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Tajiks jail three for pyramid scam
Reuters, 01.05.04, 8:03 AM ET
By Roman Kozhevnikov
Copyright 2004, Reuters News Service
More People, Places and Beads in the News

Three men have been sent to jail for running a scam which impoverished thousands of women in Tajikistan.

DUSHANBE, Jan 5 (Reuters) - Tajikistan's Supreme Court has sentenced three men to between eight and 11 years of hard labour for running a pyramid scheme that saw thousands of Tajik women lose their savings and mortgage their homes.

The company that ran the scheme, Jamal and Co, targeted women in the impoverished ex-Soviet state. It sold victims glass beads and thread for 34 somoni ($11) apiece and offered a return of 50 somoni for threading the beads together within two weeks.
Ponzi
The three men were following a well-trodden path. Pyramid schemes have taken off in several former Communist countries - including Albania, where a scheme almost bankrupted the country in the late 1990s, and Russia. Pyramid schemes, or Ponzi schemes after their American inventor, involve taking money for non-existent investments with promises of massive returns. Early investors are paid dividends out of the flow of money from later targets, while the scheme's inventors pocket most of the money
A court official said the scam generated $41 million from 60,000 people -- an average of nearly $700 per victim in a country where a typical monthly wage is just $17.

Court spokeswoman Mashkura Sodirova said on Monday Jamshed Siyayev, the director of the company that ran the scheme, had been sentenced to 11 years of hard labour for breaking banking and accounting laws. Chief accountant Vyacheslav Tsoi and deputy director Zafar Kamolov would serve eight years, she said.

The court unexpectedly handed down its sentence on New Year's Eve, ahead of a long public holiday in most of the former Soviet Union, after angry crowds of women gathered outside earlier hearings.

At its peak before the arrest of the three Jamal executives in August, the scam caused the Central Asian state's somoni currency to strengthen as Tajiks converted dollar savings. But very few saw any profits.
Anger
Rakhilla, a 38-year-old mother of six who went to the Supreme Court on Monday to hear the latest on the case, said she had paid $6,000 for beads from Jamal in June after mortgaging her flat and persuading her husband to sell their car.

"Now my husband has gone to Russia to work off our debts," she said, wiping tears from her eyes with an old down shawl. "We're moving apartments in order to somehow get some money."
The government, blamed by many victims for not warning the public about the scheme, has said it will not provide compensation and only 8,000 Jamal investors have been repaid with money seized when the executives were arrested.

Similar scams came to light in Russia and Albania in the mid-1990s, but the Jamal scheme is the first of its kind in Tajikistan, Afghanistan's northern neighbour.

Link to the BBC Article

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