SINGAPORE - The chief executive officer of an investment firm and two other Singaporeans were hauled to court on Tuesday (Jan 9) for allegedly promoting a pyramid selling scheme.

CEO of New Zealand-incorporated Maxim Capital Limited, Andrew Lim Ann Hoe, 61, Chin Ming Kam, 44 and Goh Seow Mooi, 58, are accused of committing the offences between August 2013 and July 2015.

The scheme was known as the Maxim Trader Compensation Plan, according to court papers which did not reveal how it operated and the amounts involved.

Singapore's Ministry of Trade and Industry (MTI) has said that a pyramid selling scheme will typically require participants to pay an upfront charge.

In return, they are promised financial rewards for each additional participant recruited as well as for all new participants brought in by their recruits - hence the pyramid-like structure.

MTI said on its website: "As more salespersons are recruited, participants hope to recover their upfront charges and earn sizeable profits. However, such a pyramid scheme will eventually collapse when they run out of new recruits, resulting in those salespersons at the bottom of the pyramid losing all their upfront charges.

"In the interest of consumer protection, the Government's regulation effort is targeted at preventing the proliferation of such high-risk schemes."

However, MTI added that not all multi-level marketing techniques are undesirable.

The Government enacted the Multi-Level Marketing and Pyramid Selling (Excluded Schemes and Arrangements) Order to exclude legitimate businesses from the Act. These businesses include insurance companies, master franchises, and direct selling companies which fulfill certain criteria. This exclusion order was implemented in June 2000.

MTI stated on its website: "There is no easy money, you must believe in what you are selling and you should not put your money at unnecessary risk."

On Tuesday, the court heard that Lim is also accused of causing Maxim Capital Limited to carry on a business of fund management without holding a capital markets services licence granted by the Monetary Authority of Singapore.

He intends to plead guilty to his offences and will be back in court on Jan 24.

Chin and Goh allegedly carried on a business of leveraged foreign exchange trading without holding the same licence. Their cases have been adjourned to Jan 23.

Offenders convicted of promoting a pyramid selling scheme can be jailed for up to five years and fined up to $200,000.