The Kubus scheme, a Ponzi scheme that started in South Africa in the 1980s and was extended to the United States. Even to this day it remains one of the biggest scam in the history of both countries.
In the 80’s the South African entrepreneur Adriaan Nieuwoudt gave birth a virtual gold-rush by getting people to invest in a scheme whereby they grew milk culture in a get-rich-quick scheme.
The scheme was created after Nieuwoudt’s grandmother showed him a milk culture she used as a skin product. He turned the culture into a work-from-home business by selling dried plants that would produce thick milk for R 500 (South African Rand, ZAR) which would produce 10 jars of culture a week. In return he paid R10 per envelope or R 100 per week for producers who sent him a teaspoon of the culture, making for break-even within five weeks. The dried product sent back by activation kit buyers were ground up, without first being removed from the envelopes in which it was shipped – and resold as new activators.
Thousands of naive South Africans fell for it, furiously buying the mixture of cheese and milk culture from Nieuwoudt, “growing” it in bottles, glasses and then drying it into a powder to re-sell to Nieuwoudt and recruiting others to do the same, in a classic pyramid scheme. At the time Nieuwoudt claimed that he needed vast quantities of the dried powder to develop a skin cream product.
Moreover, the Nieuwoudt’s pyramide was exported to the United States in 1984. Several corporations had been established around the product, among them: Activator Supply Company, Inc. sold “activator kits” that allowed the making of the milk culture for $350 per a minimum of ten kits; Culture Farms, Inc. produced, bought and sold culture; and Cleopatra’s Secret, Inc., was to use the culture in manufacturing cosmetics.
The Kubus scheme was eventually declared an illegal lottery by the South African government and shut down. When the story broke, it turned out to be nothing but a pyramid scheme as there was no ‘beauty product’ — the cultures were simply ground up as activator for the next batch of investors. Tons of dried milk-culture were found rotting in a shed. The scheme took in approximately R 140 million before it was shut down.
Nieuwoudt was found guilty of diamond theft and illegal diamond dealing in the 1990s and sentenced to eight years in jail. He had served in prison only a year before being released. Since the collapse of the Kubus scheme, Nieuwoudt has been involved in several controversial money-making schemes.