The country's top immigration official is urging overstayers to contact his department rather than risk being offered false residency papers.
Immigration New Zealand chief Andrew Annakin says it's important that overstayers contact his department to sort out their immigration status.
A scheme allegedly promising visas or residency for $500 came to light in Auckland on Wednesday night when hundreds of people turned up at a marae to fill out forms and hand over money.
Documents issued in the name of a Maori hapu have been sold to about 50 families, declaring them under the tribe's care and protection.
The annual residency ballot for Pacific Islanders takes place next week and about 10,000 people have registered for the 1500 places available.
Mangere MP Sua William Sio says those odds appear to make the scam offer very attractive to overstayers so he's urging Pacific Island community leaders to warn their people against it.
Pointing out that the ballot takes place every year, Mr Annakin told Nine to Noon on Friday that if overstayers came forward and agreed to go back to their home country, they could apply again at a later stage - not necessarily an option if they have to be removed.
Legality of scheme defended
The man accused of selling the documentation, Gerrard Otimi, told Morning Report on Friday that what he was doing was legal and that he wasn't ripping anyone off. Mr Otimi has previously printed Maori passports and currency.
He said overstayers were dying because they were unable to work in New Zealand, and were stressed because they were in overcrowded homes and their children could not go to school.
Mr Otimi said he was not offering passports or visas but the opportunity to become part of his hapu. In return for the $500 fee, he said, people received an equivalent amount in the hapu's barter currency.
Immigration Minister Johnathan Coleman has condemned the scam, while Pacific Island Affairs Minister Georgina Te Heu Heu says she cannot see any foundation to Mr Otimi's claim that he has the right to issue such papers.
The police are looking into the matter but have had no complaints so far.