Standard Bank to freeze suspected Ponzi scheme accounts

THE Pretoria High Court has ordered Standard Bank to freeze the bank accounts of suspected Ponzi scheme Lyoness South Africa.

The application was brought on Sunday evening by Jianliu Lin and her husband Adriaan van den Bergh, both members of the multi-level marketing scheme that was founded in Austria in 2003 by Hubert Friedl as a customer loyalty scheme offering discounts and cash back to participating merchants and customers.

Lyoness subsequently spread to roughly 40 countries, operating under a variety of names, including Lyconet and myWorld.

The ex parte (where the court hears only one side of the case) application was brought late on Sunday so that Standard Bank could be served with the order first thing on Monday (29 August) to prevent any transfer of funds out of the company bank account.

The application claims that Lyoness and various related schemes are “being operated almost solely for illegal and/or fraudulent purposes”.

“I bring this application not for selfish reasons but rather in the public interest,” she deposes, adding that she is both a participant and victim of the scheme.

Hype

Lin said she was introduced to Lyoness by a member of the Chinese community, and bought her first ‘personal international unit’ for R25 000.

She didn’t fully understand the intricacies of the system she was investing in, but was carried away with the hype of what she saw as the ‘greatest opportunity ever’.

“I saw it as a way of saving money whilst shopping,” she says.

The scheme is reckoned to have 190 000 members in South Africa. If all 190 000 members paid R25 000, the scheme would have roped in R4,75 billion in SA alone.

She then started promoting the scheme to the Chinese community in Pretoria and Johannesburg, and before long had 18 income streams coming from Lyoness and Lyconet.

Her husband paid for her to attend company events in Italy, Poland and Germany. Lyoness members receive commission of varying percentages in respect of purchases made by people introduced to the scheme.

Lin then found out that by working a little harder, she could become a vice president and earn a prize of €1 million (R17 million).

Bigger scheme for bigger dreams

Around the same time, the company started marketing an even more audacious get-rich-quick scheme called Project X, details of which remained secret, but would enable participants to reach their financial dreams.

Whatever they invested in Project X, they would be repaid thousands of times over, they were promised. Lin became a vice president in 2018 and invested a total of R6,1 million, all of it paid into the Lyoness Standard Bank account.

Including all her investments and revenue, Lin says her balance in the scheme comes to R9,8 million. She says she is also owed many millions of rands more as a result of incentive points earned.

“What I have noticed is that seemingly Lyconet keeps on rebranding the different products, thus as soon as I am entitled to a payout in respect of the points, there is a name change, and the branded products no longer exists, and I receive no payout,” she says her affidavit.

She adds that the same is true of ‘benefits’ earned by Lyconet members: Discount Vouchers were rebranded as M-Vouchers, then Shopping Points.

Lin explains how she paid another R4,5 million to the same Standard Bank account, for which she received 594,66 ‘Enterprise Clouds’ each worth R7 500. These “Clouds” were converted to ‘myWorld share points’, as Lyconet effectively forces you to consent to this by ticking boxes on their system. Those who don’t tick the boxes lose their investment, she says.

Trapped

“I am truly trapped. I can honestly say that consenting to the constant rebranding and converting of products of Lyconet is not given willingly. Lyconet has trapped me. I either tick the box or lose it all.”

Despite reaching the status of vice president, Lin never received her prize of €1 million [more than R17 million].

She later found out that a class action suit had been launched by BE Conflikt Management against Lyoness/Lyconet/myWorld over similar complaints that prizes promised were not received.

Further amounts of more than R2 million were paid for products sold through the merchant network, as well as a share in an entity called Cloud. All transaction information on the membership sites was mysteriously wiped in 2018. When Lin inquired about this, she was told that it was her responsibility to keep track of her own records.

Another R270 000 was paid by Lin in 2019 into outfit called Elite Club Membership, which was supposed to generate earnings from the rental of luxury cars, jets and other items. She received no benefits from this investment.

She says she received a total of R445 423 in income from Lyoness since 2019, but realised that this revenue came mostly from the recruitment of marketers and the down payments they were required to make.

In addition, “the millions paid in respect of Project X have not rendered one single cent,” reads her affidavit.

In June 2022, Lin contacted an attorney and started to dig deeper into the scheme she had invested so heavily in. Her husband phoned a senior manager of the company to verify whether, as he had been informed, there was R300 million in the Standard Bank account. This was not denied, but a few weeks later a screen print of the bank account reflected a cash balance of just R11,4 million.

Attorney Louw Erasmus, representing Lin and Van den Bergh, says the scheme has also been reported to the Financial Sector Conduct Authority (FSCA) and the Financial Intelligence Centre (FIC) — and authorities now have 120 days to see where the money went.

Lin explains that out of ignorance and gullibility, she invested her own money and that of her husband, as well as members of the Chinese communities in Pretoria and Johannesburg.

Erasmus adds that a complaint of fraud has been made at the Brooklyn Police Station in Pretoria. — Moneyweb.