Pyramid and Ponzi Schemes in Zimbabwe

Pyramid and Ponzi Schemes in Zimbabwe have defrauded tens of thousands of people, reports say.^[1]

What is a Pyramid Scheme

A pyramid scheme is a setup where fraudsters make money solely by having new participants recruited new participants into a program at various levels. For example, 1 person recruits 5 people who pay a joining fee, and those 5 people are required to recruit 5 people each, making it 25 members. The 25 members then have to recruit 5 people each making it 125 people, and so on. The joining fee paid by each participant is used to pay all the people who joined at an earlier level with the owners of the scheme benefiting by being first.

A pyramid collapses once the entity running the scheme is unable to sustain itself by failing to attract enough new investors to pay off earlier investors.

What is a Ponzi Scheme

A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest one's money and generate high returns with little or no risk. Returns range from as high as 25% to 100% guaranteed interest within a month. The people running the scheme do not invest the money in any actual products or assets but they use it to pay those who invested earlier while keeping some for themselves.

A Ponzi scheme only survives as long as there's a constant flow of new members (and therefore new money). Once there are not enough members to recruit, the scheme collapses as there will be no money to pay the older investors.

Ponzi schemes are named after a US fraudster, Charles Ponzi who, in the 1920s, convinced people to invest in a fraudulent postage stamp speculation scheme.

List of Pyramid Schemes in Zimbabwe

E-Creator Zimbabwe

E-Creator Zimbabwe started running in Zimbabwe in February 2023. it was managed by an individual called Abraham Mutambu. Members would join by downloading an app, signing up using the referral code of the recruiting person and then paying US $10. They would then be paid money for posting fake reviews on e-commerce sites. Recruiting more people and depositing more money would raise one's level in the pyramid scheme and also one's returns. The scheme managed to make itself look legitimate by sponsoring articles describing itself as legitimate in prominent publications such as NewsDay and iHarare. However, other publications, warned that it was a pyramid scheme.

African Business Women Association (ABWA) Zimbabwe

Led by one Dr Shamiso Fred, ABWA presented poultry and dairy farming investment opportunities and some 2000 members joined. The Zimbabwean-operated scheme had members in Australia, Canada, USA, UK, South Africa, an Zimbabwe among other countries. Investment packages were:

Invest US$1036 in one Batch 100 chickens and receive US$250 per month for 22 months
Invest US$2000 in one dairy cow and receive US$450 per month for 48months
Membership fee US$39

A publication, NewZimbabwe.com heard of cases where a retired nurse invested US$18,000 of their savings in the scheme, while a support worker said they invested US$6,000. Members received their monthly payouts until they suddenly stopped in August 2022^[2]

Beven Capital

Beven Capital (also spelt Bevern), was an investment firm and Ponzi scheme that crashed in mid-2020. The company operated by offering investors a guaranteed 50% return in just 6 weeks. When the scheme crashed the police arrested one of the directors of Bevern Capital, Richard Samunda. it is not clear if his accomplices called Bevern Dzinoenda and Ambrose Chikukwa were also arrested.

MMM Zimbabwe

The scheme was operational in Zimbabwe around 2016. The scheme operated by asking people to join and help others with money. One would join, deposit money, and then transfer that money to others. They would also 'request help' to have money transferred to them at some point. It worked by ensuring that there were new members joining who would transfer money to the older members. The scheme was described here by Techzim:

The whole concept was to use “spare money” and this is probably the gospel your guiders preached throughout your participation but the truth is many participants succumb to the lure and excitement of earning “free money” at 30% interest just because you helped someone and at some point you would need help too.

The Reserve Bank of Zimbabwe identified MMM Global Zimbabwe (MMM) as the biggest pyramid scheme to have scammed investors in Zimbabwe.^[3]

Other Schemes

Bitcoin Interchange Zimbabwe where 43 people reported being swindled of US$765,935.
Delight Credit is under investigation for the loss of US$100,000
Elamant Global which we reported on last year swindled “investors” of US$80,000 and an additional R150,000
Manifest Global Marketing is accused of ripping off 902 people of US$1,500,000
Eaul Peter Capital’s scheme robbed 600 people of US$843,000
Madzimai Akarongeka made off with US$23,300
KDW Investments defrauded 1,590 people of US$192,000
Cryptal Shares allegedly swindled 5 people of US$5,000
May Investments is under investigation concerning US$5,000 it took from two people
Beyond Credit is also under investigation for defrauding sixteen people of US$24,500
Seke High School Teachers Pyramid scheme (1996)^[4]
Goezing Pawnbrokers (2013) run by George Zingane ^[4]
Crypto Currency Share Investor Scheme (2021) run by Martin Mhlanga aka Boss Martin. ^[4]

Pyramid and Ponzi Scheme Warning Signs

Many Ponzi schemes share these signs:

Very high returns with little or no risk. It is extremely rare for an investment to guarantee high returns without any risks. In fact, higher returns usually come with very high risk. People, therefore, have to be suspicious of any “guaranteed” returns.

Company not rgistered with appropriate authorities Investment firms in Zimbabwe have to register with the Securities and Exchange Commission of Zimbabwe (SECZIM). While Ponzi Schems in Zimbabwe may be able to register their company and even open bank accounts and get tax clearance, historically, all of them without exception have not been able to register with the investment industry regulator SECZIM. Asking an investment company for the SEC Zim registration certificate is therefore very important if in doubt. Additionally, if a company is asking for one to deposit money, or is saying it offers credit opportunities, as financial service providers they also need to be registered with the Reserve Bank of Zimbabwe.

Emphasis on recruiting. Pyramid schemes survive on the constant flow of new members, who typically join for a fee. If a program focuses solely on recruiting others to join the program for a fee, it is likely a pyramid scheme. Usually, members get more money for recruiting others than for product sales.

Recruitment without a product or clear value in product. Usually, pyramid schemes have no genuine product or service provided. Sometimes, when there seems to be a service, it's not clear how the product has value for anyone.