Nigerians Lose N18Bn to Ponzi Schemes – SEC

Securities and Exchange Commission (SEC) has disclosed over three million Nigerians have lost about N18 billion to Ponzi schemes and several other illegal investment schemes.

It described the continued activities of Ponzi schemes as 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 it will continue to apply innovative measures to combat the activities of Ponzi schemes.

Mr Lamido Yuguda, director-general of the SEC, made this known during the opening of a two-day webinar organised by the Attorney General Alliance-Africa in collaboration with the Securities and Exchange Commission.

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 have 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.

He said, “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.”

Abubakar Malami, attorney general of the Federation and minister of Justice, said there is no underlying investment for Ponzi schem so it can never deliver the returns on investment as promised.

Malami stated they are fundamentally different from legitimate investment opportunities as operators 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.