Money tree investors 'face the chop'

Investors draw in friends to move to the pyramid apex

By BBC News Online's Jane Bardon

The feverish excitement surrounding a Northern Ireland "money tree" pyramid scheme is going to leave investors high and dry Trading Standards officers are warning.

People from all walks of life are queuing up to put their cash into trees being run in County Down and Belfast - sucked in by the promise of cash returns of up to £24,000 in less than a week from a £3,000 initial investment.

Everyone knows someone who has attended the meets in pubs and restaurants where the lucky 'receivers' are walking out with their pockets full of rolls of cash.

As a security measure the organisers arrange to block off access to country pubs where up to £70,000 is reportedly changing hands in a night.

Security personnel have even been employed to walk recipients of cash to their cars.

Hype

The scheme relies on hype. Hundreds of people have been more than willing to invest a stake in the top tier of the inverted pyramid.

These schemes are created by the greedy to prey upon the needy. They are no passport to wealth but rather a trap for the unwary

Trading Standards Service

Their money goes straight to the 'receiver'. As they recruit their friends and colleagues to join the pyramid behind them, they move down the four tiers, getting closer and closer to their payout at the apex of the pyramid.

For those with less cash - people as young as 19 are involved - trees have been started where the stakes are as low as £300 for a share, or £150 for a half share if you join with a friend.

One County Down man, who had been offered a stake in a scheme running in his home town of Bangor said: "Once you have signed two people up you move up the tiers. As more people join, the pyramid sub-divides again and again, so that the number of receivers grows.

It is a gifting scheme so it is not an offence to run one under current legislation because there is no transaction and no service is offered, but people will inevitably lose money

Police spokesman

"Everyone I know is either in one or trying to get into one."

But he added: "I haven't heard of anyone losing their money yet. I was tempted to join, but I would feel bad if friends further down the line didn't get their money after putting in their stake."

One Bangor investor told News Online that she had made £12,000 by sharing a £3,000 stake with a friend.

"I got my money in five days, so I have invested another £6,000 in two stakes in one of the most productive trees," she added.

Gifting

Of course the crucial payouts rely on the willingness of more people to get involved. When the pool of investors dries up, those who haven't been lucky enough to reach the receiver's spot lose their stake.

The money is given to the receiver as a gift. There is no official documentation. But the news of friends and colleagues' payouts have fuelled the phenomenon.

I got my money in five days, so I have invested another £6,000 in two stakes in one of the most productive trees

Money tree investor

One pyramid scheme organiser unwittingly bragged about the get-rich-quick scheme to News Online.

"It was brought over here by a man from the Isle of Wight. It ran for nine months there on one small island, so I think it should run for more than a year here," he said.

"The man on the Isle of Wight did lose money at the end. He lost £3,000. But he made £275,000 before that.

"People are making thousands from the scheme. All my family are involved. Yes, it's a gamble, but it's easy money."

'Not illegal'

The schemes have not attracted the attention of the law because they are not illegal.

A police spokesman said they were aware of the schemes and were concerned because "it is inevitable that someone will lose their money".

"But it is a gifting scheme so it is not an offence to run one under current legislation because there is no transaction and no service is offered."

But the Trading Standards Service has warned that the bubble is about the burst.

"We have been aware of the schemes in north Down and Belfast for about three weeks. We had our first complaint on 25 October.

"We are issuing a warning about the schemes, which we believe are nearing their conclusion in north Down and Belfast - in other words they are ready to collapse," a spokeswoman for the service said.

"These schemes are created by the greedy to prey upon the needy. They are no passport to wealth but rather a trap for the unwary."

The scheme may be new to Northern Ireland, but its ignominious end has been well documented elsewhere.

What the local organisers don't tell you is that the Isle of Wight tree entrepreneur made thousands, but hundreds of people left on tiers of unfinished pyramids as the scheme ended its run quickly found out that money doesn't grow on trees.