Desperate S. Africans lured into investing in Crowd1 despite probe, warnings

Report by Kgomotso Modise EWN..

Crowd1 has been touted as the next generation marketing network but there are warnings that it’s nothing more than a get rich quick scheme that is bound to leave many in debt and tears

JOHANNESBURG - The recently launched Crowd1 scheme might be under investigation and even banned in some countries, but that has not deterred South Africans hoping to cash in from their investments.

With economic hardships worsened by the COVID-19 pandemic, the operation continues to attract those eager to make a quick buck.

Crowd1, founded by Swedish businessperson Jonas Eric Werner in 2019 and owned by Impact Crowd Technology, was introduced to South Africans in November last year.

It has been touted as the next generation marketing network but there are warnings that it’s nothing more than a get-rich-quick scheme that is bound to leave many in debt and tears.

The operation doesn’t offer tangible products but claims to use multi-level marketing to sell packages and shares to investors. It purports to sell educational packs and shares in casinos across the world but the only way for investors to profit is through the recruitment of others, who have to fork out at least R1,800 to join. But in order for members to make a profit, they have to recruit others into their teams.

Critics say that Crowd1 bears the hallmarks of a pyramid scheme because it works through paid recruitment where money has to be sent up the chain.

One woman participating in the project told Eyewitness News that she was not new to investing in social financial platforms, having poured money into Kipi and MMM too. Both those schemes collapsed spectacularly a few years ago, leaving millions of people in the red.

Read: How to spot a ponzi scheme

"I have lost money and I have made money as well, that's why I keep coming back to these network marketing companies because I'm not going to get so rich or wealthy with a job - it's impossible. I grew up seeing my parents do it and make a lot of money and I was like 'this is for the future'. That's why I love this. They were able to pay for my school fees at the beginning of the year."

Another woman, who joined Crowd1 last month, said that she was not really sure how it worked but was taking a leap of faith.

She was promised R5,000 in three months' time from her initial investment.

"I haven't gotten any payouts because I haven't got anyone signed up underneath me but every Wednesday, you get weekly points and those points are like a rewards thing, and [it] pays out every three or four months, I think. I'm not really sure."

Crowd1 was banned in Namibia in February, and countries including Burundi, Paraguay, the Philippines and New Zealand have cautioned against it.

Here at home, it has caught the attention of the National Consumer Commission and the Financial Sector Conduct Authority. Many South Africans are latching on to the scheme and the commission said that it had already received numerous complaints.

The commission’s head of prosecutions, Joseph Selolo said that if Crowd1 was operating like a pyramid scheme, criminal charges would be pursued.

"If the VAT Forum agrees with us and it finds in our favour, then the judgment will be issued. It definitely will be requesting that the innocent victims be refunded and that the scheme promoters and owners be fined. The fine is usually 10% of a person's annual income or R1 million, whichever is the greater."

It is also now being investigated by the South African Reserve Bank’s prudential authority.

While South Africans continue to invest in Crowd1, the Reserve Bank said that it never issued a license to the scheme for any financial product, financial service or market infrastructure. The bank also warned consumers against investing with unregulated entities and to remain vigilant through conducting due diligent assessments.

Eyewitness News reached out to Crowd1 but its representatives in South Africa did not respond to questions.