Page 9 - Unlicensed Digital Investment Schemes (UDIS)

Abbreviations and acronyms

Unlicensed Digital Investment Schemes

(UDIS)

1 BACKGROUND

UDIS are fraudulent schemes which are promoted digi- MMM purports to be a community of ordinary peo-
tally via a domain name/URL, on social networks or text ple helping each other. Consumers are encouraged to
messaging services. These schemes promote and sell send money, including via bitcoin, and are promised
investment opportunities to consumers which are not monetary support at some time in the future from the
licensed by the appropriate regulator. They pay returns common fund. Thirty-percent returns are promised on
to investors from the new capital that is paid in by new the website, on Facebook pages, via Twitter and even
investors, rather than from a legitimate, profit-generat- closed MMM groups have been identified on Whatsapp.
ing business or activity. These schemes usually end, or Further, MMM offers and online school to learn how to
collapse when there is insufficient new capital paid in to promote a MMM scheme.
sustain pay outs to existing investors. Another example of an UDIS applying a new twist
The paper will not consider unlicensed investment to promote its fraudulent investment offer is the re-
schemes where there is no digital element to the fraud, cent scheme in the Uttar Pradesh region in Noida, India,
nor where the solicitation is an attempt to elicit consum- which called for consumers to invest money in a scheme
er’s private financial data online (e.g. phishing) nor will it that allowed consumers to purportedly earn money by
consider social engineering frauds such as solicitations clicking ‘like’ on Facebook for various companies, which
for funds from fraudsters pretending to be a love interest had supposedly paid the promoter for ‘pay for click’ ad-
in order to extort money from unsuspecting, and lonely vertising.
consumers. The Noida scheme had both a Facebook and URL
This is not to diminish the very real harm these types presence (www.socialtrade.biz) and ultimately, it too
of scams, but the authors believe that the collective collapsed. It was later revealed that consumers were
harm caused by UDIS is much greater, with the potential being misled and any return on investment was offered
to adversely affect the health of the financial system. solely because of later investments by new consumers
who were similarly duped, and not paid by actual com-
UDIS Examples: panies which had purchased marketing services from
An example of an ongoing, international UDIS is the the promoter. This type of UDIS illustrates that criminals
Mavrodi Mondial Money, or MMM schemes, which re- try to mask their activities as valid marketing practices
main active on the Internet with both a Facebook pres- or a new business/investment model (e.g. initial coin of-
ence, and some form of www.countryname-MMM.net ferings which will be discussed later in the paper). And,
as an URL. thus the Noida scheme too would be included in the

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