A new investigative report shows Ponzi and pyramid schemes have proliferated across Caribbean countries during the pandemic, and authorities have been unable to keep up.
The report -- by the Caribbean Investigative Journalism Network (CIJN) -- looked at cases of fraud in Guyana, Trinidad and Tobago, Barbados, Antigua and Barbuda, Jamaica and the British Virgin Islands. The schemes “have already cost would-be investors in the hundreds of millions of dollars," the report's authors wrote.
A Guyana couple was arrested in August 2020 for allegedly running an unlicensed and unregistered investment company called “Accelerated Capital Firm Inc.,” which collected $27 million from around 17,000 people, the Guyana Chronicle reported. The pair, who are awaiting trial, faces around 80 counts of conspiring to obtain money under false pretenses, according to prosecutors.
Similar schemes, in which people are encouraged to invest tantalizingly small amounts of money -- from $5 to $25 -- to receive an eightfold return, have also appeared in Guyana under names like “Freedom Family” and “Bless and be Blessed.”
A Trinidad and Tobago company called “Drugs Sou Sou” is under investigation for a similar investment scheme. A 42-year-old contractor who was struggling to make payroll said the company offered him returns of up to 600 percent, according to the CIJN report.
Such investment schemes have also proliferated in other regions of Latin America. In Cuba, authorities recently caught wind of a Ponzi scheme disguised as a game called “La Bola.” It asked people to invest 500 Cuban pesos ($20) and then convince 14 others to do so. The scheme proved popular. By February 15, one Havana police station alone had allegedly recorded more than 300 complaints related to the scam.
These schemes are not new in the Caribbean. In the 1990s and 2000s, Antigua was home to one of the world's largest Ponzi schemes -- the “Stanford Ponzi” -- in which $8 billion was stolen from investors worldwide.
Texas financier Allen Stanford ran the fraud from his offshore bank in Antigua. Over the course of 20 years, Stanford used investors’ money to fund his real estate projects, business ventures and billionaire lifestyle. He was convicted in 2012 in the United States, where he is currently serving a 110-year prison term.
A fraudulent investment company called “Cash Plus” emerged in Jamaica in 2002. The scheme -- which ensured lenders up to 120 percent in annual returns, with 10 percent paid back monthly -- collapsed in 2008, owing $10 billion to more than 40,000 investors. It took almost a decade to form a case against the company's owner Carlos Hill, who was acquitted in 2017 for lack of evidence.
Many Caribbean nations have struggled to combat these schemes. Laws are outdated and can contain loopholes, according to the CIJN report. In Guyana, for example, pyramid selling is prohibited, but the law “only covers goods and services and not financial investments.”
Following the “Cash Plus” scandal, Jamaica amended its financial laws in 2013 to explicitly ban Ponzi and pyramid schemes. Trinidad and Tobago and Antigua and Barbuda have no targeted legislation in place, according to CIJN.
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The economic crisis and job volatility caused by the pandemic may have made such schemes more attractive to people with few resources who suddenly find themselves in need.
In late February, the Caribbean Development Bank revealed that the GDP of its 19 borrowing member countries contracted by an average of 12.8 percent in 2020, due to the drop in commodity exports and tourism.
Past financial schemes sought to ensnare rich investors, but fraudsters are increasingly preying on economically vulnerable communities.
Guyana Attorney General Anil Nandlall told CIJN “the issue needs to be pursued as a matter of urgency” regionally by the Caribbean bloc of countries known as Caricom and the Caribbean Financial Action Task Force. Proposals to update legislation and provide recourse for victims of these schemes must also be put forward.
Barbados Finance Minister Ryan Straughn is pushing for regulation overseeing the country's legal peer-to-peer lending systems to be extended to cover Ponzi schemes. But he admits that convictions in such cases would be tricky.
"Unfortunately, unless there is some kind of contract or documentation, then ultimately it would be John Brown’s word against John Public...the lack of information makes it difficult to prosecute,” Straughn told CIJN.
Across the Caribbean, as well as among Caribbean populations in the United States, pyramid schemes are often disguised as communal savings clubs known as “sou-sous." The clubs often have innocuous names like “partners,” “box hands” or “blessing looms.” The clubs -- derived in West-Africa -- are used by people who don’t have easy access to banks.
A factor that has made these schemes so prevalent in the Caribbean is the tactic of infiltrating and scamming religious, ethnic and minority communities, which is known as "affinity fraud."
With the Stanford Ponzi, tight-knit Jewish communities across Latin America were disproportionately affected, while in Barbados, schemes known as “blessing circles” have proliferated in churches in the form of charity donations.
Many of these groups have promoted themselves to marginalized communities as a way for them to build wealth and become financially empowered.
The pandemic has caused a number of financial crimes to prosper in Latin America, including usurious lending operations and fraudulent investment schemes.
A high-profile actress in Argentina made headlines after authorities alleged she was involved in “telares de abundancia” or “abundance looms,” which are pyramid schemes cleverly marketed as online female solidarity groups that piggyback on the country's movements to legalize abortion and reduce gender violence.