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Ukraine: Financial Pyramids Will Be Outlawed

(Oct. 3, 2012) On August 23, 2012, the Ukrainian Commission on Financial Markets Regulation approved draft legislation banning financial pyramids in <?Ukraine and forwarded it to the legislature. The draft is published on the Commission's website. (Proposal on Banning Financial Pyramids in Ukraine [in Ukrainian] (last visited Oct. 1, 2012).) According to the proposed law, people who assist in organizing a pyramid scheme will be prosecuted, together with the formal organizers, even if they received a payment from only one participant in the scam. The draft measure recognizes as assistants those individuals who provide organizers of a pyramid with space, means of transportation, technical services, or any other equipment or who advertise the pyramid and help to attract customers. (Criminal Responsibility for Advertisement of Financial Pyramids [in Russian], SEGODNIA.UA (Aug. 27, 2012).)

A fine and/or imprisonment for a term of from one to three years is foreseen for organizing or assisting in organizing a pyramid; for repeated activities of this nature, the term of imprisonment increases to five years. If a large amount of money or electronic communication or modern information technologies have been used to carry out the scam, a punishment of eight years of imprisonment is prescribed. (Id.)

It appears that the proposed legislation was drafted in response to activities of a notorious Russian businessman who had allegedly initiated a number of financial pyramids and was moving his activities to Ukraine. He had expressed his intention to establish a political party there formed by people who invest in his financial scheme. Russia does not have a law prosecuting initiators of such financial machinations. (Ukrainian Officials Recommend Imprisonment of Organizers of Financial Pyramids, Even if There Is Only One Participant [in Russian], NEWSRU.COM (Aug. 28, 2012).)