The Head of the National Bank of Georgia’s Consumer Rights Protection Department, Lasha Gzirishvili, is warning the public about campaigns that have become increasingly active on social media, including Facebook pages and groups, offering people the opportunity to invest in cryptocurrency trading and make money in this way.

The National Bank is disseminating the information.

According to the National Bank, Lasha Gzirishvili is urging citizens to exercise particular caution before investing their money and advising them to assess the risks of losing their funds in advance.

According to Gzirishvili, this model may represent a classic “financial pyramid” scheme, whose main objective is not to invest funds in profitable assets, but to attract new members to the scheme.

“Activities of this type may represent a classic ‘financial pyramid’ model, whose main objective is not to invest funds in business activities or profitable assets, but to bring a large number of new members into the scheme and attract their funds, as these funds are then used to pay scheme participants what is presented as profit generated from business activities - in this case, cryptocurrency trading. Moreover, the more people join the scheme, the more viable it becomes,” Lasha Gzirishvili said.

According to him, during the initial stage of the scheme’s operation, while people are actively joining, the campaign may even appear quite successful, and participants may receive some money. However, at a certain point, when it becomes impossible to attract new members and additional funds, the company can no longer meet its obligations to participants, and the scheme inevitably collapses. At that point, participants are often refused withdrawals of their funds for purported technical reasons, and sometimes they are even asked to pay additional money in order to recover their investment.

“Although many consumers are aware of the risks associated with such schemes, they often knowingly join them in the hope that they will be able to make a profit on the money they invested before the scheme collapses,” Gzirishvili noted.

In his assessment, such an approach carries a high level of risk, since participants do not know at what stage of the scheme’s operation they are joining, while it is practically impossible to predict exactly when the scheme will collapse. Therefore, the risk of consumers losing their money is significant.

According to the Head of the NBG’s Consumer Protection Department, such schemes are largely driven by the desire to make quick profits. Therefore, when faced with an attractive investment offer, it is important for consumers not to make spontaneous decisions, but instead to seek detailed information and carefully weigh the potential risks.

“Seek information about the company’s reliability and activities, as well as its solvency. In an attempt to mislead citizens, such companies may use terms such as ‘financial,’ ‘brokerage,’ ‘investment,’ and others in their names. This does not automatically mean that the company is regulated and/or licensed by the relevant regulatory authority. Seek information not only about the success stories of scheme participants, but also about cases of failure and the reasons behind them,” Gzirishvili said.

He also added that, in order to protect consumers’ rights, the National Bank of Georgia is continuously improving and developing the legislative framework, with particular emphasis on vulnerable groups within the population. According to him, despite existing regulations, the final decision is still made by the consumer themselves. Therefore, the National Bank urges citizens, when considering investment offers, to seek detailed information and carefully weigh the potential risks.