Pyramid scheme unravels in WA

Consumer Protection is warning Western Australians not to get involved in pyramid schemes as they could result in prosecution and money invested in the schemes could be lost, resulting in financial ruin.

The alert follows the successful prosecution of a Ballajura man, Leon Shipard (76) who had been promoting pyramid schemes based in the United States. On 30 September 2015, the Joondalup Magistrates Court fined Mr Shipard $500 and ordered him to pay $1,000 in costs. Magistrate Smith acknowledged the fine was low but had taken into consideration Mr Shipard’s age, limited financial means and the fact that, whilst he was a promoter of the scheme, he too had been a victim.

Lawyers for Consumer Protection told the Court that Mr Shipard had been promoting the AndThanks2U website (www.andthanks2u.com) by posting leaflets in the letterboxes of Perth homes and advertising in the ‘business opportunities’ section of the Quokka classified newspaper.

The website, registered in Little Rock Arkansas USA, offers participants who pay $2.50 to join the scheme a windfall of $140,000 after eight weeks. Each new member must introduce four new recruits per week to the scheme for eight weeks. The original sponsor receives the proceeds of the fees collected from future participants who join the scheme. Magistrate Smith agreed that this website was in fact a pyramid scheme.

The Magistrate was told that Mr Shipard had been warned about pyramid schemes in 2009, however, Mr Shipard became involved in the AndThanks2U scheme and recruited people to the scheme, causing them to lose money.

Acting Commissioner for Consumer Protection Gary Newcombe said anyone taking part in pyramid schemes is not only breaking the law, but they have a much higher risk of losing their money altogether than making any financial gain.

“Pyramid schemes are based on rocky foundations where there are no goods or services being traded, just a reliance on participants being able to recruit new members paying entry fees,” Mr Newcombe said.

“It’s inevitable that the scheme will eventually collapse and those not at the top of the pyramid could risk losing substantial amounts of money. That’s why the schemes are illegal under the Australian Consumer Law (ACL) as they are usually based on misleading perceptions that participants are making a legitimate investment.

Promoters of pyramid schemes face prosecution under the ACL and can have a criminal conviction recorded against them.

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