Peru's Superintendency of Banking and Insurance (SBS) today banned two companies, WCM777 and TelexFree, from operating within the country. The regulator specifically prohibited both entities from raising funds from the Peruvian public, mirroring action taken by Colombia against WCM777 in late November.
Colombia's financial regulators suspended WCM777 operations and launched a criminal investigation just days before Peru's announcement. Peruvian congressman Jaime Delgado had signaled impending regulatory action in late November. Delgado warned the public about WCM777's business model.
WCM777, also known as World Capital Market, offered investors gains up to 300 percent. People invested between $399 and $1999 USD. Delgado noted that such schemes often appear to work initially. He added that payments stop when companies cannot recruit enough new investors.
TelexFree had advertised itself as an investment scheme for some time. Curiously, in early November, when Peruvian media asked the SBS about TelexFree potentially being a Ponzi scheme, the agency responded differently. The SBS then stated TelexFree was not a Ponzi because it "manufactures a product" and did not pay interest on money.
A month later, the SBS reversed its position. Both TelexFree and WCM777 accepted money from others for "mutual deposit." Peruvian law requires companies to seek "approval of the Superintendent" before doing this. Neither company had such approval. Both schemes used new investments to pay off earlier affiliates.
The SBS did not explicitly label either TelexFree or WCM777 as Ponzi schemes in its announcement. Neither TelexFree nor WCM777 had issued a public response to the SBS's decision at the time of publication.