Advertisement Advertisement  

(Edmund Kagire, The East African): “It’s a risky business. It means that you have to have Internet everyday, wherever you are, because if you fail to post you lose your money,” the member said on condition of anonymity.

Efforts to reach the country director of TelexFREE, Fred Nyakana, were futile as calls and messages to his phone went unanswered. When we visited the offices, Mr Nyakana was said to be in a meeting.

Many members say they are making money but experts in such multi-level marketing businesses contend that those who join first make money while those who join later “only pay those who recruited them.”

According to Ted Nuyten, an international home-business marketing expert, such schemes usually collapse after more people join. When the business starts becoming passive and stagnated, the founders pull out, leaving hundreds, if not thousands, of complainants behind.

In a review Mr Nuyten did for TelexFREE, he does not recommend people to join the scheme basing on some facts around the said business. He says the fact that it was banned in Brazil qualifies it as a Ponzi scheme.

“In fact, in Brazil, TelexFree has been shut down since June of 2013, its assets frozen, they have been ordered not to recruit any new people in the country and they not to pay any commissions and bonuses,” Mr Nuyten noted.

“They have lost a number of appeals to have the injunction against them lifted, not to mention that they have been fined for not meeting the various requirements in Brazil to operate as a VoIP company.”

He added that TelexFREE was under criminal investigation in Brazil after it diverted its earnings, amounting $88 million (Rwf61 billion), to secret accounts to avoid legal action and that in the United States regulatory bodies were closely watching the Brazil situation.

“Anyone involved with TelexFREE is either new to the industry and/or knows nothing about regulatory compliance as it relates to a network marketing company and opportunity,” he said. “TelexFREE is a very high-risk investment opportunity.”

Mr Nuyten also pointed out that the fact that somebody was making money did not make the scheme legal or legitimate.

UPDATE: It emerged Tuesday afternoon that Rwanda has now banned the scheme as tweeted by Ambassador Richard Kabonero.