Internet scams and other stupidities

The FRANCSWISS pyramid scam has collapse along with the other internet pyramid scams, and the investors are complaining, suing, or just keeping quiet.  The high profile personalities are either denying that they made investments or are claiming to be victims themselves.  It’s bad for them to be seen as greedy or stupid, so it is their best position.  Actually, a number of them who came in early in the pyramid, have already made money and are probably a hundred thousand or a million richer, as long as they did not reinvest their earnings, or  added more into the pyramid.  If they did, then it is just poetic justice, and they deserve to lose for lending their famous names to the scam, and enticing the lesser informed with hard earned money to be victimized.

This “Ponzi” style pyramiding scam is actually almost a hundred years old, as recorded. These probably happened even earlier, except that no recorded accounts were reported, for the same reason— the embarrassment of the victims. The Interpol even has a file on this kind of scam, and sends regular advisories on this together with the “Nigerian Letter Scam,” and other swindles.  If you search the Internet, you will find hundreds of entries on the pyramiding scams that date back as early as the 1940’s, 1960’s in the U.S., Australia, and even Albania, (the country whose government almost collapsed due to the pyramid scam.)

There are always people who have short memories, too greedy, or don’t know any better, so there are always victims.  In the Philippines, it was not so long ago that the Multitel, Balajadia, and Tibayan fiascos happened. This was sometime in 2001 and 2002. The only difference is that now, the pyramiding, the enrollment, and the payments are facilitated through the Internet. In a way, it makes the population of potential victims bigger as the Internet is worldwide, as they say WorldWideWeb. It may take a longer time for the pyramid to collapse due to the wider reach of the Internet, but it will eventually collapse as there is a finite number of potential victims.

I had become aware of the recent Internet based pyramids, about two months ago and the first one I saw was not even based in the Philippines but in another country. It had the same features as FrancSwiss and  the others, and it was dollar denominated. The dollar currency was part of the selling spiel as it gave a sense of legitimacy, together with the use of respectable banks, as depository accounts where you can withdraw also dollars from the ATMS. It was really an improvement over the earlier pyramid scams, but it was still a pyramid. I had cautioned some friends who asked me about them, and hopefully those who did not reinvest their earnings, at least got back their $1000 investment or even made a few thousand dollars.

On hindsight, and some simple analysis, the investors who make money on these pyramid scams are the first ten percent,(10 percent) of the pyramid, and these are usually the perpetrators and their friends who are early on in the pyramid. As the pyramid goes bigger, the absolute number of gainers increase, but the  percentage stays the same. Then as the pyramid nears the limits of potential investors, the payments start to falter, which create a contagion effect to others in the pyramid, so the collapse accelerates. If it took two months to build the pyramid, it will only take days to collapse the pyramid. In a way, it is like an inverted pyramid that collapses due to its small base.

While I do appreciate the Internet and the WWW, there are a lot of existing and potential scams in the Internet. I remember the Gold Credit Card scam for $10, the Catalogue Credit Card with no credit limit, and the Sure Loans for Projects in Developing Countries. I have met and known Filipinos who have made advance fees for sure loans, or bought overpriced  products from catalogues.  They have charged these to experience, but to some these cost them $500 up to $10,000.