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Chinwendu Obienyi
Since Nigeria’s independence in 1960, many unprecedented political and economic changes have shaped the country. These changes have in one way or the other affected the growth and development of the economy either favourably or adversely.
According to a report from the African Development Bank (ADB) Group, Nigeria has had a sluggish economic growth since the end of 2015 with the rate dropping to an estimated 3 per cent in December 2015. This led to myriads of economic problems ranging from unemployment to poor economic planning and structure of governance which eventually climaxed into economic recession in 2016.
Instructively, Nigerians started looking for ways to lessen their financial burdens and Ponzi schemes became an alternative to the harsh economic realities in the country. Investopedia defines Ponzi schemes as fradulent investment scams that promote high rate of return with little risk to investors. These returns which are usually short term, are higher than the investments for the sole of enticing new investors.
Hence, the success of one ponzi scheme however led to the birth of Mavrodi Mondial Moneybox (MMM), Charity, Zarfund, Twinkas, Ultimate Cyclers and many more others. Sadly, the scheme delved into the nation’s capital market as both informed and ignorant investors fell for the attractive returns offered by the promoters.
According to the Nigerian Deposit Insurance Corporation (NDIC), about three million Nigerians lost N18 billion in the Ponzi scheme despite warnings from market regulators. However, these operators of the scheme have continued unabated.
SEC’s efforts
The Securities and Exchange Commission, SEC, has in the last two months embarked on enforcement exercise to seal off illegal fund managers who have been collecting huge sums of money from unsuspecting members of the public.
Last month, the Commission sealed off the premises of Dantata Success and Profitable Company Limited in Kano as well as Growing Circle in Lagos for engaging in illegal fund management activities. According to the Commission, the companies were shut down for carrying out investment operations that fall within fund management without registration with the apex regulator.
The commission had established that their activities also constituted an infraction of the Investments and Securities Act (ISA), 2007.
According to SEC, “They do not have registration with the SEC and the Commission has powers according to Section 13 (w) of ISA 2007, to shut down any company carrying out capital market activities without due registration”.
“The mode of operation of the company is that for a new entrant, registration is N10, 000 and the person is not entitled to products while the second category has a registration fee of N16, 000 that entitles the registrant to receive products. “For anyone to come under the company, he has to come under an up liner since the company engages in networking business.
In the case of Growing Circle, the least stage is a starter point with minimum registration of $50 with an incentive of $15 for a member who introduced two down liners.
It was gathered that the company also engages in free seminars at its head office for people to learn more about the products and the money making business with an unbeatable compensation plan and huge bonuses.
For Dantata Success and Profitable Company Limited, the strategy is to solicit for funds from unsuspecting members of the public by enticing them with returns of monthly interest on investment of between 25 per cent to 50 per cent depending on the nature and investment type.
They also indicated a registration period of February 5, to February 15, in one of their numerous notices directing all prospective customers to make deposits into their bank accounts. The company sells its forms to prospective investors according to their investment plans ranging from N1,000 to N3,000. The minimum amount investable is N50,000 while the maximum is N5,000,000
The investment period of the scheme is pegged at a minimum of 30 working days to a maximum period of 12 months with offer of interest rates on short- and medium-term basis. It claims to be involved in trading, general merchandise supply, oil and gas, transportation, import, export and general contract.
The SEC disclosed however that, after registering, the members claim they do not get any products from the company and all efforts to retrieve their funds proved abortive, hence the complaint to SEC.
While the company claimed to have a factory in Ogun state, the said factory could not be located even though the products were on display at their Lagos office.
The SEC management said that the closure was to end unlawful activities of the company against unsuspecting investors and therefore urged investors to ensure they only deal with fund managers that are registered with the Commission.
“The accounts of the company have been frozen, the promoters have been arrested by the Nigeria Police Force and are undergoing interrogation.
The Commission wishes to notify the investing public that the company is not licensed to carry out investments business of any type and as such its operations are illegal.
The SEC therefore advises the public to exercise due diligence and caution in the course of making investment decisions.” It added that valid licence of lawful operators could be obtained on the commission’s website by members of the public to confirm the licences of firms with which they intend to carry out investment activities.
Recently, the Acting Director-General, SEC, Mary Uduk, urged Nigerians to stay away from fake financial experts who would promise to double their money within a short time.
She explained that the Commission is committed to sensitize investors and protect them from the antics of such fraudsters, especially promoters of Ponzi schemes.
