The Securities and Exchange Commission (SEC) has warned that promoters of Ponzi schemes will upon conviction serve a 10-year jail term or a fine of N20 million or both. According to the Director-General of SEC, Dr. Emomotimi Agaga, this is one of the provisions of the newly signed Investments and Securities Act 2025. Consequently, the SEC should work with the Economic and Financial Crimes Commission (EFCC) to ensure that the penalty against promoters of Ponzi schemes is effectively implemented. Nigerians must exercise caution in their desperation for easy wealth schemes. It is unfortunate that many people borrow money to patronize Ponzi schemes. Sadly, some of them commit suicide when they lose huge sums of money to these schemes. Beyond the efforts of the SEC and EFCC to curb the activities of the fraudulent schemes, they should be able to recover the lost money. The government should also enlighten the citizens about the dangers of patronizing Ponzi schemes.
We commend the SEC for the 10-year jail term and N20 million fine. However, more punishment should be meted out to both the promoters and those who patronize the fraudulent schemes. Sadly, it is estimated that Nigeria lost over N1.7 trillion in nine years to Ponzi schemes. Similarly, some Nigerians allegedly lost over N1.3 trillion in the recently crashed CBEX investment scheme. The private sector and other employers of labour must be intentional in fighting Ponzi schemes and protecting their workers. The war against ponzi schemes should be waged at all tiers of government for it to be effective.
Ponzi scheme was devised by Italian-born Charles Ponzi in North America in the 1920s as an investment scheme which purported to reward investors with 50% to 100% of their funds within a short time. However, investors soon discovered that Charles Ponzi was a conman who targeted people’s funds for personal use. His swindling network gradually spread to other parts of the world, where gullible people embraced it with much expectation, which culminated in dire consequences. Regrettably, many people still invest their funds in various types of Ponzi schemes in their quest to make quick money. These people conceive Ponzi schemes as a safe, get-rich-quick investment platform which rewards handsomely. However, the irrefutable truth is that Ponzi schemes are fraudulent platforms which promise new investors immediate huge return on investments. While a few lucky investors can be said to have benefitted from the scheme, the losers are legion. The characteristics of Ponzi schemes include; high returns with no risk; guaranteed return on investment; unknown owners/corporate officers; pressure to reinvest and recruit new investors and unregistered and unregulated. Apart from greed and the quest to get rich quick by Nigerians, the scheme is also driven by mass poverty and unemployment in the country.
Beyond stiffer sanctions against the promoters of Ponzi scheme, the government should create the enabling environment to create more jobs and reduce the rising unemployment figures. Citizens without jobs and food are more likely to fall victims of the Ponzi scheme. In 2015, Sergei Mavrodi, with roots from Russia, launched a popular Ponzi scheme (MMM) in Nigeria. The scheme recorded an unprecedented patronage from millions of Nigerians battling economic hardship and survival. However, it inevitably collapsed and many people lost millions of naira. Many of the victims also committed suicide.
There is no doubt that many Nigerians patronize Ponzi schemes due to economic hardship and the need to earn extra money. The global economic recession has affected the living standard of many families and individuals so that the money they earn is not enough to cater for their multiple needs. Also, lack of employment and the attendant poverty have increased people’s craving for easy money without first examining the pros and cons of the scheme. In a world ravaged by hunger and inexplicable get-rich-quick syndrome, many young people want easy money and to get rich without as much as sowing or tilling the ground. Therefore, some people see Ponzi scheme as an opportunity to actualize their materialistic cravings. Also, the Ponzi schemes offer mouth-watering, enticing, and irresistible cash rewards within a very short time. Due to all these reasons, many Nigerians jump into the fraudulent schemes. Unfortunately, some religious leaders and celebrities use their platforms to promote the Ponzi schemes and their followers fall prey to them. We urge SEC to ensure that the new law against promoters of Ponzi schemes is strictly implemented.