Compensation for pyramid scheme victims

MORE than 25,000 UK victims of an illegal international pyramid scheme could receive compensation as part of a US redress system, the Office of Fair Trading said today.

As part of the settlement of a case with the Federal Trade Commission, $20m has been set aside to compensate victims.

Skybiz, based in Oklahoma, operated between 1998 and 2001 selling a work-at-home business scheme in which consumers were asked to buy an e-commerce Web pack for $125.

However, they were misled into believing that they could make quick riches if they pushed new recruits into the programme. People signed up in the US, UK, Ireland, Australia, South Africa, New Zealand and Canada - around 25,000 victims are believed to be British.

The company has been banned by the FTC from operating what was uncovered as a classic pyramid scheme. The agency ruled that claims from Skybiz that consumers who invested would make substantial income were deceptive and that it also encouraged others to trick people by providing 'false and misleading' speakers and promotional material.

The ruling also banned three people at the company from engaging in any aspect of multilevel marketing for between seven and 22 years.

UK consumers who think they may have been a victim of the scheme are encouraged to make a claim through the redress website www.skybiz-redress.com.

However, victims have been warned they may not receive full compensation. Claims for the $20m could exceed $140m. The pro-rata payment for an individual member would then be about 14% of the claim. For example, an accepted claim of $300 would result in a cash payment of $42. If total claims are less than $140m, individual cash payments could be larger.