Have you seen ads promising massive monthly returns from a “revolutionary” agricultural or tourism project? Before you invest your life’s savings, stop and read this it could save you from financial ruin.
The Lure: Too Good to Be True
Across Sri Lanka, there’s a growing number of investment schemes claiming to offer guaranteed returns of 24%–420% per annum. These schemes often advertise under agriculture, tourism, or property development, using glossy ads, polished offices, and staged projects to appear credible.
But here’s the catch: all of them are illegal, and many are classic Ponzi schemes designed to collapse the moment new investors stop joining.
The Reality: Illegal and Risky
- The Central Bank of Sri Lanka (CBSL) oversees deposit-taking and financial institutions under the Banking Act and the Finance Business Act.
- The Securities and Exchange Commission of Sri Lanka (SEC) regulates securities, collective investment schemes, unit trusts, and public offerings under the SEC Act.
These fraudulent schemes are not regulated by either the CBSL or the SEC.
The CBSL has repeatedly warned the public against investing in unauthorized schemes. They typically promise unrealistic returns, pressure investors to act quickly, and provide little to no valid documentation.
Understanding the Law
Under the Companies Act No. 07 of 2007 and the Securities and Exchange Commission of Sri Lanka Act:
- Private limited companies are strictly prohibited from inviting investments from the general public.
- Only Public Limited Companies and Public Listed Companies registered with the SEC can invite public investment and even then, only under strict disclosure and compliance requirements.
Violations carry severe penalties:
- Imprisonment: Up to 10 years
- Fine: Not less than LKR 10 million
- Winding up of the private company
- Possible criminal charges under the Penal Code (e.g., Cheating)
Red Flags to Watch Out For
- Promises of unusually high guaranteed returns (24%–420%), far above normal bank lending rates.
- High-pressure tactics urging you to invest immediately.
- Entities that are not Public Limited Companies or not registered with CBSL or SEC.
- Unclear company structures sometimes advertising under individuals’ names rather than the company.
Quick Check: If they claim to pay far higher returns than bank interest rates (12–15%), ask yourself: Why wouldn’t they just borrow from a bank?
Tricks Used by Predators
Fraudsters often run legitimate-looking projects to appear trustworthy, but these are usually just fronts. They may even offer deeds of transfer of land or written agreements but none of these truly protect your money.
The Consequences
Investors in such schemes are not legally protected. When the scheme collapses — as it always does — you may lose your entire investment with no legal recourse.
The Safe Path Forward
- Verify: Always check if the company is licensed with the CBSL before investing.
- Report: If you spot suspicious schemes, notify:
- The CBSL’s Financial Intelligence Unit (FIU)
- The Securities and Exchange Commission (SEC)
- The Registrar of Companies (ROC)
- The Sri Lanka Police
- Share: Protect others by informing friends, family, and your community.
Final Thought
Ponzi schemes stand only as long as new investors keep feeding them the moment that stops, they collapse, and the last in line lose everything. Protect your savings by staying cautious and informed