According to the Ministry of Internal Affairs of the Republic of Kazakhstan, 163 criminal cases were registered in May 2022 under Article 217 "Creation and management of a financial (investment) pyramid", which is almost half more than in January of this year (91 criminal cases).

Responsibility for the creation of financial pyramids in Kazakhstan will be tightened, and criminal liability will be established for advertising. The bill that will regulate this has been approved in two readings by senators and sent for signature to the Head of State.

There are many varieties of modern pyramids today, but they work according to a single principle – funds for them come from the constant attraction of new participants. As soon as the flow of people and money ends, the pyramid collapses. Fingramota.kz interviewed experts who told us on what signs deception can be detected, and gave their recommendations.

– Deceived depositors, having trusted the organizers of financial pyramids, lose their savings. For example, there is currently a high–profile trial in Aktobe in the case of four financial pyramids - these are "Estate Pawnshop", "Nurali Capital", "Profitable Loan" and "Guarantor 24". More than 17 thousand people from all regions of Kazakhstan were recognized as victims. According to the police, the amount of damage caused amounted to more than 30 billion tenge. Many of the victims sold their last homes, cars and immediately invested in pyramids in the hope of quick and easy earnings. The organizers of the financial pyramid promised high interest rates – from 35 percent per month for investments, but only the first participants were allowed to earn extra money, and the rest were fed with promises. In order to involve the maximum number of people in the pyramid, active and aggressive advertising was carried out in the media, in social networks and through well–known bloggers," says Nurken Shardarbekov, representative of the Public Foundation "Financial Culture of Kazakhstan", the project Stop-piramida.kz .

According to him, citizens stood in queues for half a day to voluntarily give their funds to unknown people. He complains that citizens rarely check information about various online investment projects on the web, as well as whether "financial companies" have a license on the website of the Agency for Regulation and Development of the Financial Market of the Republic of Kazakhstan (Agency).

"One victim from Kyzylorda invested the last 700 thousand tenge in the financial pyramid in 2020, while he stood in line for several hours. A woman ran out of the office in front of him, as the buyers of her car drove up, quickly sold it and immediately ran back with the money, handing it to the organizers of the pyramid. And in 2021, the same person from Kyzylorda got into the networks of telephone scammers who issued loans for him totaling 22 million tenge! Now all his property – an apartment, a car – are pledged to credit institutions that require him to pay off loans. He was left without means of livelihood and without a family," says Nurken Shardarbekov.

INVESTING IN NOWHERE

– In general, all that can be called a pyramid is when the funds of attracted depositors are sent to pay those who were in the first queue, but there is no real business, – says Alexander Dronin, Deputy Chairman of the Management Board of BCC Invest JSC.

The founders of the financial pyramid promise investors high returns, which cannot be maintained for a long time. And the repayment of the obligations of the pyramid to all participants is obviously impossible.

He notes that financial pyramids skillfully disguise themselves as any organization. They often position themselves as an investment company. In their advertising, they use the slogans: "promising business", "high-tech company", "innovative project". Also, scammers disguise themselves as management companies, consumer cooperatives, bookmakers, etc.

– More and more pyramids are being created in social networks and messengers. Therefore, be careful if you are invited to join various chats, a general conversation on social networks. You can get into an online pyramid, - warns A. Dronin.

He gives an example: scammers create a chat in a popular messenger, actively attract users to it and offer to invest in a "very profitable business". Let's say you deposit 70 thousand tenge, wait a week while your money is allegedly spinning on the Western securities market, and then get 150 thousand tenge. And if you attract two participants, the amount of dividends will increase. Someone starts writing to the chat that he has already made a profit and advises everyone to invest too. When a certain amount of money is collected, the scammers delete the chat and disappear with all the "starting" money of would-be investors.

The so-called "investment sites" are no less active than social networks and messengers.

– Basically, there is now a trend of advertising investments in cryptocurrencies. Fraudsters create an investment website and report that they allegedly legally trade cryptocurrencies, shares of foreign companies, jewelry, tourist vouchers or other services and goods," says Yerkebulan Koishibayev, senior operative for particularly important cases of the Almaty Police Department. – At the same time, they write that they employ high-class specialists who have been investing in cryptocurrencies for 10 years and are making a big profit. Therefore, they say they also want you to have income, and offer to invest in their company."

Yerkebulan Koishibayev explained in detail how a standard fraudulent scheme works through an "investment site": "You create your account on their website, enter data, deposit funds, mainly through electronic wallets, for example, Qiwi or AdvCash service. Go to your personal account on their website, deposit 10 thousand dollars to your account.

The next morning, a representative of the company calls you, who confirms the receipt of money and tells you where his investments will be directed and what profit he will receive. Scammers, they are also social engineers, play on human emotions, the desire to get rich quickly. "You are our favorite customer, your dividends are growing, and soon you will be rich," they promise. After a week or a month, the investor sees not 10 thousand, but 50 thousand dollars on his account. That is, scammers draw a graph of their clients' income on the site. Those who want to withdraw their money cannot do so. Although there is a "Withdrawal of funds" button on the site, but in fact it does not work. Representatives of the company to withdraw funds are asked to pay for the services of a notary, lawyer, lawyer, or at customs, etc. This happens until the person realizes that he has fallen into the trap of scammers."

WHAT KIND OF WORK IS BEING DONE TO COUNTERACT THE FINANCIAL PYRAMID?

In 2020, the Agency created a collegial body, whose activities are primarily aimed at developing effective measures to identify financial pyramids and terminate their activities. This is an interdepartmental working group, which includes representatives of the Agency, the Prosecutor General's Office of the Republic of Kazakhstan, the National Bank of Kazakhstan, the Ministry of Internal Affairs of the Republic of Kazakhstan, the Agency for Financial Monitoring, as well as the Ministry of Information and Public Development of the Republic of Kazakhstan, says Maksat Shagdarov, Head of the Agency's Financial Market Abuse Management Department.

According to him, the Agency regularly informs law enforcement agencies about identified organizations with signs of a financial pyramid. So, since the beginning of 2022, information has been sent on 14 subjects to the Agency for Financial Monitoring of the Republic of Kazakhstan (in 2021 – 73) and on 36 subjects to the Ministry of Internal Affairs of the Republic of Kazakhstan (in 2021 – 135).

The Agency has also compiled and is constantly updating a list of organizations that have signs of unfair activity. Currently, the list includes 154 entities whose activities are outside the perimeter of financial licensing and regulation.

The list is formed on the basis of consideration of appeals and complaints of individuals and legal entities, interaction with state bodies and public organizations representing civil society institutions.

In this regard, financial transactions with organizations listed in the Agency's list may carry increased risks of loss of invested funds for citizens, M. Shagdarov warns.

HOW TO RECOGNIZE A PYRAMID SCHEME?

Pyramid builders can attract with bright advertising, throw dust in the eyes, showing beautiful pictures of a comfortable life, invite to offices, showing colorful presentations and arranging various practical jokes. According to M. Shagdarov, in 2021, in order to prevent the identification of entities with signs of financial pyramids, the Agency has developed a list of 39 signs of financial pyramids. He lists the main ones.

The first sign is the lack of a license from a financial regulator. It should be known that financial pyramids do not belong to financial organizations and do not have an Agency license to accept deposits, open and maintain bank accounts of individuals, as well as to operate on the securities market, respectively, they are not controlled by the financial regulator.

"If an organization is registered abroad, this is not a reason to trust it. Make as many inquiries as possible about this company, its managers, and projects. You can check the business reputation of the company by publications in reputable media specializing in economic and financial news. Look for independent reviews on the web, and not those offered by the company," advises M. Shagdarov.

The second sign is the guarantee of ultra–high profits and the promise of remuneration for the clients brought.

– Do not believe if you are promised inflated interest rates, and sometimes daily income, as well as bonuses for each person you bring. This is a clear sign of a pyramid scheme. Are you guaranteed profitability? This is already a wake–up call, so they are trying to lure you into a dubious project," says M. Shagdarov.

The third sign of a pyramid scheme is anonymity, the lack of specific information about the founders and managers of the company or project.

– Very often, financial pyramids declare that they conduct their activities in areas that are associated with high profitability: oil production, gold mining, construction, microfinance activities, the Forex market. You should be alerted if companies cannot provide information about the funds raised and other reporting. For example, if a company is organized in the form of a legal entity, then constituent documents should be posted on its website, but the pyramid does not have this, – M. Shagdarov notes.

OTHER SIGNS OF FINPYRAMIDS ARE

– aggressive advertising on the Internet, messengers and social networks;

– the use of words and phrases in the name, symbols, advertisements that make them look like well-known companies, brands;

– the absence of an office or the presence of a nominal office, for example, at the place of registration of a legal entity or the place of residence of an individual;

– registration of a company offshore (Cyprus, Seychelles, Belize, etc.);

– investments in non-existent assets or projects, with the promise of payment of guaranteed income significantly exceeding the market level;

– the contract is formulated in such a way that the company, individual or public project has no obligations to the investor. Or the contract is formulated in such a way that it becomes impossible to return funds, even in the event of termination of contractual relations and non-fulfillment of obligations, etc.

WHAT SHOULD I DO IF YOU GOT INTO A FINPYRAMIDE?

First of all, try to withdraw your money from the pyramid. Its organizers will convince you to stay, promising fabulous profits, or they can intimidate you with fines, lawsuits. If the pyramid was organized recently, and its organizers are afraid of publicity, then they can allow you to withdraw your money. But it is often impossible to return the money invested in finpyramids.

Be sure to report the pyramid scheme to law enforcement agencies, prepare evidence that you transferred money to fraudsters. This may be a contract, bank account statements, screenshots of correspondence with the organizers. Write statements to the police and the prosecutor's office with a request to investigate. Even if you fail to get your money back, then perhaps you will become a person who will achieve justice – the pyramid will be found, disbanded and other people will not fall into the same networks as you.

The main advice not to get caught in the network of financial pyramid schemes is to improve your level of financial literacy, attend specialized courses, read literature and articles on this topic. For example, on the website of Fingramota.kz has a section "Beware of scammers", in which you can get acquainted with useful information on the topic of countering financial pyramids.

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