Why Ponzi schemes are unstoppable in Nigeria

With the Ponzi market in Nigeria growing bigger by the day, IMA-ABASI PIUS takes a look at how its operators are leveraging technology.


The global Ponzi market appears to be experiencing a massive boom, as the past few years saw the number of Ponzi schemes being introduced into the market, hit an all-time high.

There seems to be nothing stopping the perpetrators of these shady schemes from cashing out big, as they appear to have an endless list of tricks up their sleeves.

According to Ponzitracker’s research in 2019, authorities in the United States of America, uncovered 60 alleged Ponzi schemes that involved a collective $3.245bn in investor funds, a figure which exceeds the Gross Domestic Product of Gambia and Guinea-Bissau combined.

Evidently, the Ponzi market has expanded and current situation suggests that Africa is gradually becoming the next booming market for the Ponzi scheme merchants.

Nigeria today, is home to one of the largest Ponzi markets in the world. Every year, hundreds of Ponzi schemes are introduced into the ever-widening Ponzi market in the country, increasing the amount of money lost to fraud annually.

The situation has grown worse in recent years, as it appears that one in four Nigerians would definitely have a story to tell about their unfortunate experience with a Ponzi scheme.

The Securities and Exchange Commission in response to the recent upsurge of Ponzi schemes in the country, has ramped up efforts, issuing out warnings to stakeholders and the investing public against the scheme.

Efforts have also been made by the SEC to freeze assets and seal properties linked to operators of Ponzi schemes.

However, while these efforts have proven to be effective in loosening the strong grip the schemes have on Nigerians, Ponzi scheme operators have devised easier ways of plying their trade without being tracked by the SEC through the use of digital currencies.

Financial Street, in a bid to unravel the current situation of the Ponzi market in Nigeria, spoke with Emmanuel Patrick, Founder of Telokanda Blockchain Community, who revealed how Ponzi schemes are taking advantage of the ignorance of Nigerians and the anonymity provided by blockchain to ply their trade.

According to him, the concept behind Ponzi schemes are fraudulent and can threaten the financial system of a nation.

“I’m 100 per cent against the idea of Ponzi schemes because most of these schemes have been intentionally designed to fail. If we can take time to analyse the concept on which most legitimate businesses run on today, you would observe that in order for a business to thrive anywhere in the world, it has to have a product.

“This could either be in the form of a good or service they’re delivering to the market. But in the case of every Ponzi scheme, the participants tend to become the products without even knowing it.”

He added, “While people join these schemes with the mindset that they are making an investment into a legitimate business with strong financial backing, they have no knowledge of the fact that they are the ones fuelling the schemes financially, and without their funds these schemes would not exist.

“In 2017, we all witnessed how the Nigerian populace were thrown into chaos when the news of the MMM crash broke. According to the media, over N18bn was lost to the scheme. Now you could imagine the devastating effect this situation had on many Nigerians financially. Let’s not even go into the psychological aspect. It was really devastating for many.”

Patrick lamented the increasing number of Ponzi schemes being onboarded into the blockchain space and also expressed his dissatisfaction at the way many Nigerians are engaging in the schemes.

He disclosed that Ponzi schemes might change Nigerians’ perception about blockchain and cryptocurrencies in a negative way.

Explaining further, he stated, “As someone who has dedicated years towards pushing for the adoption of blockchain in Nigeria, I must say that I am utterly disappointed with the manner in which this technology is being abused.

“Blockchain and cryptocurrencies, are already being adopted across mainstream sectors in the world and they are being utilised to impact change particularly in the global financial system.”

Continuing, he said, “However, when you look at the rate in which these technologies are being adopted in Africa, you would realize that we still have a long way to go, because most Africans don’t understand how these techs work.”

Patrick believed that most Nigerians engaging in the schemes are driven by greed.

According to him, the concept behind cryptocurrency is “amazing,” noting that it goes beyond buying when the price is low and selling when it goes up.

“It’s just really sad that most Nigerians are more concerned about gaining quick profit through these blockchain-powered Ponzi schemes, instead of taking time to learn the fundamentals of the blockchain technology.

“That’s why you notice that when these Ponzis fold up and participants lose their investments, they’ll end up holding the notion that blockchain and cryptocurrencies are fraudulent, and this is really not encouraging,” he said.

Against this back drop, Patrick advised Nigerians who intend to get involved in blockchain and cryptocurrencies to focus on gaining fundamental knowledge on how the technology operates before they venture into them.

He recommended that they join a blockchain community and attend tech seminars.

 

Final Thoughts
With every passing day, Nigeria’s financial system is crippled by the Ponzi and other pyramid schemes. Their recent incursion into the blockchain space has made it difficult for authorities to effectively stop their activities. It is, however, important that the people are constantly informed of the dangers of Ponzi schemes.

Get in Touch

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Related Articles