Rwanda has banned operations of an online marketing business known as TelexFree over fears that it could be running a pyramid scheme.

An announcement issued by the Ministry of Trade and Industry on Tuesday stated that the decision came after joint investigations by the Ministry and the National Bank of Rwanda found that the business, which was attracting many Rwandans, could be a 'Ponzi scheme’ in which many were bound to lose their hard-earned savings.

READ: Rwanda govt probes TelexFREE over Ponzi scheme claims

“The Ministry of Trade and Industry hereby informs the general public that the operations of PLI TelexFree Rwanda Ltd are banned.”

“Telexfree’s activities are pyramid scheme based, which rely on recruiting participants to increase traffic on its website, and bonuses are awarded on the basis of the number of recruits and the recruiter’s level in the chain,” Minicom said in a statement.

According to findings, the funds invested by promoters/members of TelexFree Rwanda Ltd were transferred to Germany on TelexFree e-wallet account.  The company is said to have moved contributions amounting to $11m to the Germany account.

Government further found out that if such physical cash is transferred through a local account the e-wallet on the TelexFree’s software of the promoter is credited by electronic money and not physical cash in Rwanda.

According to Emmanuel Bayingana, the person in charge of competition at the Ministry of Trade and Industry, the company did not engage in the activities it had initially registered for.

“The company registered to carry out communication operations. Their initial plan was to provide calling and messaging services using VOIP technology but that is not what they have been doing,” Mr Bayingana said.

Mr Bayingana said that the fact that the company had transferred the funds to Europe signalled something fishy. 

“If they were genuine, they would not have transferred the $11m to Europe. The Central Bank particularly found it worrying to know that such an amount had been secretly transferred to an account outside Rwanda. It is a dangerous motive that doesn’t only threaten people’s savings but the economy too,” said Mr Bayingana.

Rwanda Utility and Regulation Authority (Rura) had since February instructed TelexFree Rwanda Ltd to cease all operations related to the provision of unauthorised telecommunication services.

The money paid by the new recruits is transferred abroad and members have no legal means of claiming it.

The Ministry warned the public against investing in such businesses and to, instead, continue saving their money in duly licensed financial institutions or invest in authorised businesses.