The Manitoba Securities Commission (MSC) and the Winkler Police Service last week issued a joint warning about an investment scheme that's operating in the province, which they say has some of the classic features of a Ponzi scheme.
The company in question is known as PayDiamond.com, which purports to be an online diamond distribution company purportedly operating from Hong Kong. According to the alert, the company is seeking to raise money from investors in order to purchase raw diamonds, which it will cut and sell.
"Investor returns are allegedly from the profits of the pool they have invested in," the joint warning states. Investors in the scheme are called "affiliates" and are promised weekly payments until the diamonds are sold and the purported profits are split among them.
"There is a heavy emphasis on recruiting new investors," says Len Terlinski, MSC investigator, in a statement. "An ‘affiliate' is paid based on the amount invested by people he or she recruits. This is a red flag. Additionally, the ‘affiliate memberships' maybe be considered a trade in a security, and PayDiamond is not registered to sell securities in Manitoba."
The MSC is receiving calls about the legitimacy of PayDiamond, and the Winkler Police Service reports that local residents have been recruited into the scheme.
"We are aware of a Winkler resident who has recruited at least five individuals into the scheme," says Constable Chris Kalansky of the Winkler Police Service. "This individual has convinced friends and family to invest in PayDiamond, and has profited through recruitment fees. This is a classic Pyramid/Ponzi scheme model."