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Pyramid schemes: How they work and who gets hurt

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The Central Bank of Sri Lanka has started a special awareness campaign called “Anti-Pyramid National Awareness Week” from July 14 to 18, 2025. The theme is “Pyramid is a trap – don’t get into the wrong track.” This campaign is meant to warn people about pyramid schemes, which are fake money-making plans that can cause big financial losses. During this week, the Central Bank will reach out to schoolchildren, teachers, police officers, government workers, and the general public through over 6,000 schools and 14,000 local areas across the country. They will explain how these scams work, why they are dangerous, and how to avoid falling into such traps.

While the slogan Pyramid is a trap – don’t get into the wrong track sounds catchy, it raises an important question: How can people avoid a pyramid scheme if they don’t know what one looks like? For many Sri Lankans, especially those without financial education, pyramid schemes are often hidden behind friendly faces, smart-sounding plans, or online platforms that promise easy money.

Therefore, telling people “don’t fall into the trap” is not enough unless they’re clearly taught how to recognise the trap in the first place. Without showing what a pyramid scheme really is, how it works, and what signs to look for, this slogan risks becoming just a rhyme with no real impact.

What Are Pyramid Schemes?

Pyramid schemes are deceptive and fraudulent business models that masquerade as legitimate investment or income-generating opportunities. The people at the top benefit, while those lower down the pyramid inevitably lose money when recruitment stalls.

Figure 1 visually demonstrates how a pyramid scheme rapidly grows unsustainable due to its structure. If each participant must recruit just five new people, the numbers multiply at an exponential rate:

*  Round 1: One person (the original recruiter)

*  Round 2: Five new recruits (total so far: six)

*  Round 3: 25 new recruits (each of the five recruits five more)

*  Round 4: 125 new recruits

*  … and so on.

By Round 14, the calculation goes: 5^14* 6,103,515,625

That’s over sixbillion people, close to the entire world’s population. This mathematical reality highlights why all pyramid schemes must collapse: they require ever-increasing numbers of new recruits, quickly exceeding the number of people available—even if everyone on earth participated. This makes them fundamentally unsustainable and ensures that the vast majority at the lower levels will inevitably lose all their money. (See Figure 01)

How Do They Fool People?

Pyramid schemes are often cleverly disguised. They wear many masks: “investment clubs, High-yield “opportunities,” Multi-level or network marketing and “passive income,” etc.

In 2003, I was approached by a well-known banker and the dean of a leading state university’s Faculty of Commerce, both of whom attempted to pitch the notorious Gold Coin pyramid scheme to me. During one of their public presentations, I intervened by illustrating the scheme’s unsustainable mathematics—demonstrating the inevitable collapse of the scheme to the audience helping many people avoid falling victim to the Gold Coin scam.

Look Out for These Red Flags:

To protect oneself, it’s important to recognise the common warning signs:

*  Guaranteed high returns with little or no risk

*  Profits dependent on recruitment rather than product sales

*  Upfront fees or starter kits required for participation

*  No actual product or service of value being sold

These red flags are almost always present in fraudulent schemes and should trigger immediate caution.

Lessons from History: Big Schemes, Big Losses

History offers painful lessons about the damage pyramid and Ponzi schemes can inflict:

Charles Ponzi (USA, 1920): Promised 50% returns in 45 days, resulting in $20 million in losses and a public panic.

*  Albania (1997): Two-thirds of the population invested in pyramid schemes; their collapse wiped out half of the country’s GDP and sparked riots that left over 2,000 dead or injured.

*  Russia’s MMM (1990s): A pyramid scheme defrauded 10 million people, siphoning over $10 billion in public funds during a time of economic transition and weak governance.

*  Bernie Madoff (USA, 2008): Orchestrated a $65 billion Ponzi scheme, highlighting deep flaws in financial oversight.

*  Crypto-era schemes (2010s–2020s): Digital scams like OneCoin and BitConnect lured investors worldwide by misusing blockchain terminology. OneCoin alone defrauded people of more than $4 billion globally.

These cases show that pyramid schemes adapt to their cultural and technological context, making them hard to detect and resist.

Sri Lanka’s Experience and Response

In recent years, Sri Lanka has witnessed a rise in fraudulent pyramid schemes, especially those facilitated through digital platforms. With the economic challenges faced by many Sri Lankans, the appeal of fast money has grown stronger, creating fertile ground for these scams.

What Has CBSL Done?

The Central Bank of Sri Lanka (CBSL) has taken several important steps:

Legal action: Section 83C of the Banking Act makes it illegal to operate, promote, or recruit for pyramid schemes. CBSL has investigated and taken action against several such operations.

*  Awareness campaigns: In 2025, CBSL organised the National Anti-Pyramid Awareness Week, reaching over 50,000 people through 700+ educational events across schools, government offices, and local communities.

*  Media strategy: CBSL has used television, radio, social media, and print advertisements to educate the public about the dangers of pyramid schemes.

*  Partnerships: Engaged schools, the Tri-Forces, police, and civil organisations to spread the message widely.

These actions represent a significant institutional effort to combat financial fraud and protect vulnerable groups.

Where the Fight Falls Short: A Critical Review

While CBSL’s efforts are commendable, a critical look reveals areas for improvement:

Weak messaging: The slogan “Pyramid is a trap – don’t get into the wrong track” lacks emotional impact and clarity. It sounds more like a rhyme than a serious warning. Stronger, context-specific messages are needed.

*  Lack of digital outreach: Pyramid schemes today often operate through encrypted messaging apps, fake crypto platforms, or “get-rich-quick” online influencers. CBSL’s campaigns focus heavily on traditional media and may not effectively reach digital-first audiences.

*  Absence of real-time reporting tools: Victims have no direct hotline or mobile app to report suspicious schemes. Quick reporting and verification can prevent further spread.

*  Limited transparency: While CBSL investigates and prosecutes schemes, the public rarely hears about the outcomes. A lack of updates weakens deterrence and reduces public trust.

*  Insufficient victim support: There is little visible effort to provide financial counselling or psychological support to those who’ve lost money, further stigmatising victims and allowing fraud to flourish in silence. (See Figure 02)

Simple Checklist: How to Protect Yourself

Before investing in or joining any programme ask yourself:

Do I have to pay to join?

Do I earn money mainly by recruiting others?

Is there no real product or service involved?

Is the company unregistered or unregulated?

If you answer yes to two or more of these, walk away—and report it! (See Figure 2).

Moving Forward: How to Beat the Scammers

Sri Lanka’s long-term success in combating pyramid schemes depends on modernising its strategy:

Create better awareness tools: Short animations, radio dramas, local-language leaflets, and testimonial videos from victims can resonate more than technical explanations.

*  Target digital scams: Training programmes for digital literacy and scam recognition should be rolled out in partnership with universities and telecom providers.

*  Establish reporting infrastructure: A national hotline, mobile app, and web portal for submitting complaints should be introduced. Anonymous tips could also help.

*  Enforce with transparency: Regular public reports on investigations, legal outcomes, and recovered funds will show that justice is being served.

*  Empower schools and youth: Make financial literacy part of the curriculum from secondary school onwards. Young people are frequent digital users and vulnerable to online scams.

Pyramid schemes thrive where there is ignorance, desperation, and misplaced trust. While the Central Bank of Sri Lanka has taken commendable steps to address this growing threat, a more aggressive, digitally-savvy, and emotionally resonant approach is necessary. Public education must move beyond slogans to build resilience, foster skepticism, and offer real-time protection tools.

Ultimately, the best defence lies with informed individuals. If something promises extraordinary returns with little effort, it’s almost always a scam. Ask questions. Think critically. And when in doubt—walk away, report, and protect your community.

(The writer, a senior Chartered Accountant and professional banker, is Professor at SLIIT, Malabe. The views and opinions expressed in this article are personal.)



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Illegal solar push ravages Hambantota elephant habitat: Environmentalist warns of deepening crisis

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Land earmarked for the project

A large-scale move to establish solar power plants in Hambantota has triggered a major environmental and social crisis, with more than 1,000 acres of forest—identified as critical elephant habitat—cleared in violation of the law, environmental activist Sajeewa Chamikara said.

Chamikara, speaking on behalf of the Movement for Land and Agricultural Reform, said that 17 companies have already begun clearing forest land along the boundaries of the Hambantota Elephant Management Reserve. The affected areas include Sanakku Gala, Orukemgala and Kapapu Wewa, which are known to be key elephant habitats and long-used movement corridors.

He said that what is taking place cannot be described as development, but rather as a large-scale destruction of natural ecosystems carried out under the cover of renewable energy expansion.

According to Chamikara, the clearing of forests has been carried out using heavy machinery, while large sections have also been deliberately set on fire to prepare the land for solar installations. He said that electric fences have been erected across wide stretches of land, effectively blocking elephant movement and fragmenting their natural habitat.

“These forests are not empty lands. They are part of a living system that supports wildlife and nearby communities. Once destroyed, they cannot be easily restored,” he said.

The projects in question include a 50 megawatt solar development undertaken by five companies and a larger 150 megawatt project implemented by 12 companies. The larger project is reported to be valued at around 150 million US dollars.

Chamikara stressed that these projects are being carried out in a coordinated manner and involve extensive land clearing on a scale that raises serious environmental concerns.

He further alleged that certain companies had paid about Rs. 14 million to secure support and move ahead with the projects. He said this points to a troubling failure of oversight by state institutions that are expected to protect forests and wildlife habitats.

“This is not only an environmental issue. It is also a serious governance issue. The institutions responsible for protecting these lands have failed in their duty,” he said.

Chamikara pointed out that under the National Environmental Act, any project of this scale must receive prior approval through a proper Environmental Impact Assessment process.

He said that clearing forest land before obtaining such approval is a direct violation of the law.

He added that legal requirements relating to archaeological assessments had also been ignored. Under existing regulations, large-scale land clearing requires prior evaluation to ensure that sites of historical or cultural value are not damaged.

“The law is very clear. You cannot go ahead with projects of this nature without proper approval. What we are seeing is a complete disregard for legal procedure,” Chamikara said.

The environmental impact of these activities is already becoming visible. With their natural habitats destroyed, elephants are increasingly moving into nearby villages in search of food and shelter. This has led to a sharp rise in human-elephant conflict in several areas.

Areas such as Mayurapura, Gonnooruwa, Meegahajandura and Thanamalvila have reported increasing encounters between humans and elephants. According to Chamikara, more than 5,000 farming families in these areas are now facing growing threats to their safety and livelihoods.

 

He warned that farmers are being forced to abandon their lands due to repeated elephant intrusions, while incidents involving damage to crops and property are rising. There have also been increasing reports of injuries and deaths among both humans and elephants.

“This is turning into a serious social and economic problem. When farmers cannot cultivate their lands, it affects food production, income and rural stability,” he said.

Chamikara also raised concerns about the broader environmental consequences of clearing forests for solar power projects. While renewable energy is promoted as a solution to reduce carbon emissions, he said that destroying forests undermines that goal.

“Forests play a key role in absorbing carbon dioxide. When you clear and burn them, you are increasing emissions, not reducing them. That defeats the purpose of promoting solar energy,” he explained.

He added that large-scale deforestation in dry zone areas such as Hambantota could also affect local weather patterns and reduce rainfall, which would have further negative impacts on agriculture and water resources.

Chamikara called for a shift in policy, urging authorities to focus on more sustainable approaches to solar power development. He said that rooftop solar systems on homes, public buildings and commercial establishments should be given priority, as they do not require clearing large areas of land.

He also recommended that solar projects be located on degraded or abandoned lands, such as areas affected by past mining or other low-value lands, rather than forests or productive agricultural areas.

“Renewable energy development must be done in a way that does not destroy the environment. There are better options available if there is proper planning,” he said.

Chamikara urged the Central Environmental Authority and the Department of Wildlife Conservation to take immediate action to stop ongoing land clearing and investigate the projects. He stressed that all activities carried out without proper approval should be halted until legal requirements are met.

He warned that failure to act now would lead to long-term environmental damage that could not be reversed.

“If this continues, we will lose not only forests and wildlife, but also the balance between people and nature that supports rural life. The consequences will be felt for generations,” he said.

The situation in Hambantota is fast emerging as a critical test of whether development goals can be balanced with environmental protection. As pressure grows, the response of authorities in the coming weeks is likely to determine whether the damage can still be contained or whether it will continue to spread unchecked.

By Ifham Nizam

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Why Mahatma Gandhi’s teachings need to be at the heart of conflict resolution

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Mahatma Gandhi

All credit to the Tamil Nadu government for taking concrete measures to perpetuate the memory of the renowned Mahatma Gandhi of India, who on account of his moral teachings stands on par with the likes of Socrates, Plato, Aristotle, Confucius and Jalaluddin Rumi, to name a few such all-time greats. The time is indeed ripe to draw the world’s attention to the Mahatma’s humanistic legacy which has resonated in the hearts of peace-oriented sections the world over down the decades.

Under its mega developmental blueprint titled ‘ Tamil Nadu 2030’, the Tamil Nadu government, among other things, intends transforming villages into centres of economic growth in conformity with the Mahatma’s vision of making the village the fundamental unit of material and spiritual advancement. Thus will come into being the ‘Uttamar Gandhi Model Villages Project’, which will be initially covering 10 village Panchayats. (Please see page 3 of The Island of March 11, 2026).

The timeliness of remembering and appreciating anew the teachings of Mahatma Gandhi resides in the utter lawlessness that has been allowed to overtake the world over the last few decades by none other than those global powers which took it upon themselves to usher in a world political and economic order based on the UN Charter and the Universal Declaration of Human Rights. Mainly in ‘the dock’ in this regard are the permanent members of the UN Security Council.

As is plain to see, the international law and order situation has veered out of control. Principal priorities for the international community or what’s left of it is to prevent the current mainly regional war in the Middle East from degenerating dangerously into another world war, coupled with the task of eliminating the possibility of another nuclear holocaust.

The most scorching of ironies is that the world’s ‘number one power’, the US, has virtually lost its way in the ‘Global Disorder’ it has been party to letting lose. For instance, instead of making good its boast of militarily neutralizing Iran and paving the way for the constant flow of fuel and gas from the Strait of Hormus by itself and Israel, it is now appealing to the rest of the West to come to its assistance. Not surprisingly, US allies are indicating their unwillingness to help pull the US’ ‘chestnuts out of the fire’.

Oil and gas are the veritable life blood of countries and going ahead it should not come as a surprise if impatience gets the better of the major powers and the nuclear option is resorted to by some of them under the dangerous illusion that it would be a quick-fix to their growing economic ills and frustrations.

All the above and more are within the realms of the possible and the need is pressing for humanistic voices to take centre stage in the present runaway crisis. As pointed out in this column last week, Realpolitik has overtaken the world and unless the latter is convinced of the self-destructive nature of the major powers’ policy of ‘meeting fire with fire’ to resolve their disputes, annihilation could be the lot of a good part of the world.

For far too long the voice of humanity has been muted and silenced in the affairs of the world by the incendiary threats and counter-threats of the big powers and their allies. No quarter has been bold enough in these blood pressure-hiking slanging matches to speak of the need for brotherly love and compassion among nations and countries. But it’s the language of love and understanding that is the most pressing need currently and the Mahatma in his time did just that against mighty odds.

At present the US and Iran are trading threats and accusations over military-related developments in the Gulf and it’s anybody’s guess as to what turn these events will take. However, calming voices of humanity and moderation would help in deescalating tensions and such voices need to go to the assistance of the UN chief and his team.

The Mahatma used the technique of ‘Satyagraha’ or the policy of non-violent resistance to oppose and dis-empower to a degree the British empire in his time and the current major powers would do well to take a leaf from Gandhi. The latter also integrated into the strategy of non-violent resistance the policy of ‘Ahimsa’ or love and understanding which helped greatly in uniting rather than alienating adversaries. The language of love, it has been proved, speaks to the hearts and minds of people and has a profoundly healing impact.

Mahatma Gandhi defined the ideal of ‘Ahimsa’ thus: ‘In its positive form, “Ahimsa” means the largest love, the greatest charity. If I am a follower of “Ahimsa”, I must love my enemy or a stranger to me as I would my wrong-doing father or son. This active “Ahimsa” necessarily includes truth and fearlessness.’ (See; ‘Modern Indian Political Thought; Text and Context’ by Bidyut Chakrabarty and Rajendra Kumar Pandey, Sage Publications India, Pvt. Ltd., www.sagepub.in).

In the latter publication, the authors also defined the essence of ‘satyagraha’ as ‘protest without rancour’ and this is seen as ‘holding the key to his entire campaign’ of non-violent resistance. From these perspectives, the teaching, ‘hatred begets hatred’ acquires more salience and meaning.

Accordingly, the voice of reason and love needs to come centre stage and take charge of current international political discourse. The UN and allied organizations which advocate conflict resolution by peaceful means need to get together and ensure that their voices are clearly heard and understood. The global South could help in this process by seeing to the vibrant rejuvenation of organizations such as the Non-aligned Movement.

An immediate task for the peace-oriented and well meaning is to make the above projects happen fast. In the process they should underscore afresh the profound importance of the teachings of Mahatma Gandhi, who is acclaimed the world over as a uniting and healing political personality and prophet of peace.

If the Mahatma is universally acclaimed, the reason is plain to see. Put simply, he spoke to the hearts and minds of people everywhere, regardless of man-made barriers. The language of peace and brotherhood, that is, is understood by everyone. The world needs more prophets of peace and reconciliation of the likes of the Mahatma to drown out the voices of discord and war-mongering and ensure that the language of humanity prevails.

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Exciting scene awaits them …

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The Future Model Hunt extravaganza, organised by Rukmal Senanayake, and advocacy trainer Tharaka Gurukanda, held in late January 2026, has brought into the limelight four outstanding contestants who will participate, at the international level, this year – Sandeepa Sewmini, Demitha Jayawardhana, Diwyanjana Senevirathna, and Nimesha Premachandra.

Nimesha took the honours as Mrs. Tourism Sri Lanka 2026 and was featured in The Island of 05th March,

Sandeepa Sewmini was crowned Miss Supranational 2026 and will represent Sri Lanka at the big event to be held in Poland later in the year.

A Business Management and Human Resources student, she will be competing under the guidance of Rukmal Senanayake from the Model With Ruki – Model Academy & Agency.

The Mister Supranational Sri Lanka crown went to Demitha Jayawardhana, a 20-year-old professional model and motocross rider.

Apart from modelling he is engaged in his family business.

Demitha Jayawardhana: Mister Supranational Sri Lanka 2026

Demitha is also a badminton player with a strong passion for sports, fitness and personal growth.

In fact, he is recognised for his strength, discipline, and passion for fitness.

A past student of Wycherley International School and St Peter’s College, Colombo, Demitha is currently in his second year of Economics Management at the Royal Institute of Colombo.

He will represent Sri Lanka at the 10th edition of the Mister Supranational pageant, in Poland, in August, 2026.

Mister and Miss Supranational are annual international beauty pageants, held in Poland, and are designed to discover new talent for the modelling and television industries and produce instant celebrities.

The competition focuses on elegance, intelligence, and social advocacy, with contestants, representing their countries.

The newly appointed Miss Teen International Sri Lanka 2026 is Diwyanjana Senevirathna.

She was crowned at the Future Model Hunt and will represent Sri Lanka at the Miss Teen International 2026 pageant in India.

Diwyanjana is noted for her grace and dedication to representing the country at this prestigious event that aims to celebrate talent, intelligence, charm, and individuality, and provide a platform for young girls to showcase their skills.

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