The General Directorate of Consumer Protection, Competition and Fraud Repression (CCF) has opened an investigation into crimes related to an alleged pyramid scheme after receiving complaints from a number of victims.
Officials from the Australian Department of Consumer Protection are helping with the probe, having met with complainants regarding the pyramid scheme alleged to be operating in Cambodia, in order to gather information from witnesses and further investigate their case. It was not immediately clear if the scheme involves any Australian victims or businesses.
CCF director-general Phan Oun did not provide details, citing an ongoing investigation.
“We are looking into the company and gathering more information to determine whether its operation falls under the definition of a pyramid scheme, but we haven’t made any conclusions yet,” he told The Post on November 30, without naming the firm in question or specifying how many victims were involved.
He called on the public to be cautious about investment to avoid being tricked by those operating pyramid schemes, and encouraged people to report any suspected cases to the authorities for legal action.
Pyramid schemes are a business model that primarily requires recruiting more members into the scheme in exchange for payments or benefits, rather than providing an investment or selling products to end consumers to make a profit.
This method mainly relies on expanding the number of people enlisted in the scheme. The salesperson recruits a reseller who then goes on to select other resellers, with all of them purchasing inventory from the scheme operator, which usually ends up going unsold unless it is to other resellers. Those with the lowest recruitment score will receive the lowest commission rate and those with the highest score will receive the top commission rate.
This business model is considered fraudulent by many experts and is illegal in many countries, though some businesses similar to pyramid schemes called multi-level marketing businesses still manage to operate in a gray area, though they are often the targets of scrutiny by regulators and law enforcement.
Oun said that under Cambodia’s law on consumer protection, Article 20 clearly defines the meaning and the punishment for pyramid schemes, which are banned in the Kingdom. He warned that people who violate the law and operate or participate in such schemes could face two to five years imprisonment and fines of four to ten million riel.