Saturday, February 4, 2023

Ponzi schemes on rise in Kano as Nigerians lose over N300bn in 5 years

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“It was a hard time to me after I invested my NYSC savings into a Ponzi schemes. Investing N500,000 was the biggest mistake I ever made,” a victim of Ponzi scheme, Nkem, narrates ordeal to Hadiza Musa Yusuf and Musa Sani Aliyu

Ponzi schemes involving fraudulent organisation or individuals operating in different ways to exploit people with promises of enticing returns after a specific period of time, is on the rise in Kano, DAILY NIGERIAN can report.

According to data generated by the Norrenberger Financial Investment scheme, Nigerians have lost over N300bn to ponzi schemes over the last 5 years.

In recent years, thousands of Nigerians have fallen victim to the devious money-doubling platforms, known as Ponzi schemes.

Since the official declaration of economic recession in early 2016, Nigeria has experienced a proliferation of the world’s oldest scam, the Ponzi scheme.

In the wake of the economic crisis of 2016, the Central Bank of Nigeria and the International Monetary Fund had stated that Nigeria’s economy had slipped into recession. The effect was evident through the country’s significant decline in economic activities, such as increased hardship, unemployment, low output, and inflation.

Due to the hardship Nigerians began to seek alternative means of income via scamming that looked viable on surface value but fraught with potentially tragic consequences in the long run.

Hence, when the unorthodox financial system, Mavrodi Mundial Movement, a Ponzi scheme launched in 2011 by Russian politician and conman Sergius Mavrodi, made its way to Nigeria, many Nigerians embraced it as the system that would finally help to secure their financial freedom.

Historically, Ponzi schemes in Nigeria were common in the 1980s and early 1990s. The earliest in the recall were the Umana-Umana investment platform in Port Harcourt and Calabar, the Planwell scheme in Edo State, and the Nospecto in Lagos.

Nigerians lose N300b to ponzi schemes, speculative trade

A report published by the Guardian noted that of the N300 billion lost by millions of Nigerians to ponzi schemes in the past few years, over 2,000 speculators lost N900 million to Yuan Dong Ponzi.

Also, Galaxy Transport Ponzi schemes defrauded victims of N7 billion while N2 billion was lost to Famzhi Interbiz Limited. Nigerians who invested in Cowlane and Dureil also lost N100 million to each of the outfits.

For the infamous Mavrodi Mundial Movement (MMM) that operated between 2015 and 2016, three million investors lost N18 billion. Nospecto investors also lost over N106 billion within the same period.

The Nigeria Electronic Fraud Forum, which was unveiled in 2017, stated that the Nigerian investing public also lost another N11.9 billion to the MMM.

Victims narrate ordeal

A Nigerian graduate, Nkem, who refuse to give her full name, narrates that after her service year in 2021, she saved her NYSC allowances, wanting to start a business that can sustain her, in order to avoid the jobless life after service tussles.

She recounted that, “In the quest for wanting to stand on my own, my friend introduced me to Chinmark group. She convinced me that I would be able to invest and gain more, which pushed me to invest 500k of my savings.

“I was convinced that it was all genuine and tested. On the WhatsApp group chat I met lot of investors. It worked by investing some amount which you will receive N15,000 for six months, then after the sixth month one can take up the initial capital”.

Mr Nkem told DAILY NIGERIAN that she was paid for 3 months, which was later stopped. After being on pending payments she stated that “I was devastated and reported to the police.

“Till date no positive response regarding my case, my monthly allowance and capital gone. I reached out to the WhatsApp group they created and everyone was just complaining and I realized my money is just a token when compared to others”.

Mas’ud Muhammad, another victim of a ponzi schemes in Kano in 2021, narrates how he was duped through the Getapp.

“I was introduced to Getapp and Inskme by a friend. As a then student in Kano State Polytechnic I saw many of my course mates engaging in the Ponzi scheme which I decided to join in.

“It works by buying a package that comes in different amounts. I purchased N20,000 package which I borrowed from my dad and promised to refund.

They promised N3,000 daily profit as investment return which cannot be withdrawn until it reaches a N15,000 threshold out of which you will only be given N7,500 and they take N500 as their charges,” he narrates.

According to Mr Muhammad, he didn’t suspect foul play as their website was verified.

“I didn’t even have the chance to get half of the money I invested when the scheme vanished. I reached out to my course mates and they were saying the same thing. But those who invested at the early stage of the scheme benefited before the site becomes unreachable,” he recalled.

Another victim identified as Abdulrazaq Ibrahim said to have joined Phoenix Contact, which he was introduced to by his mother in March 2022 narrates his ordeal.

He said that his mother invested N10,000 in the reward of N4,000 as a monthly return.

“Excited, my mother imagined the amount of return N50,000 will give if N10,000 brings such amount so she convince all the family to invest after putting in another N50,000 herself.

“I invested N10,000, alongside my brothers too. After successful payments, the site lost its connection and we fall victim to the scam” he said.

Many people like Messrs Mas’ud and Nkem are still out there.

Why Nigerians keep investing in Ponzi schemes

The recent crisis affecting gambling and investment service platform, 86FB has been a rude reminder to many Nigerians of the disadvantages of investing in Ponzi schemes and unverified investment platforms that promise higher than average mouth-watering yields.

The activities of Ponzi scheme operators have been on the increase in Nigeria, especially in the last decade. Nigerians will not forget in a hurry, MMM which is perhaps the most popular Ponzi scheme ever introduced into Nigeria. When the scheme finally crashed in 2016-2017, the CBN revealed that N12 billion was lost by investors.

Since MMM, several others have come in and repeated the same cycle with many more Nigerians falling victim to these scams. The list includes Dantata Success & Profitable Company, Ultimate cycler, MGB Global, Bitcoin Company, Money Rite, No Failure Development, and X-World, Imagine Global Holdings Company Limited, most of which have been shut down by the Securities and Exchange Commission, SEC.

Nigerians have shown time and again that they have a high appetite for high-risk, high-return investment, regardless of the lack of a business model inherent in most of these schemes. Many are ever willing to rush into the next get-rich-quick-scheme with the thoughts that they might be able to benefit before it crashes.

Taking advantage of the country’s large population and woeful economic condition, Ponzi scheme founders are ever-ready to introduce their scam to Nigeria as quickly as possible.

Why do people fall for Ponzi schemes

Unlike a legitimate business, Ponzi schemes boast outrageous returns and this is a major factor why many people will patronise them.

Many people fall into ponzi schemes’ trap because they would rather invest their money and get double the return within a short period of time than work for it.

Unfortunately, it’s usually presumptuous to believe in something that sounds too good to be true.

In the last year, Ponzi schemes have witnessed an upsurge, prompting the SEC’s moves to clamp down on them. The SEC announced in February that it was working with the National Orientation Agency, NOA, and other government agencies to combat the operations of Ponzi schemes and illegal investment platforms.

We don’t accept Ponzi cases at the courthouse – Barrister

Badamasi Gandu, a private lawyer in Kano says evidences provided in court in Ponzi cases are mostly inadmissible as there were no traceable and visible evidence that one has been duped.

“These criminals are very smart, because no physical location to meet them, where did u transfer the money to? Is the account traceable? Even if they are caught, most accounts used are untraceable and they cannot be charged without evidence,” he explained.

He also added that for the quest to make easy money, people engage in illegal businesses, “Ponzi scheme is an illegal trade which both the victim and the initiator can be arrested according to the law if caught, for the fact that the business from initial is not a legitimate one.

“The victim has the intention of cheating the initiator, the initiator knows this and will start as trusted and tested to gain the trust of the individual, this continues until after a particular period when the ponzi schemers have received their target and can no longer lie by using the invested money of their new client to give the old client and boom! They go into hiding,” he explains.

Mr Badamasi advised people to learn that there is no easy money, “nothing good comes easy, and people should refrain from such act as there is no gain without pain,” he states.

Ponzi schemes on rise in Kano state – Kiyawa

The spokesman for Kano State Police Command, S.P Abdullahi Kiyawa said that Ponzi schemes are on the rise in Kano state as the police have received more than 100 cases of ponzi schemes in 2022.

He added that ponzi criminals are very are smart and very difficult to trace, but the police have arrested some suspect whom have been charged to court of law.

The PPRO added that most ponzi cases reported are females as they are prone more to believing people.

Mr Kiyawa advised that people should be careful and should investigate properly before investing in an online business and not risk their money and themselves.

Any investment not registered with SEC is a fraud

An interview with the Zonal head of security and exchange commission Kano, Danladi Mohammed, he explained that ponzi schemes, wonder banks, or investment scams as they are all referred to involves all kinds of illegal fund managers offering incredibly high interest rate which is always beyond what is obtainable and practicable in the financial sector and for a very short period of time.

He reveals that according to the Investments and Security Act 2007, whoever is collecting funds from the public by whatever means to fund its private ventures must be registered with SEC, which means the organization, person, funds, and purpose, as the commission has to be aware of it.

“Any unregistered crowdfunding platforms, which is not recognised by the commission is illegal, and may lead to persecution of such operators and loss of investment by their clients,” he warned.

How to Identify Ponzi schemes be identified – SEC

Speaking further, Mr Mohammed told DAILY NIGERIAN that, Ponzi schemes can be identified when an organization or person offers, “extra-ordinary profit as they always promise to give a high return for the money they collect, this is to lure in their customers. Also they have a very strong promotional drive as they ensure that potential victims hear about what ‘benefits’ their other ‘investors’ have made from the scheme. Lastly, their investments are fictitious as they sometimes claim to be involved in oil and gas, foreign exchange trading, or some other bogus activities to convince other customers on how they make so much profit,” he said.

A company with CAC registration can be illegal

The SEC zonal director, Danladi Mohammed Stated that people should not be deceived when companies provide them with CAC registration.

“Of course, they can have it to protect the name of their company, having CAC is one thing and proper registration with SEC and other regulatory bodies is another,” he said.

The zonal head emphasized that people should try and ask questions, not pretend they know it all.

He further warned that any member investing in dealings with any entity without seeking information from necessary regulatory bodies is doing so at their own risk.

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