified them for a meat pack. The new members were then required to recruit five other new participants; this process was termed level one.

“The original investor would then help the five he or she recruited to sign up their five new members each. This would then ensure that the original recruiter moved to level 2 whose benefits were a meat pack, groceries and R500.

ALSO READ: The difference between a WhatsApp stokvel, WhatsApp gifting and a traditional stokvel

“When those on level one were moved to level two by their recruits, the original organiser was pushed to level three. When here the investor received level two benefits plus R3,000.

“The new participants made up the base of the pyramid and provided funding for participants who were recruited earlier. Those who joined earlier were pushed to the top by the new recruits. Thus, pyramid schemes like Up Money are also loosely called push-push,” she added.

The advocate said more than R12.5 million was blown through purchases at retail stores and buying the three luxury cars although the scheme had received R42,720,501.82 between 4 May 2020 and 2 July 2020.

She said the NCC was alerted to the pyramid scheme by a complainant from East London.

“The commission’s investigation revealed that Up Money contravened the CPA by promoting and causing members of the public to join and participate in a pyramid scheme.

“Following requests from the NCC, the FIC traced how the funds were laundered through various methods, accounts and transactions,” she said.

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