The National Bank of Georgia is warning the public about possible pyramid schemes circulating on social media.According to Lasha Gzirishvili, Head of the National Bank’s Consumer Rights Protection Department, campaigns have become increasingly active on social media, including Facebook pages and groups, promising citizens high returns from investing in crypto assets or trading. The National Bank’s Consumer Rights Protection Department urges citizens to exercise particular caution before investing their money and recommends assessing the risks of losing their funds in advance.
According to Lasha Gzirishvili, this model may represent a classic “financial pyramid” scheme, whose primary objective is not to invest funds in profitable assets, but to attract new members to the scheme.
“Such activity may represent a classic ‘financial pyramid’ model, whose main objective is not to invest money in business activities or profitable assets, but to involve many new members in the scheme and attract their funds. These funds are then used to pay scheme participants what is presented as profits generated from business activities — in this case, crypto-asset trading. Moreover, the more people join the scheme, the more sustainable it becomes,” Lasha Gzirishvili said.
According to him, during the initial stage of the scheme, while people are actively joining, the campaign may appear quite successful, and participants may even receive some money. However, at a certain point, when it becomes impossible to attract new members and additional funds, the company can no longer meet its obligations to participants, and the scheme inevitably collapses. At such times, participants are often refused withdrawals of their funds for purported technical reasons, and in some cases they are even asked to pay additional money in order to recover their investment.
“Although many users are aware of the risks associated with such schemes, they often knowingly participate in them in the hope that they will be able to earn back their invested money before the scheme collapses,” Lasha Gzirishvili noted.
In his assessment, this approach carries a high level of risk, as participants do not know at which stage of the scheme they are joining, while it is practically impossible to predict exactly when it will collapse. Therefore, the risk of consumers losing their money is significant.According to the Head of the National Bank’s Consumer Rights Protection Department, such schemes are largely driven by the desire to make profits quickly. Therefore, when faced with an attractive investment offer, it is important for consumers not to make spontaneous decisions, but instead to seek detailed information and carefully weigh the potential risks.
“Seek information about the company’s reliability and activities, as well as its solvency. In an attempt to mislead citizens, such companies may use terms such as ‘financial,’ ‘brokerage,’ ‘investment,’ and others in their names. This does not automatically mean that the company is an entity regulated and/or licensed by the relevant regulatory authority. Seek information not only about the success stories of participants in the scheme, but also about cases of failure and the reasons behind them,” Lasha Gzirishvili said.He also added that, in order to protect consumer rights, the National Bank of Georgia is constantly improving and developing the legislative framework, with particular emphasis on vulnerable groups of the population. According to him, despite existing regulations, the final decision is still made by the consumer. Therefore, the National Bank urges citizens to seek detailed information when considering investment offers, carefully assess the risks, and only then make a decision.
