Almaty. September 16. Information Center - Finiko’s promotional videos are straight out of the pyramid-scheme playbook. The clip opens
with shots of flowers, champagne, party balloons and happy people hugging and
kissing. A man in a business suit and wearing an expensive watch introduces
himself to camera as a partner in Finiko, described in his telling as an
exciting investment company in Kazakhstan, Eurasia Net writes.
the right companies,” the man advises.
months into handing his money over the company, he says, he has made enough
money to buy a shiny new car. Moments later, he pops on a pair of stylish
sunglasses and drives away.
was uploaded to Finiko’s Vkontakte page in May. Since then, many of the people
who followed the man’s advice have found themselves stripped of their savings
and saddled with crippling debts.
year has seen something of a boom in private investor activity
in Kazakhstan. The fervor has been enabled in large part by new possibilities
on the market for local investors to gain access to a theretofore
distant-feeling U.S. stock market.
have sniffed an opportunity in all this excitement.
Smagulova, an event manager from Almaty, had spent a year saving up for a car,
but she lost it all in the space of a month after entrusting it to
about financial pyramids and I would never have fallen for one, but what I
thought I was doing here was putting my money into an investment company,”
Smagulova told Eurasianet.
said she had been inspired by the experience of an acquaintance who, she said,
had made good money speculating on securities.
Yegorchenko, an investment consultant and the editor of an investor-focused
magazine, told Eurasianet that the craze for investing was the result of a
widespread chatter about the 2020 rally of the U.S. stock market.
the financial pyramids began to pretend to be successful brokerage companies
that make money on ‘trending investment instruments’,” said Yegorchenko.
emerged as the biggest among these speculators.
me that they were investing in the forex market, currency exchange,
cryptocurrency, they spouted incomprehensible terms, and then promised returns
in the region of 30 percent monthly,” said Smagulova, who said she entrusted
$10,000 with the company.
General Prosecutor's Office in 2020 reportedly saw a sevenfold year-on-year
increase in the number of criminal cases opened over the “creation and running
of a financial [investment] pyramid.” That was 180 cases in total. The Interior
Ministry produced an even larger number – 217.
many other problems in Kazakhstan, it has taken an intervention from the
highest levels of the national leadership to lend a sense of urgency. Back in
February, President Kassym-Jomart Tokayev said at a meeting with officials from the
Prosecutor General’s Office that he was growing alarmed by the proliferation of
made another appearance during Tokayev’s state of the
nation speech on
September 1, which indicated that progress is still wanting on drawing up a
clear long-term battle plan.
Prosecutor General's Office is set to develop a set of measures to combat fraud
and financial pyramids,” he said, without elaborating.
meantime, however, criminal cases are multiplying rapidly. In the first seven
months of this year alone, the police have initiated 330 financial pyramid-related
criminal cases. The value of the suspected fraud committed in those cases has
been estimated at 21 billion tenge ($50 million). Kazakh and Russian
prosecutors have opened criminal cases against Finiko; its co-founder was
arrested in Russia in July.
perpetrators of fraud are only one part of the equation.
Brasilova runs a financial literacy school in Almaty that is designed to
address the other half: the still high propensity among small-time Kazakh
investors for falling victim to con tricks.
of investment can we talk about when people don’t even understand the terms of
bank loans and are ending up in debt bondage?” she told Eurasianet.
solution devised by the Astana International Exchange, a trading floor set up
by the Astana International Financial Center, was to commission a documentary about financial pyramids and
their effects. The film was produced by public relations expert Rinat
Balgabayev and posted on his YouTube channel.
Two of the
schemes described in the documentary include Garant 24 Lombard and Estate
Lombard, which both promised their clients fabulous profits on investments in
the cryptocurrency market.
explained to Balgabayev how the companies were especially persuasive by behaving
like legitimate companies: They offered their services on billboards in city
centers, enlisted pop stars, famous bloggers, and other influencers for
endorsements. When the latter were quizzed by police, however, they admitted to
knowing little about the operations of the companies.
important final piece in the persuasion campaign is often to show hopeful
investors paperwork attesting to their state registration, operating licenses
and even letters from local government officials thanking them for their
Bekbolatov, an Interior Ministry investigator, told Balgabayev that one
financial pyramid obtained the paperwork in question by registering as a
The hope is
that a two-pronged approach of intensified prosecutions and increasing
financial literacy will help mitigate the problem. Brasilova is sanguine,
however, and says that human frailties will ensure that pyramid schemes
routinely make appearances on Kazakhstan’s investment market.
people that are to blame because they think they can get rich or solve their
financial problems without making any effort, but that is not how it works,”