D.M.G. Grupo Holding S.A better known by its acronym DMG is a controversial Colombian company, intervened and disbanded since November 18, 2008 by the Colombian government, under the suspicion of money laundering and illegal money catchment by using the Ponzi scheme. [1]
Unlike the pyramid scheme, people in DMG could buy a prepaid card from 100,000 Colombian pesos, which could be used to buy a wide range of articles and services offered by DMG subsidiaries. [2] These products and services were all provided by DMG subsidiaries and they ranged from food and home appliances to cosmetic surgeries.[ citation needed ] five to seven months after purchasing the prepaid card, investors had the right to receive 75% to 150% of the money they invested in cash, according to the amount of money invested and how many new clients they had introduced to the company. According to the owner and president of DMG, David Murcia Guzman, this business is supported by the constant flow of money for selling new prepaid cards, and also by the profitability of the subsidiaries companies.
This controversial company is rooted in southern Colombia Department of Putumayo, where David Murcia implanted the basis of his business taking advantage of people's poverty as the population of this department used to get income by the production of cocaine, and other drugs supported by the Colombian guerrilla FARC and the AUC. Once former president Álvaro Uribe started a Coca eradication plan in 2002, the population saw in the Murcia's business (in 2003) a way to get easy money and support their families. The success in Putumayo lead Murcia to spread his business first in the Southwest of Colombia and then in the central zone of the country where the Colombian capital Bogotá is located. Murcia moved his company headquarters to Bogotá in a mall named Outlet, located on Autopista Norte and 198th Street on the north of the city, where hundreds of people used to go to acquire the prepaid cards and buy goods with the cards. David Murcia decided to back his company with a bunch of small companies, so he called his company D.M.G. Grupo Holding S.A, instead of the original DMG S.A. [3] It is estimated that David Murcia and his bunch of new companies caught about One Billion Dollars, most of them lost in the Caribbean tax havens.
David Murcia used the revenue to expand his business to Venezuela, Ecuador, and Panama where his businesses were also disbanded by the local authorities. In Panama where Murcia used to live in 2008, it was reported that he lived a life of luxury and excesses, owning many luxury cars and yachts.
The scheme was based upon a Ponzi Pyramid; and it is alleged that drug money laundering was also involved.
In March 2009, Murcia made declarations through an interview made by a journalist from La Prensa (Panamanian newspaper of most circulation) about his "investments" (donations) to Democratic Revolutionary Party candidates Balbina Herrera and Roberto Velasquez (candidates for president and mayor of Panama, respectively) for their campaigns. He mentions in the interview that he gave the candidates $6 million ($3M each) in exchange for his protection by Panamanian authorities. For the Panamanian public the allegation of Murcia's bribes to politicians and government officials generated a great scandal and, even though corruption is perceived as common in Panamanian politics, investigations are being made to verify the facts mentioned by Murcia. [4]
Charles Ponzi was an Italian swindler and con artist in the U.S. and Canada. His aliases include Charles Ponci, Carlo, and Charles P. Bianchi. Born and raised in Italy, he became known in the early 1920s as a swindler in North America for his money-making scheme. He promised clients a 50% profit within 45 days or 100% profit within 90 days, by buying discounted postal reply coupons in other countries and redeeming them at face value in the U.S. as a form of arbitrage. In reality, Ponzi was paying earlier investors using the investments of later investors. While this type of fraudulent investment scheme was not originally invented by Ponzi, it became so identified with him that it now is referred to as a "Ponzi scheme". His scheme ran for over a year before it collapsed, costing his "investors" $20 million.
A Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. The scheme leads victims to believe that profits are coming from product sales or other means, and they remain unaware that other investors are the source of funds. A Ponzi scheme can maintain the illusion of a sustainable business as long as new investors contribute new funds, and as long as most of the investors do not demand full repayment and still believe in the non-existent assets they are purported to own.
A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products. As recruiting multiplies, recruiting becomes quickly impossible, and most members are unable to profit; as such, pyramid schemes are unsustainable and often illegal.
A high-yield investment program (HYIP) is a type of Ponzi scheme, an investment scam that promises unsustainably high return on investment by paying previous investors with the money invested by new investors.
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