The Commission, along with the Ministry of Business, Innovation and Employment (MBIE) and the Financial Markets Authority (FMA) is raising awareness of scams as part of Fraud Awareness Week (14–20 November).

Pyramid schemes are a type of scam that can cause harm in our communities. They can take many forms and be difficult to spot. A common factor is that earning money from the scheme depends on getting more people to join and pay into the scheme, rather than on the sale of goods or services.

Getting more people to join – often friends and family – is the main way that anyone is able to make any money from a pyramid scheme. But many people do not make the money they were promised because not enough other people to are willing to join and pay money into the scheme. 

Pyramid schemes are illegal under the Fair Trading Act, and the Commission continues to assess suspected schemes as it becomes aware of them.  

“We want to make sure New Zealanders know how to spot and avoid pyramid schemes and other scams, and how they can speak out to protect others from scams,” said Commission Chair Anna Rawlings.

Recent pyramid schemes investigated by the Commission include one that used crypto-currency instead of cash and “gifting” schemes that ask participants to pay an “unconditional gift”. 

Social media can be used as a platform to promote pyramid schemes and other scams. Promotional material may claim benefits such as “instant commissions”, “passive income” and “you get paid while you are sleeping”.

Ms Rawlings said consumers should be wary of offers on social media that sound too good to be true.

“If you think someone is trying to recruit you to a pyramid scheme or other kind of scam – don’t get involved, and don’t encourage anyone else to get involved. Instead, speak out to protect others. If you suspect you are being asked to join a pyramid scheme, contact the Commerce Commission.” 

The Commission’s website includes a fact sheet to help people spot a pyramid scheme as well as general information about scams.

Other information about scams
The Netsafe website has up-to-date information on known scams and you can report any kind of scam to Netsafe.

MBIE’s Scamwatch website also has information on how people can protect themselves against scams.


Pyramid schemes
Pyramid schemes are illegal under the Fair Trading Act 1986. They can take many forms but have the following essential elements:
*    they offer a financial return based on the payments made by new recruits; and
*    the return is dependent primarily on the continued recruitment of new members, not sales of a product or service.

What is the Commission’s advice to people who may find themselves associated with schemes of this nature?
If you are involved in what you think is a pyramid scheme, stop any ongoing involvement immediately, do not encourage other people to join, and make contact with the Commission. If an offer sounds too good to be true, it probably is.