A few weeks back, one of my readers asked me if Jacama was for real. At that time, I was still unaware of what it was, so I asked her to elaborate a bit on what they offer. She answered that they offer 32% return in 15 days. All sorts of warning bells rang in my head at this statement because that is too fantastic a return. For comparison, legitimate businesses would be very happy to generate a 20% return in ONE YEAR.
After a little digging online, I found out more details about the company’s “cash back program” which operates like this:
- You buy product packages from them starting at P1,800 (up to P1.8M).
- Your product package is actually worth only around P450. One of the packages worth P1,800 is a gift cheque from a local store worth P450.
- You get a 6 vouchers from the company worth P450 each. The first one is dated 15 days after your original purchase and the subsequent ones are all dated 15 days after the previous one. In other words, you can claim P450 from the company every 15 days until you reach the 90th day after your purchase.
- That means after 90 days, you would have “earned” a total of P2,700. So in 3 months, you have effectively gained back what you originally paid for plus 50% of that (150% return in 3 months). And we are not even including the value of the product itself yet.
To appreciate how incredible this all seems, imagine that you’re strolling around SM and a saleslady approaches you to tell you of their special promo. You buy a stove for P10,000 and in 3 months, they will refund your P10,000 and give you an additional P5,000 on top of that. Plus, you get to keep your stove. Is this a realistic and believable scenario? I don’t think so.
The obvious question here is, how does Jacama make money by selling you a product and then paying you back more than the amount you paid them? How is this a sustainable business model? It is not sustainable at all. In fact, the way I see it, this operation is very much like a Ponzi scheme (quite similar to the Aman Futures scam which victimized many people just over 2 years ago).
The US Securities and Exchange Commission defines a Ponzi scheme as “an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors…In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors to create the false appearance that investors are profiting from a legitimate business.”
In other words, the operator of such a scheme uses the money put in by later investors to pay off earlier investors. So as long as more and more people join the program, or as long as people keep re-investing their earnings, the party goes on. But there will inevitably come a time when the number of new investors will no longer be able to sustain the existing ones. When that happens, the operator knows it’s time to pack up and run. Checks and vouchers start bouncing. People who invested their life savings into the program find themselves on the verge of bankruptcy. There will be ugly fights and broken relationships as people start blaming and pointing fingers at those who recruited them into the program.
This is not conjecture. This is historical fact. Just google Multitel scam, or Aman Futures, or Legacy scam, or Mateo Management. All of these companies operated “legitimately” for a while and their investors were all happy, until everything came crashing down in the end. It is also a historical fact that even after almost 100 years (Ponzi schemes started as early as 1920), many people still fall for them. The lure of easy money is just too difficult to resist, but regret always comes too late.
The Davao City Business Bureau recently shut down and padlocked Jacama for not having the necessary business permits for offering investments. It took its cue from an advisory by the Securities and Exchange Commission (SEC) dated January 11, 2016 which strongly advised the public to “stop investing and recruiting other people.” The SEC also warned those who recruit others into such schemes that they can be held “criminally liable, or accordingly sanctioned, or penalized.”
Amidst all these, there are rumors that the business plans to open again elsewhere. Its followers are of course decrying the closure as being motivated by envy and crab mentality. But I urge these people to listen to reason. The government is not trying to stop you from earning. Rather, it is trying to stop a fraudulent practice that has ZERO historical records of success and 100% worldwide rate of imminent failure. There is not a single record of a Ponzi scheme that ended on a happy note. They all ended with despair, bankruptcy, depression, and even suicide.
Save yourselves the grief. There is no such thing as easy money.
Originally published in Sunstar Davao.