Pyramid Scheme Alert President Speaks in Sri Lanka

July 1, 2005

Pyramid Scheme Alert was recently called upon by Asian countries to assist them in understanding and regulating pyramid sales schemes. PSA President, Robert FitzPatrick delivered a highly publicized speech in Sri Lanka on June 2 and facilitated an international seminar in Sri Lanka's capital of Colombo on June 3, 2005.

Attending the June 3 seminar were Central Bank officials from Sri Lanka, India, The Maldives, Bhutan, Bangladesh and Nepal. The other presenter was Mr. Chris Jarvis, an official of the International Monetary Fund who has researched and written about the pyramid schemes that ruined Albania in the late 1990s.

A full report with photos is available in a downloadable PDF. The seminar was followed by a large press conference. The June 2 presentation was attended by about 200 people and much news media. More information is available at the Daily News website and South Asian Media Net.

Located off the southeast coast of India, Sri Lanka is about the size of West Virginia and is home to 20 million people. The country was recently struck by a Hong Kong-based scheme called Gold Quest. This scheme is similar to Gold Unlimited, which had been prosecuted in the US four years ago.

The Gold Quest scheme spread across Sri Lanka, marketing gold coins for double their worth. Sri Lanka's Central Bank noticed that the equivalent in their currency of millions of dollars had left the country, a drain of much needed currency. They also realized that many of the $400-transactions were done with credit cards and that many people were effectively loaning their cards' use to other people in order to make the offshore payments. The financial losses suffered by Sri Lankans were acute since average incomes in Sri Lanka are under $1,500 per household.

Sri Lanka had no specific laws against endless-chain schemes and faced a scheme that claimed the status of "multi-level marketing," which its organizers claimed is legal and fully permitted in America.

Sri Lanka took extraordinary measures to stop the flow of currency and the personal losses to citizens. Its Central Bank applied a law that prohibits the loaning of credit card usage and it persuaded local banks to stop facilitating transactions involving the scheme. The president of Sri Lanka issued a national warning to the citizens to beware of the scheme's folly and pledged support for new laws to prohibit pyramid schemes in the marketplace.

Sri Lanka has subsequently enacted a law against endless chain schemes. See the text of the law.