In the Charles Dickens 1844 novel’ Martin Chuzzlewit, ‘Tigg Montague started a Company, which pays off early policyholders’ claims with premiums from more recent policyholders.
It was here a classical ponzi scheme was first described. A pyramid scheme recruits members via a promise of payments for enrolling others into the scheme.
A Ponzi scheme promises returns on “investments,” but which are actually paid for by new investors.
NIS reflects this.
Money from new investors (taxpayer) is used as payout to older investors (retirees).
With the increasing elderly population and decline in younger workforce this program now has major challenges.
At the beginning of this month persons rushed to receive ‘blessings ‘or double returns on their investments ,if they brought in two other members in the “Blessings Overflow” pyramid group. This crashed, leaving many persons in turmoil.
Failure of pyramid schemes caused rioting and unrest in 1997 in Albania, and in the town of Lucea in Jamaica , four police officers had to be hospitalised and five police vehicles were damaged in 2001.
Four days ago persons threatened to march to the police station to recover $22million which police seized from the Drug Sou Sou scheme in La Horquetta.
The police returned the money? Was it due to a fear of rioting? A legal misstep in seizure?
Gary Griffith and the public are waiting for some answers.
Would the pastor who had some money seized with the demonetization of the hundred dollar bill now expect similar treatment ?In July this year in the U.S. District Court for the District of Columbia, prosecutors had to approach the court to get formal ownership of $6.5 million assets seized in the “Banana Fund” cryptocurrency Ponzi scheme.
Yes there fraudsters who must be punished but one must distinguish between the sou sou and ponzi /pyramid schemes.
Soy Sou ,partner (Jamaica )or paluwagan (Philippines )has been a help to the poor who find themselves shut out of the traditional financial institutions.
Some people were able to build a house, start a business, and get out of economic oppression.
With the Covid economic downturn, sou sou may be a saviour to some.
The lure of quick riches, a jump start of your dreams and greed were some of the same reasons persons invested in CL Financial.
Persons took a risk going after 8 to 13 per cent interest rates.
In 2011, the then Attorney General Anand Ramlogan said CLICO had been operating an ‘elaborate Ponzi scheme’. ‘The intervention by the authorities coming down under section 44D in January 2009 was too late.
There was oversight and governance failure across the board, and questions must be asked of the regulators, auditors, executives and, of course, the previous administration under whom this all unravelled.
The then Prime Minister Kamla Persad-Bissessar said “Do you remember the pyramid? Now we are hearing about Ponzi schemes and so on. This here was the CL scheme, and what it was really is to take people’s money in non traditional investments, push it out there in very risky investments to try to get a very high rate of return and, of course, like a pack of cards, it collapsed.”
$24 billion of taxpayers money were spent to bail out the CL Financial group ,revenue that could have been used to increase the salaries of public servants, fix roads, hospitals, buy medicine etc.
Some argue that the government had no choice because of the size of the company in relation to the national economy, others speculate that the deal struck was a result of the relationship of key members of CLICO’s management with both the government and opposition members.
In ‘Ponzimonium’-How scam artist are ripping off America, author Bart Chilton stated.
“In many countries there is a notable absence of political and popular support for regulatory actions to close down Ponzis because of the carefully crafted public persona of the scheme-operators. Regulators in developing countries are further constrained by a lack of the requisite tools, resources and sometimes political independence to cope with such schemes.”
Bernie Madoff in the USA with his 64 billion Ponzi scheme and Allen Stanford who used millions of US dollars of depositors’ money to dramatically transform T20 cricket are both serving prison sentences.
With the CL Financial collapse in 2008 , I am still waiting to see some of the main players answer to us.
Justice must be dispensed equally, the wealthy and the powerful cannot be seen to escape while 9 persons who were charged in La Horquetta take a fall.