Financial Times

CB clarifies nature of pyramid schemes
By Duruthu Edirimuni
The Central Bank last week issued a tough statement saying referral marketing schemes that sell products where customers expect future returns based purely on the expected expansion in the number of participants bore the characteristics of a pyramid scheme.

The reference was clearly to the GoldQuest gold coin marketing scheme although the Central Bank statement (See page 4) did not identify the company. Meanwhile, the Controller of Exchange has already dispatched 250 show cause letters to GoldQuest customers who had violated exchange control regulations.

A spokesman of Rowland PR, the PR Agency of Gold Quest said their client has made written representations to the Central Bank, but declined to comment on what they were about. GoldQuest issued a statement saying its legitimate Network Marketing programme had been mislabeled as a pyramid scheme but without giving details of how it operates. (See page 4).

Director General Customs Sarath Jayatilake said that the investigations into the gold coin imports were not yet complete. "There is an investigation on exchange control violations, another relating to the value of the gold coins and the other relating to violating the internal Customs regulations," he said. Another company, Pentagono Lanka, said that if any anti pyramiding legislation is enacted, the company will abide by the law.

Ronald Thomas, Managing Director Pentagono Lanka (Pvt) Ltd., told The Sunday Times FT that the management of Pentagono will take a decision on the fate of the clients who are already members, in the event the Central Bank issues any directive to ban pyramid schemes. He declined to speak further on the matter.

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