The Nigeria Deposit Insurance Corporation (NDIC) has disclosed that at least N911.45 billion has been lost to various Ponzi schemes and related frauds across the country in the last 23 years.
This even as the Corporation is seeking stronger collaboration among relevant agencies in the financial regulatory sector and public support to achieve a breakthrough in the war against Ponzi schemes.
Director of Bank Examination Department of the NDIC, Michael Oladele, who made the disclosures at the just concluded workshop organised by the corporation for finance in Port Harcourt, said promoters of the schemes have become so sophisticated and creative in their tricks that broad base collaboration is needed to stay ahead of them.
Delivering a paper titled, ‘Rising Ponzi Schemes and Investment Scams in Nigeria’, Oladele further disclosed that N700 billion was reportedly trapped in private placements in Nigeria in 2016 just as MMM swindled investors of N18 billion.
He also disclosed that MBA Forex defrauded investors of N171 billion, while another N22.45 billion was lost to Nospecto.
The NDIC Director further x-rayed local and global case studies of Ponzi schemes, which are popularly referred to as wonder banks in Nigeria; the history of the frauds, their modes of operation, enablers of the schemes as well as regulatory approaches.
Other areas covered were specific actions by the regulatory authorities, expectations of regulatory authorities, pre-conditions for effective deterrence and responses and possible countermeasures by the investing public.
He argued that counteractions by the targets, who bear much of the brunt of the scams, are required to expose and prosecute suspects, adding that there is much the public could do to evade the antics of Ponzi scheme traps, which is a conceptual fraud.
Placing it side-by-side with affinity fraud, advance fee fraud (419), pre-IPO/private placement investment scams, pump and dump investment scams among others, he warned that there are increasing reasons to be wary and conduct due diligence before any investor releases their money.
In his words, “A Ponzi scheme is a fraudulent investing scam which generates returns for earlier investors with money taken from later investors that is, robbing Peter to pay Paul. The premise of a Ponzi is that the value of the investment is not representative of any underlying productive capacity that generates value over time. Ponzi schemes and investment fraud operators are into shadow activities”.
Tracing Nigeria’s Ponzi scheme history to the 1980s and early 1990s when the famous Umana-Umana investment platform and Planwell took the market unaware, Oladele decried lack of data on the activities of Ponzi schemes in the country, linking this to under-reporting and wrong classification.
According to him, a little more due diligence and recourse to history, would have helped millions of Nigerians who lost an estimated N18 billion to the legendary MMM bust. More MMM cases, according to the NDIC Director, would be replicated as long as current desperation, quick rich syndrome, financial illiteracy, ignorance and regulatory arbitrage continue.
