Treasury now rejects Sh8bn pyramid scheme victims' claim
What you need to know:
- Treasury says it did not find any money in bank accounts run by 270 firms that swindled cash from the public with the promise of tripling returns.
- The pyramid scheme victims filed a lawsuit against the government seeking compensation from the Sh8 billion they insist the CBK confiscated from bank accounts owned by the 270 firms following a 2007 swoop.
- The government insists the victims could only claim compensation from the founders of the 270 pyramid scheme firms.
More than 26,000 people who lost close to Sh8 billion through pyramid schemes will not get a single cent after the Treasury said it did not confiscate the assets of the fraudsters.
The government has said it did not find any money in bank accounts run by 270 firms that swindled cash from the public with the promise of tripling returns.
The pyramid scheme victims filed a lawsuit against the government seeking compensation from the Sh8 billion they insist the Central Bank of Kenya (CBK) confiscated from bank accounts owned by the 270 firms following a 2007 swoop.
The government insists the victims could only claim compensation from the founders of the 270 pyramid scheme firms.
“It is not the case as alleged by the petitioners that the monies that were held in various bank accounts by the said entities be remitted to the CBK. In any event, there were no monies that the AG, Ministry of Co-operative Development and the Ministry of Finance ever recovered from any of those enterprises and they were not so placed to effect such recovery,” said Co-operative Development PS Ali Noor Ismail.
WARNING NOTICES
The claim follows a similar stance by the Central Bank of Kenya and the Ministry of Finance.
The victims claim, through lawyer Wanyiri Kihoro, that the 2007 crackdown on pyramid schemes and implementation of the 2008 Sacco Societies Act was an admission that the fraudulent businesses could have been stopped before they duped Kenyans.
But Mr Ismail insists that the government realised only after investigations that hundreds of firms registered as microfinance institutions were promising the public double or triple returns on deposits.
The CBK further claimed that it issued notices to the public in 2007 warning about the pyramid schemes and hence it cannot be faulted for any money lost in the scam.
DUE DILIGENCE
But the victims say they entrusted their money with the firms in the belief that the government had done its due diligence before registering them.
They add that the government’s continued custody of the money is a violation of their property rights.
“The petitioners claim this money as of right, with interest and the damages arising thereof. The respondents have impounded the funds that never belonged to them for eight years. The petitioners’ property rights are violated daily by the respondents’ continued retention of the money.”
Former Co-operatives Development and Marketing minister Joseph Nyagah in 2009 appointed a task force that published a report identifying 270 pyramid schemes that stole Sh8.1 billion from 121,205 Kenyans.
“The co-operatives so registered were being misused as entry points to parallel organisations that run the fraudulent schemes. With a view to quelling the mischief the Ministry of Industry, Trade and Co-operatives deregistered all the enterprises that had taken advantage of wananchi by operating pyramid schemes,” said the PS.
