- Up Money promoted its model as grocery Stokvel
- It collected more than R40 million in subscription fees
- Each member had to pay R180 and recruit 5 more members to qualify for benefits
The National Consumer Tribunal (NCT) has slapped Up Money (PTY) Ltd with an administrative fine of R1 million for running a pyramid scheme subsequently contravening the Section 43 (2) of the Consumer Protection Act (CPA).
Up Money promoted its’ model as a grocery stokvel in which they collected R42 million membership subscriptions in a space of two months last year.
Each member had to pay a once off fee of R180,00 and recruit five more members to join the scheme. In return the participants would be apportioned meat and grocery packs according to the ‘level’.
In a media statement released by the National Consumer Commission, Up Money lured investors under the pretext of a stokvel as explained by Nomalungelo Gina, Deputy Minister for the Department of Trade, Industry and Competition (dtic).
“While Up Money promoted their scheme as a “stokvel” to lure participants during the pandemic, the Tribunal confirmed that it is not a stokvel but, a pyramid scheme, as their operation fits the description of a pyramid scheme as provided under Section 43 of the CPA. Up Money’s business model was unsustainable as it relied heavily on new participants feeding into the scheme” said Ms Gina.
The National Consumer Commission had been conducting investigations into allegations of running a Pyramid Scheme in the case of Up Money . The Consumer Protection Act explicitly describes a Pyramid Scheme as an arrangement, agreement, practice, or scheme if participants receive compensation derived from their respective recruitment of other persons as participants, rather than the sale of any goods or services.
Last year, the NCC joined forces with the Financial Intelligence Centre and Asset Forfeiture Unit to freeze Up Money’s banks accounts which had more than R15 million and luxury vehicles.
The only company Director for Up Money is Jude Matsimela who rebutted to unfreeze the bank accounts.
Up Money has been given 20 working days to pay the R1 million fine for dealing in illegal operations. The NCC reiterates that South Africans should be more careful when exploring other means of earning extra income as they may fall victim to Pyramid Schemes.