A number of residents have been approached by family and friends to join Lion’s Share – an online platform described by observers as a pyramid and Ponzi scheme.
Local and international observers have warned that an online scheme being promoted to residents by family and friends living abroad is a “scam” and should be avoided.
The scheme is known as Lion’s Share, which users join by using cryptocurrency to create an account and set up a “business”. But critics say it’s illegitimate and are describing it as a pyramid and Ponzi scheme.
Once a “business” is set up on Lion’s Share, users recruit other members of the public in order to earn “commissions”. On its website, it says “…the more people you refer, and the more team members you help, the more you will earn”.
Janine Grainger – co-founder of a New Zealand-based cryptocurrency purchasing platform Easy Cryto – said Lion’s Share has the telltale signs of a “scam”.
“There is no product, and no income other than the money that is put in by the people you refer – it’s a classic pyramid scheme, and it’s not even trying to hide that fact,” she wrote in an email to Cook Islands News.
“We’ve seen huge uptake in what we believe to be Lion’s Share activity among the Pasifika community here in NZ.”
Writing on scam investigation blog, The Snapping Point, Australian journalist Karie Cornell said Lion’s Share “… is NOT a legit website”.
“It may hold the trappings of legitimacy, but it is a Ponzi scheme veiled in technobabble,” she wrote.
A review on scam information website tbbob.com reads: “No matter the technology that Lion’s Share is running on, it is a scam, a Ponzi scheme. It means that new members have to come and deposit money in order for the older members to earn profits.”
Earlier this week, the Cook Islands Labour and Consumer Division of the Ministry of Internal Affairs issued a warning to residents over the risks and illegality of participating in pyramid schemes.
“These schemes work for a few who make money, and fail for many who lose,” the ministry warned. “The ones at the bottom of the recruitment process are defrauded by the ones on the top. This is why pyramid selling schemes are illegal, as only a few people make money on the back of the majority.”
Under Cook Islands law, operating or promoting a pyramid scheme is considered as a serious offence punishable with a fine up to $10,000.
Sandrina Thondoo, Internal Affairs director of Labour and Consumer Services, said: “If we have evidence there is someone here that is promoting it or is operating it, then they may be found liable.”
When approached by Cook Islands News, half a dozen members of the public said they were approached on social media by a friend or relative to consider joining Lion’s Share.
Lion’s Share does not use conventional money. Instead, the platform uses two cryptocurrencies called Etherium and Tron and uses “smart contract technology”.
It advises potential users there is no guarantee of earnings.
A 2019 study by academics at the University of Cagliari in Italy took a closer look at Ethereum – a cryptocurrency developed in 2015. They found it was being used by fraudsters to develop pyramid and Ponzi schemes.
“Overall, we have observed that, in the first 3 years of life of Ethereum, there have been a multitude of experiments to implement Ponzi schemes as smart contracts,” the authors wrote.