Fri, 3 May, 2019
Warning: Have you heard of the latest pyramid scheme luring Aussies?
There are new warnings of an international scam making its way throughout Australia called the “loom” scheme.
Participants are targeted through social media and can lead to them “scamming” their friends and family to purchase products that they are selling.
The victims can then be left hundreds out of pocket as they run out of friends and family to recruit, but still need to purchase a base amount of stock.
How it works
Users are initially asked to invest $300, with the promise that they will make eight times that amount once they recruit their friends and family.
Facebook user Luke MacDonald explained the experience to the ABC. His friend had claimed that they had made up to $5,000 through the scheme.
"It was just a link to a chat in a WhatsApp group … I asked what it was and he said it was a Loom group and that he had cashed out twice," Mr MacDonald said.
Mr MacDonald was aware of what it was, but thought most people involved had not known what they were doing.
"This particular person is a really nice guy, but he wouldn't think about things that deeply," he said.
"His response was; 'it doesn't matter to me, I've made $5,000 in two days'. People have this concept that it's just making money out of nothing, but it's not.
"Essentially you're scamming your family and friends because it's your immediate circle that you're pushing it onto — it's just transferring money around to different people and then eventually the people at the bottom get screwed,” MacDonald explained.
It’s against the law in Australia to not only promote a pyramid scheme, but to participate in one.
What to look out for
Queensland University of Technology fraud expert Dr Cassandra Cross explained how the Loom was so successful in Australia and how it’s similar to a pyramid scheme.
"There are a lot of similar characteristics of a pyramid scheme … but this is a circle one where people get pushed into the middle," Dr Cross said.
As the Loom is built via social media, it can be a bit more deceptive as you see your friends and family participate in it.
"If you're committing to it and then asking your friends and family to do so, it takes away some of the warning signs," Dr Cross said.
"You have to give out your bank details in order for money to go into an account, and you also send money to someone else's account.
"That just raises suspicions about money laundering, and around not necessarily knowing who you're sending money too, or having your bank account details that are out there."
However, Dr Cross warned that people will be left out of pocket once they run out of people to recruit.
"It will certainly get to a point, as many of these schemes do, where there's no new investors and no new people coming into it and once that happens all of the promised returns never eventuate and it all falls over," she said.