Issue Date:  -  Friday, 7 March 1997

Cyberspace scam smashed - refunds ordered

The Acting Commissioner for Consumer Affairs has welcomed news that Western Australian victims of an internet pyramid scam will be refunded their 'membership fees.'

Acting Commissioner Mark Bodycoat said Fortuna Alliance was a pyramid scheme promoted worldwide on the Internet.

In May 1996 the Federal Trade Commission in the United States started legal proceedings against the promoters.

"As well as obtaining injunctions to freeze bank accounts, the FTC also closed down the Fortuna Alliance Internet site in an example of cyberspace law enforcement," Mr Bodycoat said.

A consent decree filed in a Seattle court in February provides for refunds to worldwide contributors, estimated to total five million US dollars. Refund claim forms will be sent out this month.

Enticed by claims they could earn more than $5000 per month, tens of thousands of people worldwide paid between $250 and $1750 to join Fortuna.

The Ministry of Fair Trading took five formal complaints between March and June last year, as well as dozens of telephone inquiries about the scheme.

"Most people who participate in these illegal pyramid schemes will lose their money," Mr Bodycoat said.

"Promoters take the money from those who join, and encourage these members to recoup their fees by finding an increasing number of new members who recruit others, and so on.

"Inevitably, the schemes collapse, either because of a simple lack of new members or following action by consumer agencies.

"We were pleased to offer our co-operation to the US authorities because the links we have established help us protect people from the consequences of these parasitic pyramid schemes. Prosecution of local promoters has not been ruled out," Mr Bodycoat said.

Under the Fair Trading Act, individuals can be fined up to $20,000 for participating in or promoting a pyramid scheme, while for companies the penalty can be as high as $100,000.

For more information: http://www.ftc.gov/ro/fortuna.htm.

Media contact:

Neil Stanbury
(08) 9282 0613