Reserve Bank warns public not to invest in illegal pyramid schemes [1]
Monday, November 16, 2020 - 16:49. Updated on Monday, November 16, 2020 - 16:50.
The investment by Tongans in illegal pyramid schemes is concerning the National Reserve Bank of Tonga, which issued a warning to the public against participating.
“The Reserve Bank cannot assure the public of the risks involved in investing with various schemes that are now being introduced around the country,” it warned.
In a statement on November 12, the Reserve Bank alleged that some of these investment schemes are not licensed to conduct business in Tonga.
Investment companies are classified as “non-bank financial institutions” which the Reserve Bank may regulate and supervise under section 4A(k) of the National Reserve Bank of Tonga Act.
A Pyramid Scheme is an unsustainable business model that involves promising participants payment, services, or commissions, primarily for enrolling other people into the scheme or training them to take part.
“Pyramid Schemes are illegal pursuant to Section 3A of the Financial Institutions Act, which states that: Any person, who directly or indirectly, initiates, offers, advertises, conducts, finances, manages, supervises, or directs a scheme where profits earned by participants in the scheme largely depend on increases in the number of participants in the scheme or the size of their contributions to the scheme, commits an offense and such person shall be liable upon conviction to a fine not exceeding $1.000,000 or to imprisonment for a term not exceeding 30 years or both.”
The National Reserve Bank of Tonga warns – “If you wish to still participate in such a scheme, it will be at your own risk.”