Three people have been fined for promoting a “cash-gifting” pyramid scheme that targeted the Pasifika community in South Auckland.
The scheme, known as ‘6K Gifting Co-operative’ (6K), ran in 2020 and 2021 and saw legal action taken by the Commerce Commission.
It is estimated that at least 240 people took part in the scheme and between $225,000 and $336,750 was invested by participants.
Associate Commissioner Joseph Liava’a said as the scheme was cash-based it was hard to measure the full financial impact and “evidence found during our investigation suggests that the scheme may in fact have been larger”.
The 6K scheme was promoted by Frances Saimone and Patricia Pousini through in-person events and posts on Facebook as a ‘family and friends’ group which linked to the tradition of gifting to support each other in Pasifika communities.
Saimone told participants “We are not a pyramid scheme, first of all because a pyramid is illegal… gifting has been around since Adam & Eve”.
Hundreds of people were recruited into the cash-based gifting scheme with a promise of a return of up to $6000.
“Participants could ‘gift’ $750 individually or, if they did not have enough money to contribute alone, they could form a ‘syndicate’ and invest their pooled resources to gift $750 as a unit,” said Liava’a.
Those who made the initial $750 payment in any given 21-day cycle (initial investor) were required to recruit two new participants in the first week.
“Those two new participants were each required to invest or ‘gift’ $750 to the scheme, and recruit a further two new people themselves, and so on.”
“A total of 14 new members (either directly or indirectly) had to be secured over 21 days, if this wasn’t fulfilled, the initial investor received a smaller return.”
Liava’a said pyramid schemes often thrive in close-knit communities, including churches, because of the trust which exists within these groups.
Those who lost money in the scheme told the Commerce Commission that they joined to escape poverty and secure a better future for themselves and their children.
Saimone was the leader of the scheme and fined $33,306 in the Manukau District Court for her involvement and ordered to pay reparation of $1500 shared between two victims. Pousini was one of the main promoters and fined $10,200.
Feleti Halafihi was found guilty of failing to provide information regarding the scheme and was initially issued with a notice requiring him to meet with the Commission. He failed to do so and was fined $9000.
Pyramid schemes usually involve purchasing a membership or upfront payments into schemes promoted as “investment opportunities” and are illegal under the Fair Trading Act.
Only the few people on the top of the pyramid are likely to make money as the schemes are primarily based on recruiting members rather than selling goods or services to make money.
The schemes rely on constant recruitment of others which eventually collapse as it runs out of recruits.
“We saw with Shelly Cullen’s Lion’s Share how big these schemes can become – and how quickly they can trap victims. In that case, 150,000 participants worldwide lost a total of almost $17 million,” Liava’a said.
“No matter the size of the scheme, the main concern for us is the impact on the victims. The people who can least afford to, lose money in schemes like these.”
