Complaints to Commerce Commission about Facebook pyramid scheme 'The Loom'

Monday, 8 April 2019

An internet scam that has been doing the rounds for years has resurfaced on Facebook and users are warning friends and families not to fall prey.

The Commerce Commission is looking into an internet scam that has resurfaced on Facebook.

The consumer watchdog has received six complaints about the pyramid scheme called 'the loom', which had been appearing on people's newsfeeds, promising people $2400 –or eight times the return on an initial $300 investment if they got their friends and family to join it.

The scheme has targeted people around the world, operating under different names like 'loom circle', 'fractal mandala' and 'blessing loom'. Police in Virginia, United States, warned Facebook users of the scheme in 2016.

Netsafe chief executive Martin Cocker said while the type of scam was not new, how it had been repackaged to target through social media was.

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'The most effective scams on social media are transferred through friends' networks because, naturally, your guard's down when you receive posts that are from friends and people you trust,' Cocker said.

If you have lost money in this scheme contact anuja.nadkarni@stuff.co.nz

'It would be pretty easy for a scammer to release a similar kind of programme and release it into social media and see how far it can go.

Netsafe chief executive Martin Cocker says the most effective scams on social media are transferred through friends' networks.

'It's a scam because there's no actual product. It is beneficial for the people who get in early because after that everyone is paying up the chain. By and large pyramid schemes lead to a whole lot of people paying small amounts of money and getting nothing in return.'

Cocker said his advice was for people to do a quick Google search about any investment before giving their money away.

Facebook has been approached for comment.

NZ Police said the query would need to be put under the Official Information Act because collating the information from possible complaints across the country would be 'tough'.

According to Netsafe Kiwis lost $33 million to online scams last year.

The figure reversed a trend that had seen reported losses drift down from just over $13m in 2015 to $10m in 2017.

The most common scams were 'tech support' phone scams believed to be mostly run out of call centres in India.

But the most costly scams for victims were romance and investment scams, where victims are duped into sending large amounts of money overseas.