Pyramid scheme victims sue CBK for compensation

A group of investors has sued Central Bank of Kenya for alleged failure to regulate the operations of pyramid schemes in the country.

Andrew Gesora has filed a suit on behalf of 26 investors who lost millions of shillings in 18 pyramid schemes in 2007.

They are accusing the CBK of failing in its statutory duty to supervise, oversee, check and control the operations of the banking industry, which include banks, non-banking finance institutions and micro-finance institutions.

Sued together with the CBK are the Finance permanent secretary, commissioner of co-operatives and the attorney-general.

The investors allege that in 2007, Jitegemee Entrepreneurs Sacco Society Ltd and Clip Investments Co-operative Society operated as co-operative societies or co-operative savings and credit societies under the Co-operatives Development ministry’s watch, but in essence they were pyramid schemes.

They claim that the illegal operations or irregular management of the collapsed companies was allowed due to negligence of the defendants in their supervisory, control and regulatory duties.

Substantial investments of their funds, they allege, were lost after the CBK and the government froze the bank accounts of the pyramid schemes and no refunds were made to them.

They want the court to declare that the CBK, Ministry of Co-operatives, Finance Ministry and the A-G are liable to compensate them for their respective losses, court costs and interest.

The investors have named the 18 companies which operated as pyramid schemes as Capital Business Initiative, Cordnet Investments, Monte Blanc Afrique, Universal Premium, Fficca International, Global Entrepreneur Empowerment and Community development, Povera Investment and Circuit Investment.

Others are Deci-Developing Entrepreneur and Community Initiative, Ripe Investments Plan, Delux Investment, Smart Welfare Associates, Sheraton Charity Investment, Cyber Investment, Adler Yetu Community Initiative, Spell Investment, Kibec Investment, Doken Investment, Pamoja Revolving Fund and Amity Investment.

Separately, Loise Nduta and 36 other investors have sued Circuit Investment Company Ltd for allegedly collecting money from the members of public to purportedly invest on their behalf in bonds and stocks for six or 12 months and repay them with an interest of 16 per cent per month on the capital invested by each person.

Ms Nduta says in 2007, Circuit Investment collected Sh41 million under the pretext they would invest on their behalf and repay the principal sum plus interest.

However, she claims that after collecting the funds, the company closed its offices without notice and without paying the investors.

“The officials also never left behind any forwarding address,” says Nduta. They are seeking judgement for Sh43.7 million against Circuit Investment and interest on principal sum above 25 per cent from December 2007 until payment in full.

Two weeks ago, three investors moved to court seeking to recover Sh11 million from two collapsed pyramid schemes- Sasanet Limited and Sasanet Investment Co-operative Society.