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Published on December 7, 2007

The schemes solicit people to make an investment in their products and promise hefty but unrealistic returns. If you happen to be an early bird, you'll get returns that the dealers have got from participants who join the schemes later on. This creates excitement among the latecomers. The scheme works only if there is an unlimited stream of new participants joining the network.

But somewhere along the line, the scheme will break down because the money you put in has never been invested properly for the returns. It relies solely on the contributions from latecomers. In the end, the dealers walk away, saying thank you very much.

Khunying Dhipavadee Meksawan, the PM's Office Minister, chaired a meeting on this critical social problem yesterday. Among the concerned agencies taking part were the Consumer Protection Board, the Department of Special Investigations, the National Police, the Finance Ministry and the Anti-Money Laundering Office. In the end, they all signed a memorandum of understanding and pledged to work together to get rid of pyramid share schemes.

From now on, when someone lodges a complaint with the Consumer Protection Board over damage suffered from a pyramid share scheme, the board will pass the complaint on to all other agencies for further action. The authorities will from now on try to educate the public and launch campaigns to raise awareness about the risks of investing in such schemes.

Recently, the authorities have gone after two major pyramid schemes.

Easy Network Marketing, which appeared at a trade exhibition at Muang Thong Thani's Impact Arena, launched a rice seed scheme. People were told if they invested Bt1,200 to buy 35 kilos of rice, they would get half the money back in five days. Within 30 days, it was promised they would get the principal back. From then on, he or she would begin to see monthly profits.

Hundreds of people fell for this rice seed scheme, which soon raised some Bt1 billion in cash.

It was a similar story was with Bangkok Noodles. People were told invest Bt45,000 in the company and you will get two big pots for making noodles. And over the next 10 months, you will see returns of Bt10,000 a month.

People invested in this scheme without having to sell real noodles. Actually, there were no Bangkok Noodles for anybody to buy and eat. It was simply a fictitious noodle scheme which, again, relied on the cash contributions from latecomers to finance the profits of the early birds. It was only a matter of time before the dealer was laughing, all the way to his bank. And, only a matter of time before the late investors realised they had been taken for a ride.

The police have already arrested the masterminds behind both these scandals. Yet there more of these scammers still operating all around the country.

Incidentally, one of my friends just sent me a story similar to these pyramid schemes. It is an age-old trick. The story goes as follows:

"Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for Bt10. The villagers, knowing that there were many monkeys around, went into the forest and started catching them. The man bought thousands at Bt10 and as supply started to diminish, the villagers reduced their efforts. The man then announced he would buy at Bt20 per animal. This renewed the villagers' interest and they started catching monkeys again. Soon the supply of monkeys diminished even further and people started going back to their farms.

"The man then increased his offer to Bt25 and the supply of monkeys became so poor that it was an effort to even see a monkey, let alone catch it. The man then announced he would buy monkeys for Bt50! However, since he had to go to the city on business, his assistant would now buy on his behalf. In the man's absence, the assistant told the villagers: look at all these monkeys in the big cage that the man has collected. I will sell them to you at Bt35 and when the man returns from the city, you can sell them to him for Bt50. The villagers came up with all their savings to buy the monkeys. And they never saw the man or his assistant again, just monkeys everywhere.

"Welcome to the Market!"

Well, we see this money making scheme happen every day in the stock market. The only difference is, in the stock market, it's legal.

Thanong Khanthong

The Nation