In 2016, when Nigeria’s economy suffered a recession, people were desperate to make money to make ends meet.
Seeing the desperation of the people, many Ponzi schemes came up and then people began to invest the little they had in those schemes in the hope of getting more money.
However, as typical with all Ponzi schemes, it came crashing not quite long after and collectively, Nigerians lost billions of money.
Data from the Nigeria Deposit Insurance Corporation (NDIC) showed that over three million Nigerians lost about N18 billion when popular Ponzi scheme, Mavrodi Mundial Movement (MMM) crashed in 2017.
According to NDIC, over three million Nigerians were participating in MMM before December 2016 when organisers of the scheme suspended payment to investors, citing heavy workload on its system and by the time the scheme resumed in January 2017, both old and new investors never got paid before it finally went under.
It was a gloomy yuletide for many of MMM investors in 2016 as all hopes of getting money to spend during the season were dashed when the system crashed.
Ponzi schemes typically promise high returns to investors with little or no risk.
However, they crash when many investors cash out, and it becomes difficult to recruit new ones. They pay the initial investors, who now unconsciously become their recruitment agents and spread the word about the scheme and then when more people come in and commit their funds, they begin to renege on the promise by first slashing the promised ROI till they eventually turn off the tap on payment and begin to treat the investors disdainfully
While some people were reported to have died by suicide following the crash of MMM, there were many reports of those who took ill as a result of the shock from the crash.
One would have thought that the losses would be an eye opener to people to be more investment savvy and avoid such schemes as there seemed to be a lull in Ponzi schemes for some time but prevailing reality proves otherwise.
Many of such schemes resurfaced in 2020 in the wake of Covid-19 pandemic and despite warnings from the Central Bank of Nigeria (CBN) and Securities and Exchange Commission (SEC), people have continued to participate and get their fingers burnt.
The modus operandi of the Ponzi scheme operators is the same. They offer mouthwatering ROI to investors even though it is unclear what business they are investing the money in, to guarantee such returns.
Data generated from the EFCC website showed that between 2019 and 2021, Ponzi scheme operators fleeced unsuspecting investors of over N23.4 billion in reported cases, for which the commission has made arrests, in addition to $2.8 million.
The data was collated using the amounts of money said to have been swindled by the Ponzi scheme operators from their clients, as reported by the anti-graft agency on its website.
Sadly, however, more Nigerians have fallen on hard times to dubious investment scheme operators since then.
Nigerians need to understand that Section 38(1) of the Investments and Securities Act (ISA) 2007 prohibits the operation of Ponzi schemes.
The section provides that “no persons shall (a) operate in the Nigerian capital market as an expert or professional or in any other capacity as may be determined by the commission, or (b) carry on investments and securities business unless the person is registered in accordance with this Act and the rules and regulations made thereunder.”
Similarly, section 67(1) of the ISA, 2007 provides to the effect that no person shall invite the public to deposit money whether bearing or not bearing interest except a bank or body established by law for that purpose, while sections 58(1) and 59 of Banks and other Final Institutions Act (BOFIA), 2004 provides that no person shall carry on financial business in Nigeria other than insurance and stock broking except if it is a company duly incorporated in Nigeria and holds a valid license granted by the Central Bank of Nigeria (CBN).
Worsening economic situations as many Nigerians are currently faced with, occasioned by the removal of subsidy on petrol and attendant hike in the cost of goods and services provided an inroad for Ponzi schemes to come in and defraud people of scarce finances.
This is the time many of such investment schemes will come up offering excessive returns on investment, some as high as 200 per cent.
The question everyone needs to ask before they put their money down is whether the promoters of the Ponzi schemes are doing business in the same economy that other businesses are experiencing a downtime what they trade in to guarantee such returns and if the schemes are regulated and insured by relevant government institutions.
Then there are those who say they are wealth teachers and motivational speakers.
While their teachings on how to make money may be real, another question to ask is why they are not applying those teachings in their own lives.
Has it ever occured to you that the money you pay to buy those classes, which most of the information is internet-sourced is their only means of making money?
You are their only source and the moment you stop paying for some of those needless classes, many of them will be out of business.
As it is often said in local parlance, this is the time to shine your eyes before you fall mugu.
