-
-
  • 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 fees.

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.”

A pyramid 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 media platforms.

“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. 

Receive a daily news update on your cellphone. Or get the best of our site emailed to you

Go to the Business Insider front page for more stories.