ComCom Warns Of Pyramid Schemes After South Auckland Scammers Plead Guilty

The Commerce Commission is urging consumers to be wary of opportunities that seem too good to be true, after two individuals pleaded guilty in the Manukau District Court to charges related to the promotion of a pyramid scheme which targeted the Pasifika community in South Auckland.

Associate Commissioner Joseph Liava'a says pyramid schemes often thrive in close-knit communities, including churches, because of the trust which exists within these groups.

The Commission took Frances Saimone and Patricia Pousini to court after hundreds of people were recruited into the cash-based gifting scheme known as ‘6K Gifting Co-operative’ (6K) with the promise of a return of up to $6,000.

A third individual, Feleti Halafihi, was found guilty of failing to provide information regarding the scheme.

The scheme was promoted as a ‘family and friends’ group and linked to the tradition of gifting in Pasifika communities, as a way to support each other.

One of the promoters of the scheme, Frances Saimone sought to legitimise it, telling participants, “we are not a pyramid scheme, first of all because a pyramid [sic] is illegal….gifting has been around since Adam & Eve”.

Those who lost money in the scheme say they joined to escape poverty and saw an opportunity to secure a better future for themselves and their children.

“This was an important case for us to take. One of the Commission’s enduring priorities is to protect vulnerable consumer groups in New Zealand,” says Joseph Liava’a.

“We saw with Shelly Cullen’s Lion’s Share how big these schemes can become - and how quickly they can trap victims. In that case, 150,000 participants worldwide lost a total of almost $17 million.

“While ‘6K’ was on a much smaller scale, it has been hard to measure the full financial impact this scheme had on the victims as it was cash based.

“It is estimated that at least 240 people fell victim to this scheme and between $225,000 and $336,750 was invested into the scheme by participants. However, evidence found during our investigation suggests that the scheme may in fact have been larger.

“No matter the size of the scheme, the main concern for us is the impact on the victims. The people who can least afford to, lose money in schemes like these.

“This action and the recent prosecution of Shelly Cullen should serve as a warning to others who promote pyramid schemes,” says Joseph Liava’a.

Background

Pyramid schemes are illegal under the Fair Trading Act. They usually involve purchasing a membership or making an upfront payment into schemes that are frequently promoted as “investment opportunities”.

These schemes are primarily based on recruiting new members rather than selling goods or services to make money.

Pyramid schemes are unfair to majority of participants, only the few initial people at the top of the pyramid are likely to make money. Earning a financial reward is entirely based on the constant recruitment of others which is likely to be unrealistic for participants. These schemes always run out of recruits and eventually collapse, so most participants will end up losing their money.

6K Gifting Co-operative 

Ms Frances Saimone and Ms Patricia Pousini promoted the ‘6K Gifting Co-operative’ pyramid scheme to Pasifika communities in South Auckland during 2020 and 2021.

The scheme was largely promoted at in-person events and through videos and social media posts on Facebook.

Participants could ‘gift’ $750 individually or, if they did not have enough money to contribute alone, they could form a ‘syndicate’ and invest their pooled resources to gift $750 as a unit.

Participants who made the initial $750 investment in any given 21-day cycle (initial investor) were required to recruit two new participants in the first week. Those two new participants were each required to invest or ‘gift’ $750 to the scheme, and recruit a further two new people themselves, and so on.

A total of 14 new members (either directly or indirectly) had to be secured over 21 days, if this wasn’t fulfilled, the initial investor received a smaller return.

Ms Frances Saimone was overall leader of the scheme. In person events were led by Saimone, she was described in promotional posts on Facebook as the ‘founder’ and ‘banker’ of the scheme. Saimone was fined $33,306 for her involvement in the scheme, and was ordered to pay reparation of $1,500, shared between two of the victims.

Alongside Saimone, Ms Patricia Pousini was one of the main promoters of the scheme, including at in-person events on at least three occasions; and through Facebook (videos and social media posts) on at least 18 occasions. Pousini was fined $10,200 for her involvement in the scheme.

The Judge accepted that, were it not for the current financial circumstances of the promoters of this scheme, a much more significant fine would have been appropriate for the conduct.

Mr Feleti Halafihi was warned for his involvement with 6K and was subsequently issued with a notice requiring him to meet with the Commission and provide information regarding the scheme. He failed to do so. Halafihi was found guilty of failing to comply with a statutory notice issued under section 47G of the Fair Trading Act 1986. Mr Halafihi was fined $9,000.

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