Another lesson learned from Manna Ponzi scheme

 

This is the second in a series about the lessons we learned from the Manna ponzi scheme which resulted in over $10 million US losses from more than 800 investors.

Lesson #2: A key component of this fraudulent scheme was the use of existing investors to bring in new investors. They were called ‘affiliates’ or ‘consultants’, and were paid one-time bonuses of between 10 and 15% of the amount invested by the new investor, as well as a monthly percentage of the amount invested by the new investors and, for a short period of time, on the amount invested by any investor brought in by the new investor. 

This pyramid structure of a ponzi scheme is an essential component to any successful ponzi scheme. Another consequence of the pyramid structure is that often the person brings in friends and family, unwittingly including them in a fraudulent scheme, which ultimately results in devastating financial losses for them. At the Manna hearing, one witness testified that he felt he had betrayed the trust of two friends and that he had been robbed by a ‘collection of thieves’.

Recent research tells us that the first casualty of fraud is the victims’ trust in other people, investments and financial markets. Not surprisingly, Canadians agree that the impact of investment fraud can be just as serious as the impact of crimes like robbery and assault.

The lesson learned here is if you are involved in an investment scheme that gives you a financial incentive to invite more investors to participate, think twice. It has all the earmarks of a ponzi scheme. You should walk away from it as quickly as possible. Tell friends and family to do the same.