Participants in YS Sharing Technology could face substantial financial risks if recruitment slows and promised returns cannot be sustained, the Vanuatu Financial Intelligence Unit (VFIU) has warned. The unit is also examining the business’s financial arrangements after information provided by its owner indicated that it has no operational business or investment accounts with any domestic banking institution.
The VFIU’s financial modelling estimates that direct investor losses could reach VT2.74 billion under a broader participation scenario involving about 2,000 participants if investment activity ceased or recruitment declined significantly. The higher VT31 billion estimate includes returns promoted to participants and represents potential total financial exposure, not confirmed losses.
In an update aimed at informing the public and encouraging informed investment decisions, the VFIU said preliminary inquiries had identified regulatory, consumer protection, financial crime and anti-money laundering concerns requiring further investigation by the relevant authorities.
The VFIU said no final determination had been made regarding the legality of all aspects of the business’s operations. However, the information available raised concerns about the sustainability of its business model, the nature of its activities and the potential risks to the public.
Financial and economic risk assessment
Analysis of materials provided by the business indicates that participants are encouraged to contribute funds through various investment packages in return for substantial returns over specified periods.
Based on financial modelling using information available to the VFIU, direct investor losses could range from approximately USDT4.3 million (VT509 million) under a conservative participation scenario to USDT23.19 million (VT2.74 billion) under a broader scenario involving approximately 2,000 participants, if investment activity ceased or recruitment declined significantly.
The same assessment indicates that total financial exposure, including returns promoted to participants, could range from approximately USDT47.5 million to USDT264.16 million. The higher estimate is equivalent to approximately VT31 billion and represents the broader economic impact that could arise if promised returns could not be met.
The VFIU said the returns promoted in the materials reviewed substantially exceeded ordinary commercial investment returns and, based on the information assessed, would require continuous inflows of new participant funds to remain sustainable. Its modelling also indicates that advertised liabilities could exceed the total funds contributed by participants by more than tenfold.
Recruitment-based structure
The VFIU has reviewed information suggesting that participants are encouraged to recruit additional members into the programme.
Analysis of the recruitment structure indicates that the number of new participants required increases exponentially at each level. Under the model reviewed, most participants would be concentrated at the lowest levels of the recruitment structure and would therefore face the greatest risk of financial loss if recruitment slowed or stopped.
The VFIU reminded the public that schemes relying primarily on continued recruitment, rather than genuine economic activity, may expose participants to substantial financial risk.
Regulatory and compliance concerns
Preliminary inquiries have identified several issues requiring further examination by the relevant authorities, including:
Whether the activities being conducted are consistent with the information registered with the Vanuatu Financial Services Commission (VFSC).
Whether the activities comply with the requirements of the Virtual Assets Services Providers Act, administered by the VFSC.
Whether the current business licence accurately reflects the location and nature of the business’s operations.
Whether activities involving the collection of public funds constitute regulated financial activities requiring authorisation or licensing.
Whether activities involving the purchase, transfer or exchange of USDT and other virtual assets fall within applicable virtual asset regulatory requirements.
Whether the business has complied with obligations under the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act where its activities constitute reporting entity services.
Information provided during a regulatory visit also indicated that the business does not operate a business bank account and that certain transactions may be facilitated through agents and members exchanging USDT for Vatu. The relevant authorities are assessing these matters.
International business representations
The VFIU is also examining representations concerning overseas business relationships and related entities.
Preliminary reviews of publicly available corporate records have identified matters requiring further verification, including the status of certain overseas business registrations referred to in promotional materials. These matters remain under investigation, and no final conclusions have been reached.
The VFIU is aware of publicly available reports and commentary concerning entities associated with the YS Global network in other jurisdictions. This information is being reviewed as part of the broader assessment.
The VFIU cautioned that the existence of such reports should not, in itself, be regarded as proof of wrongdoing, although the information may be relevant to ongoing regulatory examinations.
Ongoing regulatory action
The VFIU said it had previously informed YS Sharing Technology that activities identified during its review may fall within reporting entity obligations under the AML/CTF Act. It also directed the business to cease conducting activities covered by the Act until the applicable registration and compliance requirements had been satisfied.
The matter is being coordinated between the VFIU, Reserve Bank of Vanuatu (RBV), Vanuatu Financial Services Commission (VFSC), Department of Customs and Inland Revenue (DCIR), and relevant licensing and law enforcement authorities.
These authorities are assessing matters within their respective mandates, including licensing requirements, business registration obligations, financial services regulation, virtual asset activities, tax compliance and AML/CTF obligations.
The VFIU strongly encourages members of the public to exercise caution before investing in any business or scheme that:
Guarantees unusually high returns;
Promotes recruitment of new members as a source of earnings;
Relies on cryptocurrency transactions that are difficult to verify independently;
Does not maintain transparent banking arrangements;
Cannot clearly demonstrate the legitimate source of returns paid to participants; or
Appears to operate without the appropriate regulatory approvals.
People who have invested funds with YS Sharing Technology should retain all records relating to their participation, including contracts, receipts, wallet addresses, transaction records, promotional materials and communications with agents or representatives. These documents may assist authorities in assessing the matter.
Key reasons higher-level members promote the scheme
Members at higher levels of a pyramid scheme may actively promote and support it because their financial interests and profits depend on continued expansion of the recruitment structure.
Financial dependency: Higher-level members receive a share of money paid by new recruits brought in by lower-level members. If recruitment slows, their payouts may stop.
Protecting their investment: Reaching a higher tier may require members to invest substantial amounts of money or time. Promoting the scheme may be an attempt to recover their initial costs and secure a profit before the structure collapses.
Illusion of legitimacy: Top members and directors may project an image of wealth, luxury and success, including by displaying expensive cars, clothing or purported earnings. Such displays can encourage lower-level members to believe the system works and recruit others.
Shifting the blame: When lower-level members begin losing money, higher-level members may attribute those losses to a lack of effort or a poor personal mindset rather than problems with the business model.
Self-preservation and fear of liability: Members who profit from the losses of others may have a strong incentive to maintain the appearance of a legitimate business and delay scrutiny or potential legal action.
Consumer warning and regulatory compliance information
The VFIU reminded the public that it had previously issued media warnings about investment schemes, pyramid-style schemes and other arrangements that may expose participants to substantial financial losses.
It encouraged the public to consider previous schemes that operated in Vanuatu, in which participants collectively suffered substantial losses, with some cases involving losses of up to VT40 million.
The VFIU said YS Sharing Technology had not complied with notices and correspondence requiring it to complete registration requirements and provide information needed to assess compliance with the AML/CTF framework. This included an AML/CTF procedures manual and related compliance documentation.
The entity had also not completed all regulatory forms requested by the relevant authorities.
The VFIU advised that conducting activities covered by the AML/CTF Act without the required registration, or failing to establish and maintain AML/CTF policies, procedures, systems and controls, may constitute breaches of the Act. Depending on the circumstances and nature of the non-compliance, penalties may include substantial financial sanctions, with fines of up to VT250 million.
Information provided to the authorities by the owner of YS Sharing Technology also indicates that the business does not maintain operational business or investment accounts with any domestic banking institution.
The absence of domestic banking arrangements raises concerns from both consumer protection and AML/CTF perspectives. It may reduce transparency around the movement, custody and safeguarding of customer funds, increase the difficulty of tracing transactions and limit the protections ordinarily available to consumers dealing with regulated financial institutions.
The VFIU therefore urged the public to exercise extreme caution before investing in any arrangement that promises unusually high returns, relies on recruiting new participants or operates outside established regulatory and banking safeguards.
People considering an investment should undertake appropriate due diligence and verify that the operators are properly registered and comply with all applicable laws and regulatory requirements.
The matters outlined above remain under assessment by the relevant authorities. Any determination regarding statutory breaches, enforcement action or penalties will be made in accordance with Vanuatu law and the facts established through the relevant regulatory processes.
The VFIU and relevant authorities remain committed to protecting the integrity of Vanuatu’s financial system and safeguarding the public from potential financial crime risks.
Although investigations are ongoing and no final determinations have been made, the information currently available indicates financial, regulatory, consumer protection and AML/CTF risk indicators that warrant continued scrutiny.
Members of the public are advised to exercise caution and conduct thorough due diligence before transferring funds or participating in any investment programme associated with YS Sharing Technology.
