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How Nigerians Lost N18b to Ponzi Schemes – See Details

The Securities and Exchange Commission (SEC) yesterday said over three million Nigerians have lost about N18 billion to Ponzi schemes and other illegal investment schemes.

It, therefore, described the continued activities of Ponzi schemes as a threat to the protection of investors, the functioning of a fair and orderly financial market, as well as the development of the economy at large.

It, however, assured the public and relevant stakeholders that it will continue to apply innovative measures to combat Ponzi schemes.

SEC Director-General, Mr. Lamido Yuguda, made this known during the opening of a webinar organised by the Attorney-General Alliance-Africa in collaboration with the SEC.

Yuguda said the devastating impact of the COVID-19 pandemic on the economy, the low-interest rate environment, coupled with the increased use of online services to interact and transact, has helped the proliferation of Ponzi schemes.

He said Ponzi schemes operators had capitalised on the harsh economic climate to offer unrealistic returns on investment to unsuspecting investors.These illegal schemes have also been able to solicit new investors and expand their operations through the increased use of online services.

Yuguda, however, stressed that the SEC has a duty to promote investor education and the training of persons in the capital market, saying that the programme is organised in furtherance of that statutory mandate.

He said: “This capacity building programme will afford participants the opportunity to learn contemporary and innovative ways of combating and curbing the menace of Ponzi schemes in Nigeria.

“I believe the knowledge gathered from this programme will provide participants new ways of approaching, assessing and tackling the growing problem of Ponzi Schemes.

“Ponzi schemes operate with unsustainable operating models that, ultimately, lead to huge losses for investors. Following the collapse of the MMM Ponzi scheme, the Nigerian Deposit Insurance Corporation (NDIC) had estimated that over three million Nigerians lost about N18 billion. Several other illegal investment schemes have cost Nigerians their assets and life savings.”

He described the theme of the programme as apt, and its organisation timely, in view of the challenges confronting the sector and its regulators, by the Ponzi schemes.

“The pervasiveness of Ponzi schemes undermines regulatory efforts in developing the capital market, and also negatively impacts investor confidence,” he added.

The SEC chief said the Commission’s efforts in addressing Ponzi schemes are therefore geared towards investor protection and preserving market integrity, emphasising that the Nigerian capital market should be a safe destination for investors.

Also speaking, the Attorney-General of the Federation and Minister of Justice, Mr. Abubakar Malami (SAN) said there is no underlying investment for Ponzi scheme, so it can never deliver the returns on investment as promised.

Malami stated that they are fundamentally different from legitimate investment opportunities, as the perpetrators are simply fraudsters who take advantage of even the wealthy, intelligent, the sophisticated people.

“They are usually people who are very good at what they do and they thrive on trust and friendship promising easy cash in the short term and financial succour to the naïve. Ponzi scheme is an operational, social and economic risk and the fight against it is now a war, and in fact a full blown war. It is everywhere, not peculiar to us.

“The investment climate is not simplistic, it can be highly sophisticated and that is why the law regulates the space to ensure that the requisite duty of care by operators is not breached in any way, that there is a proper disclosure as required by law and that there is a generally level playing field for all stakeholders” he added.

Malami added that the nation has relevant laws to ensure that offenders are punished, stating that the government is doing its best to tackle economic problems and committed to ensuring that Nigerians are lifted from poverty through a number of incentive-based loans and a number of programmes

In his remarks, AGA-Africa Board member, Mr. Markus Green, stated that due to the pandemic, businesses are operated online and criminals have taken advantage to attract people to Ponzi schemes, adding that the seminar is timely in order to build capacity on how to track these schemes, apprehend the perpetrators and prosecute them.

He said: “We bring in experts from the United States to combine with others in Africa for training on these activities and how to curb them. COVID-19 has changed the way we do business but it has not stopped us from our work.”

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