The Kubus scheme was a Ponzi scheme

Ponzi scheme

A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation...

 that originated in South Africa

South Africa

The Republic of South Africa is a country in southern Africa. Located at the southern tip of Africa, it is divided into nine provinces, with of coastline on the Atlantic and Indian oceans...

 in the 1980s and was subsequently exported to the United States. It remains among the biggest frauds in the history of both countries.

Origins

The scheme was initiated by Adriaan Nieuwoudt after his 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 R500, which would produce 10 jars of culture a week. In return he paid R10 per envelope or R100 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 people invested a reported R140-million in the scheme before it was declared an illegal lottery.

Kubus in the USA

According to subsequent evidence presented at trail, the Kubus business was exported to the United States in 1984. By late 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., (also known as House of Cleopatra) was to utilise the culture in manufacturing cosmetics.