Pyramid scam victims lose up to HK$400,000

PUBLISHED : Tuesday, 17 November, 2009, 12:00am
UPDATED : Tuesday, 17 November, 2009, 12:00am

A group of South Asians say they have run up huge debts after being conned into sales jobs that a legislator suspects may be part of a pyramid scheme.

The victims were allegedly talked into borrowing money from credit companies to buy cosmetics and fragrance products. They said they had been told they would be rewarded through commissions, and their careers in the distribution business would advance. They could also get commission for successfully recruiting new members. But they ended up with debts totalling HK$400,000.

Some of them can speak Cantonese, but most do not read Chinese and did not understand the documents they signed.

Legislator Wong Kwok-hing, who is helping the group, said he suspected it was a pyramid scam. He said his office had in recent weeks received 15 complaints from South Asians, all of whom had signed up as a distributor at one company.

'We are contacting other possible victims these South Asians know and we believe as many as 100 people could have been affected, involving some HK$3 million worth of products and debts,' Wong said.

One complainant, Azake Rehman, said he had been introduced by a friend and paid HK$5,000 last year to join as a distributor. He was told he could receive commission of up to HK$9,000 for recruiting a member.

He borrowed HK$70,000 from a credit company to pay for the products, which he never received. He later learned that there was a stamp on his receipt, in Chinese, acknowledging receipt of the goods.

'I was confused ... and I sat down and asked them to tell me everything,' Rehman said. 'They said that was how it worked - and you would have no choice because you had invested in all the products.' He was unable to repay the credit firm and had been chased by debt collectors.

Wong said: 'Ethnic minority groups can easily fall prey to pyramid selling scams because they do not read Chinese and rely much on verbal explanation.'

Pyramid selling is illegal in Macau and on the mainland. Hong Kong has the Pyramid Selling Prohibition Ordinance, but Wong said there was a loophole that allowed a company to evade legal responsibility by using independent distributors.

Concerns about such scams arose in June after a 19-year-old filed for bankruptcy after signing up with the same company and borrowing HK$110,000 to buy goods. The woman, who is also supported by Wong, reported the case to police, and in September three men were arrested for conspiracy to defraud.