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WhatsApp gifting: An old trick in a new dress

On the rise: The WhatsApp gifting scam is going viral PIC: KENNEDY RAMOKONE
Despite threats that promoters and members of the rising WhatsApp gifting scheme could face P100,000 fines and/or five years in jail, its popularity on local social media is taking off like wildfire. Experts speak to Staff Writer, MBONGENI MGUNI and say the new craze will end in tears

In their different incarnations over the years, pyramid schemes and similar cons have had the same hallmarks. They rely on the continuous recruitment of new members to reward older ones and at some point, they inevitably become unsustainable and collapse, leaving many penniless and without hope of any remedy.

Whether it is the sale of products that require continuous recruitment of new sellers, or an investment scheme that constantly requires new investors and huge ‘training’ costs, pyramid schemes also share the promise of simple access, high returns and low risk.

Another commonality is that many spread by word of mouth, which ingrains them with a level of trust that promoters are often quick to exploit. Catchphrases such as “It’s our turn to empower ourselves,” “ask me how,” “don’t let the rich discourage you,” appeal to the sense of belonging and safety in numbers that fan the flames of pyramid schemes.

In the 1990s, pyramid schemes roared through Southern Africa branded as novel investment schemes and playing on low financial literacy, desperation and a level of greed. Despite getting their fingers burnt, the generation who endured that period apparently did not learn its lessons as it comprised the majority of the victims of newer age scams such as the Eurex Trade con.

Where the damage of those yesteryear scams was limited by technology, leaving the word of mouth to literally travel via ‘over the fence’ neighbourhood conversations, today the fallout from pyramid schemes is practically limitless and borderless thanks to the advent of social media.

“These scams are nothing new but what’s changed is social media,” says the Consumer Watchdog’s, Richard Harriman.

“Previously scammers had to try very hard to find victims, sending emails to vast mailing lists of potential victims.

“Today a post on Facebook can be easily seen by 100,000 in minutes.”

WhatsApp gifting, as the name implies, uses the popular social platform to form groups where new members pay older ones to sign up and so on. The most popular ones circulating at the moment promise a P600 payout for a P100 ‘investment’ but there are others with ‘entry fees’ as low as P10.

The WhatsApp group promotes ‘belonging’ and ‘security,’ an element its promoters further exploit by likening the scam to the traditional cooperative savings arrangement, motshelo. WhatsApp as a platform is easily accessible.

The returns are high, the risk appears small. The scam is riding on a new platform, but the trick is old.

Harriman believes the other factor enhancing the allure of the new WhatsApp gifting scam is that it comes at a time when many people’s incomes are under pressure due to the coronavirus (COVID-19) pandemic.

“I also think that COVID-19 has had an impact. Many of us are having trouble making ends meet and are much more likely to fall for the suggestion that we can make some extra money with little effort.

“These scammers are preying on the desperate and they deserve to face the wrath of the law,” he says.

The promise of quick and high returns are proving simply irresistible for many and the sign-ups to groups are ballooning. On social media, those involved in WhatsApp gifting say they are members of multiple groups and claim to be harvesting frequently “from the comfort of my home”.

“It’s hugely popular and I worry that thousands, maybe tens of thousands of people will fall for it,” says Harriman, who expects that five out of every six people who join WhatsApp gifting will lose money.

“Unfortunately, this is nothing new.

“Many of the same people fell for the Crowd1 pyramid scheme, and before that GDN and many others. “That worries me a lot. Some people are repeatedly falling for similar Get Rich Quick scams without learning the simple lesson that there’s no such thing as miracle money.”

Crowd1 blew over Botswana recently, while the BitClub Network scam defrauded its victims of more than $722 million around

the world, including on local soils.

Harriman, who frequently crosses swords with promoters of various scams on the Consumer Watchdog’s popular Facebook page, says WhatsApp gifting is quite clearly a pyramid scheme.

“There are several clues that it’s a scam.

“Firstly, the numbers don’t work out. You join by paying P100 and then encourage six other people to join and you get the money they pay.

“How is that sustainable?

“Every generation will need to hire six times as many people for this to work. There aren’t enough people available to keep this going unless people keep on re-entering and keep the money flowing. Five out of six people will lose money from this scam.

“The other clue is that this only involves recruiting other people. There are no products or services on sale. That’s always a sign that it’s a scam. Real businesses have things they sell. Scams do not.”

He adds: “Another clue is that they claim that the scheme is a motshelo or stokvel, some sort of savings scheme. So why do they need to recruit so many new people?

And where is the money being saved? “This scheme just directly pays the money from later joiners to earlier people.

That’s not a savings or gifting scheme, it’s a Ponzi scheme.

“Finally, everyone should ask themselves this question when they’re asked to join a scheme like this. Why are they asking me to join? The answer is simple. People running these scams are trying to make money FROM you, not WITH you.”

Victims of previous schemes are either difficult to locate or prefer to speak on strict anonymity, which is another hallmark of pyramid schemes. Their promoters bank on victims being too embarrassed to speak out publicly.

In the case of Botswana, until recently, the only recourse for victims was to file a report at a police station. While by law, pyramid scheme promoters could be charged with theft by false pretences, history shows that barely any have actually been hit with the law.

Since 2018, however, the Competition and Consumer Authority (CCA) has been empowered to take action against both promoters and even members of pyramid schemes, using a tough Act that threatens five years in jail, a P100,000 fine or both.

The CCA’s communications and advocacy director, Gideon Nkala says an investigation is underway to identify promoters and members of the WhatsApp gifting scam.

“We have been made aware of WhatsApp gifting and we are establishing where it falls under the law,” he says.

“The immediate task, however, is for us to go out and conduct strong public education on these schemes to help Batswana identify them and understand the dangers associated with them.”

Curiously, but in line with typical pyramid schemes, the CCA is yet to receive a report from any member of the public about WhatsApp gifting. No one has complained officially and in fact, the information the CCA has currently, has come from its own staffers’ observations from social media. Pyramid scheme members are typically tight-lipped at the beginning of the scam.

“Those involved may believe that nothing can happen to them because in the past, these scams were run and nothing happened,” says Nkala.

“However, these activities are unlawful.

The legal regime has changed and there are stiff penalties.”

Harriman, meanwhile, believes it’s up to Batswana to take on the WhatsApp gifting scam themselves.

“We don’t need to wait for the authorities to take action, we can do that ourselves,” he says.

“In a recent poll in the Consumer Watchdog Facebook group, 96% of members said they could easily see that WhatsApp gifting was a scam.

“That’s a very good sign but it might not reflect the wider population.

“It’s up to all of us as friends, relatives, colleagues and neighbours to help stop the people we care about from falling for these scams.”

Sadly, all signs are that history will repeat itself and the tears will incessantly flow.


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