- The National Consumer Tribunal has fined Gauteng-based Up Money R1 million for running a pyramid scheme.
- Up Money promoted itself as a grocery stokvel, but members’ benefits depended on how many other members they recruited.
- In just two months last year, Up Money received more than R42 million in membership fees.
- For more articles, go to www.BusinessInsider.co.za.
Up Money, which promoted itself as a grocery stokvel, was found to be a pyramid scheme and fined
R1 million by the National Consumer Tribunal (NCT) on Monday.
Members had to pay a one-off fee of R180 and recruit five
new participants to be part of the scheme and receive a meat or grocery pack. The size of the packs depended on their “level” in the
club, which in turn depended on how many people they recruited.
The Gauteng-based scheme had some 230,000 members and in
the two months to July last year received more than R42 million from membership
fees, Fin24 previously reported.
But an investigation by the National Consumer
Commission found Up Money operated as a pyramid scheme, and Fin24 also reported that
many members did not receive their grocery packs, despite paying membership
Last year, the NCC, together with the Financial Intelligence
Centre and the Asset Forfeiture Unit, obtained preservation orders from the
Gauteng High Court to freeze Up Money’s bank accounts that
contained more than R18 million in cash. Several luxury vehicles, including a
Jaguar XKR Coupe, Hummer H3 and an Audi TT were also attached.
Up Money’s only director is Jude Matsimela,
who launched a legal bid to unfreeze the accounts.
“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,” said Trade, Industry and Competition Deputy Minister, Nomalungelo Gina, who
welcomed the R1 million fine. “Up Money’s business model was unsustainable as it
relied heavily on new participants feeding into the scheme.”
scheme is an arrangement where participants receive a benefit derived from their recruitment of other members, rather than the sale of any goods or services.
Acting National Consumer Commissioner, Thezi Mabuza, said
pyramid schemes continue to “mushroom on a daily basis” in South Africa, especially via social
“We want to reiterate to
consumers that all involved; the directors, the promoters (the ones advertised
and recruited on social media and other platforms) and all those who joined Up
Money, broke the law. We want to send a strong message to operators of schemes,
arrangements or practices like Up Money that as the consumer protector in the
space, we will not tolerate the contravention of the Act,” Mabuza said.
Up Money has been given 20
working days to pay the fine.