Can NDIC alone tackle Ponzi scammers?, Salisu Na’inna Dambatta writes

Promoters of Ponzi Schemes scams are aggrevating poverty in the country. They do this by swindling Nigerians of huge amounts of money.

A Ponzi scheme is defined as “an investment fraud that pays existing investors with funds collected from new investors.” This is clearly doubtful for the discerning.

Information in multiple sources including the NDIC website indicate that the swindlers at a stage operated up to 160 illegal financial companies in Nigeria through which they swindled Nigerians a cumulative N911 billion in over two decades of committing financial crimes in our country.

The Director of the Bank Examination Department at the NDIC, Mr. Michael Oladele said that the amount was lost to various Ponzi schemes and related frauds across the country over a 23-year period to December 2022.

Of the amount, N700 billion was trapped in private placements in 2016. One Ponzi schemer, Mavrodi Mundial Movement (MMM), swindled Nigerians N18 billion who thought they were investing in a lucrative enterprise. A Ponzi organisation, MBA Forex, allegedly defrauded investors of N171 billion. Nospecto, another suspected Ponzi scammer, swindled investors N22.45 billion.

A Nigerian newspaper reported in its September 21, 2022 edition, that in Kano State alone subscribers to various Ponzi Schemes, who aspired to get rich quickly, lost an estimated N300 billion in a five-year period to 2021. Some Ponzi scam victims died of frustration and many of them fell into poverty.

Ponzi schemes were not invented in Nigeria or by Nigerians. In fact, an American financier, stockbrocker and fraudster, Bernad Lawrence Madoff, organised the biggest Ponzi scheme in history. The sum of $65 billion belonging to over 40,000 people in 136 countries was involved. He operated his scam scheme for 40 years undetected. Fairfield Greenwhich, a British assets management firm alone invested $7.5 billion in his scheme and lost much of it.

The crafty Ponzi schemers proved the lucrative profitability of their financial designs by making sure that a number of their subscribers receive huge returns on their investments. The satisfied unsuspecting investors will then spread the word that indeed the scheme works.

Deceived by a huge funny marging, the satisfied investors would become more greedy by staking more of their money into it. And in some cases, they naively invite others to invest in the scheme in the vain hope of reaping handsome profits.

The fraudsters in such schemes have many tricks that make their world so real, including falsfying their books. They massively use the media to claim investment successes where there was none and deploy dubious tactics to cover their misdeeds They flaunt to the public clients who were lucky to cash out along with the huge profit paid; but they fully knew that the hollow scheme will ultimately crumble.

Ponzi schemes crumble, according to a Nigerian publication, whenever it becomes hard to recruit new investors, or when large numbers of existing investors take out their money.”

Consequently, most investors end up losing all, or much of the money they invested. Some operators of Ponzi schemes simply run away with the money entrusted in them.

Sadly Ponzi schemes flourish due to many factors like reluctance by victims to report any sign of misdeed to the relevant authorities. However, in NIgeria several agencies are collaborating to tackle the menace.

Mr. Oladele of the NDIC said, “There exists an inter-agency committee on Illegal Fund Managers comprising the Central Bank of Nigeria (CBN), the Nigeria Deposit Insurance Corporation (NDIC), the Security and Exchange Commission (SEC), the Economic and Financial Crimes Commission (EFCC), the Corporate Affairs Commission (CAC) and the Nigeria Police.”

While the Committee wants Nigerians to shun Ponzi scammers, the Economic and Financial Crimes Commission (EFCC) and the Security and Exchange Commission prosecute arrested Ponzi scammers.

© Salisu Na’inna is a Kano-based journalist