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ANCHORAGE - State banking officials issued a cease and desist order Friday to a private investment club after finding that its get-rich-quick scheme is illegal.
The state Division of Banking and Securities ordered organizers Friday to stop marketing the scheme to Alaskans.
The scheme, called the "People in Profit System," or PIPS, asks members for a "loan" of $450 and agrees to repay it with interest under various schedules, depending on what plan the investors choose.
The club says it invests the money in various businesses and promises far-fetched interest payments, with a $450 loan returning as much as $8,800 in two years.
Regulators have determined that PIPS is a Ponzi scheme, where money from new investors is used to pay off early investors. They warn Alaskans who buy into it that they are bound to get burned when the scam ultimately collapses.
The division has determined that PIPS is selling securities and ordered it to stop selling them to Alaskans until they are registered with the state, said state securities administrator Mark Davis.
The division sent the order to nine people, with addresses in Malaysia, Denmark, Oregon and Nevada. If they do not deny the state's claims within 15 days, the temporary order will become permanent, Davis said.
The division also found that the PIPS "2 percent plan," where investors are promised a 2 percent return on their investment per day, is a fraudulent investment that is being sold through misrepresentation, Davis said.
However, it's very unlikely the order will stop PIPS from pitching its plan to Alaskans, said Ed Sniffen, an assistant attorney general who works in the consumer protection unit in Anchorage.
Because the group appears to be based in Malaysia and transacts most of its business over the Internet, there's little Alaska officials can do to stop it. Also, while officials have deemed it illegal for PIPS to sell its securities in Alaska, it is perfectly legal for Alaskans to buy them, Sniffen said.
Hundreds of Alaskans already have bought into the PIPS plan, and many of them have reported making good money from it, Sniffen said.