A few months after the collapse of the CBEX (Crypto Bridge Exchange), a ponzi scheme, in Ibadan, Oyo State, that led to the colossal loss of investors’ hard earned money, put at over N1.3 trillion, the Securities and Exchange Commission (SEC), has warned against the emergence of another ponzi scheme, a new digital currency, known as ‘Punisher Coin’ or ‘$PUN.’ For many years now, millions of Nigerians have become victims of numerous ponzi schemes. Many have lost their life savings largely because they failed to recognise the red flags and heed the warnings by both SEC and the Economic and Financial Crimes Commission (EFCC).
The latest warning comes amid the growing vulnerability of Nigerians to enticing financial returns on investment offered generously by the promoters of the ponzi schemes. The latest red alert by the SEC is sequel to widespread online promotion and ongoing pre-sale of $PUN, which the investment regulatory commission described as ‘unauthorised and unapproved.’ It also comes in the wake of the arrest and arraignment last week, of a director of a ponzi scheme in Port Harcourt, Rivers State, over alleged N13.8 billion fraud. The female director has been remanded in custody on the orders of a High Court pending further investigation of the matter.
According to SEC, the public should be wary of the $PUN, as the promoters of the ponzi scheme have neither been registered nor got any approval to conduct investment solicitations or digital asset sales within the Nigerian capital market. SEC says that the pre-sale and all related media advertisement campaigns currently being circulated are unregulated, and therefore, illegal. Part of the promotional campaigns describes $PUN as a ‘very lucrative investment opportunity’, and urged Nigerian investors ‘not to miss the opportunity.’
Investigation by SEC revealed that $PUN falls into the category of ‘meme coins’, which are digital tokens created without a genuine use case, business model or underlying project to support their valuation. In real financial terms, unlike more established cryptocurrencies that offer technological innovation, meme coins are driven by internet culture, viral marketing and speculative interest. Perhaps more disturbing, the value of meme coins, of which $PUN is one of them, is largely based on community sentiment or promotional buzz rather than any intrinsic or technical merit, offering no real utility service, or product backing its value.
The message is simple: investors should beware! It is unfortunate that the vulnerability of many Nigerians to financial frauds in the form of ponzi schemes is ever increasing. A combination of harsh economic condition, aspiration to get rich quick, financial illiteracy, have made many fall victim of enticing offers – double return on investment within short timeframes. This is despite the absence of legitimate operation of the schemes. Notable examples of such ponzi schemes that have fleeced many Nigerians of their savings include MMM Nigeria, MBA Forex, Twinkas and others.
Some months ago, Nigeria witnessed one of its most devastating financial scams when CBEX, a digital asset trading platform that operated as a ponzi scheme, collapsed. The promoters promised investors 100 per cent return on investment within 30 days. The promoters of CBEX seemed to have leveraged on the allure of cryptocurrency trading and Artificial Intelligence-driven strategies. Investors in the scheme reportedly lost over N1.3trillion, according to figures from the EFCC and SEC.
Some of the victims, who relived their agony, said they sold some of their valued assets and felt duped when the scheme collapsed. Some of frustrated investors took to the streets and ransacked CBEX offices in Ibadan, Oyo State, carting away chairs, air-conditioners and solar panels. But they could not recover their investments. CBEX, like others before it, operated as a fastest-finger game. While early investors reaped the profits, others that invested later were ripped off. By the time the victims begin to understand their missteps, the damage has been done.
To avoid being victims of ponzi schemes, Nigerians should be wary of unsolicited offers, as well as suspicious investment with mouth-watering returns. Many of the promises are too good to be true and unreliable. Besides, prospective investors should verify the credentials of the promoters of such investments. They can also consult trusted financial advisers to avoid heartbreak when such financial platforms fail. We commend the efforts of the SEC and EFCC in alerting the public of numerous ponzi schemes. The two agencies should not relent in exposing and prosecuting those behind them.