Up Money Club has officially been designated as a COVID-19 pyramid scheme, National Consumer Commission (NCC) acting commissioner Thezi Mabuza said on Tuesday.
Mabuza was briefing the media on the outcome of its investigation into the Club. The National Prosecuting Authority, Financial Intelligence Centre (FIC) and Asset Forfeiture Unit were also part of the investigation.
She said Up Money Club was among schemes that allegedly took advantage of unsuspecting members of the public during the national lockdown.
Up Money Club exposed
Mabuza explained, “The modus operandi of Up Money was to use social media to solicit members of the public to be part of the scheme. In order to receive a promise made of grocery packs, participants were required to pay a once-off joining fee of R180 [and] to recruit five new participants.
“As is typical of all pyramid schemes, new participants made up the base of the pyramid and provided funding for participants who were recruited prior to them and who occupy higher levels in the scheme. The Up Money pyramid scheme promised participants monthly meat and grocery packs and monthly financial rewards.”
Following complaints from members of the public and suspicious activity picked up the FIC, the NCC launched the investigation that eventually uncovered the Club as a pyramid scheme, she added.
“44 percent of the money goes directly to the directors of Up Money, while only 56 percent goes to the different levels that then remains to be shared as profits or to be distributed.
“Section 42(b) of the Consumer Protection Act was contravened by the directors of Up Money, the promoters of Up Money, those that are advertising or recruiting on social media and all those who joined or are participating in the scheme,” Mabuza said.
R42 million in deposits
NCC’s investigation established that from 4 May to 2 July, 2020, Up Money’s participants made 221,976 deposits, of R180 each, into an FNB business account. These deposits amounted to R42 million.
“Over R40 million was deposited through points of sale and purchases at various retail stores. An amount of R3.5 million was transferred from the FNB account into another account held by another company called UniitCo,” Mabuza added. One Up Money director was also a sole director of UniitCo.
Between 24 May and 23 June, UniitCo allegedly paid for the purchase of three luxury vehicles – an Audi TT, a Hummer H3 and a Jaguar XKR Coupe – registered in the director’s name.
Subsequently, the AFU obtained a preservation order at the Johannesburg High Court to freeze bank accounts worth more than R18 million and the luxury vehicles.
Mabuza said, “These are associated with Jade Matsemela and Sipho Martin Mdlhuli, who are respectively the director and former director of Up Money (PTY) Ltd and UniitCo (Pty) Ltd.”
The suspects face various charges including racketeering, money laundering, fraud, theft, assisting another to benefit from proceeds of unlawful activities and acquisition, possession or use of proceeds of unlawful activities.