As the year 2019 gradually draws to a close, one of the fiercest battles fought by the Securities and Exchange Commission (SEC) was against Ponzi schemes, which at some point had become a festering sore, seriously eroding investor confidence in the Nigerian capital market.
The renewed focus on and zero tolerance for schemes that promises fabulous returns on investment followed the rise in illegal fund managers across the country.
According to the annual report of the Nigeria Electronic Fraud Forum which was unveiled in 2017, for example, the Nigerian investing public lost as much as N11.9bn to the Mavrodi Mundial Moneybox Ponzi scheme, otherwise known as ‘MMM.’
The seeming success of this scheme, indeed, encouraged a multiplicity of illegal fund managers who adopted various strategies to collect money from would-be investors, often engaging in free seminars to educate unsuspecting investors about their products and fantastic offerings.
As these were ongoing, the SEC, as part of its powers investigated and sealed up their premises, while engaging in educational and enlightenment programmes focused on the dangers of engaging in such schemes.
Addressing participants at a town hall meeting in Port Harcourt, Rivers State in July last year, Ms. Mary Uduk, Acting Director-General of the SEC, warned participants not to fall victim to the antics of fraudsters promising to double investment capital within a short time.
“These fraudsters or promoters of Ponzi Schemes are the false prophets of the investment environment, they are the ill wind that blows no good and at whose sight you must flee; they are to be avoided. This is one message you must take home to family, friends, relations, and acquaintances in order to save them from the agony of loss of their hard-earned money” she stated.
As part of its investor protection mandate, the commission, in line with the provisions of Section 13 (w) of Investment & Securities Act (ISA) 2007, during the year, the commission reviewed the January 19, 2017, Memorandum of Understanding (MoU) signed with the Economic and Financial Crimes Commission to partner in areas such as training, cross-secondment of middle cadre officers, repatriation of stolen funds from the Capital market, cross-border asset seizure, and prosecution of offenders, amongst others.
“We have had reasons to work together on some cases in the past. There is no better time for the SEC and EFCC to collaborate more closely than now,” a statement by the SEC quoted Ms. Uduk as stressing.
To further demonstrate its determination to eradicate suspicious transactions and other capital market crimes, the SEC signed another MoU with the Nigerian Financial Intelligence Unit (NFIU), which will see both agencies collaborating closely to check the menace of insider dealings, and recurrence of Ponzi schemes, among others.
A Season Of Closures
Perhaps the biggest of the Ponzi schemes in Nigeria after MMM in recent years could be Dantata Success and Profitable Company, whose premises the SEC sealed off last February for engaging in illegal capital market activities. Dantata Success reportedly solicited funds from unsuspecting members of the public and did not register with the commission before going into investment operations that fall within the purview of fund management.
It sold registration forms to prospective investors according to their investment plans, ranging from N1,000 to N3,000, with the minimum amount investable being N50,000 and a maximum amount of N5m, luring unsuspecting investors with returns of monthly interest on the investment of between 25 and 50%, depending on the nature and type of the investment. The investment period of the scheme was pegged at a minimum of 30 working days and a maximum of 12 months with an offer of interest rates on a short and medium-term basis.
In one of its numerous notices, the company, which claims to be involved in trading, general merchandise supply, oil and gas, transportation, import, export, and general contract, directed all prospective customers to make deposits into designated bank accounts between February 5 and 15.
This was in disobedience to Nigerian laws which provide that businesses carrying out capital market activities in the country must register and be regulated by the SEC which is empowered by Section 13 of ISA 2007 to shut down any company without due registration.
The company’s bank accounts were frozen, while its promoters were arrested and interrogated by the Nigeria Police, as part of what the SEC management said was to end the company’s unlawful activities against unsuspecting investors.
The SEC verified claims of 4,160 unpaid investors of the company who were required to provide original receipts evidencing their payments or bank tellers for deposit into the company’s account, valid means of identification and bank account details from Monday, July 15 to Tuesday, July 30, 2019.
Additionally, the commission also closed some other illegal investment companies during the year, including Lagos-based Growing Circle, just as it issued a “cease-and-desist order” to Kapa-Community Ministry International Inc (KAPA), which solicited investments from the public in a manner resembling a Ponzi scheme. This followed “substantial” evidence that it had been offering and selling securities in the form of investment contracts without the necessary license.
Also in May, the SEC had alerted Nigerians about an online investment scheme tagged ‘Loom Money Nigeria,’ luring young people into a pyramid scheme through social media platforms like Facebook and WhatsApp. Victims were encouraged to invest as low as N1000 and N13,000 and get as much as eight times the value of the investment within 48 hours.
In July this year, the EFCC sealed off the premises of MGB Global, its accounts frozen and the promoters arrested and interrogated by the Nigeria Police, following mounting petitions by depositors over unmet demands for refunds. Four other such unlicensed companies whose premises were sealed were Bitcoin company, Money Rite, No Failure Development and X-World, after mounting requests by the populace to withdraw what was collected in the name of investments.
Uduk Warns Nigerians on Ponzi Scheme
Acting Director-General, SEC, Ms. Mary Uduk, had at various forums warned Nigerians on the antics of illegal fund managers and fake financial experts who promise to double their money within a short time.
The commission, she often stressed, remains committed to sensitising and protecting investors from the antics of fraudsters, especially promoters of Ponzi schemes.
Speaking on the activities at one forum, she urged people not to “fall victim to the antics of fraudsters who purport to be able to double any amount of money you make available to them as investment value.
“These fraudsters or promoters of Ponzi schemes are the false prophets of the investment environment; they are the ill wind that blows no good and at whose sight you must flee. They are to be avoided. This is one message you must take home to family, friends, relations, and acquaintances in order to save them from the agony of loss of their hard-earned money.”
Also commenting on the trend, SEC’s Acting Executive Commissioner, Legal, and Enforcement, Reginald Karawusa, lamented that operators of illegal schemes in the last five years have swindled Nigerians of their hard-earned savings with promises of unrealistic returns on deposits.
This, he said, was despite a series of warnings by the commission to the general public against investing in such schemes, assuring of the SEC management’s determination to address the menace head-on to stem the further proliferation of Ponzi schemes in the country.
She described promoters of Ponzi schemes as fraudsters and false prophets of the investment environment and the ill-wind that blows no good and at whose sight investors must flee.
Anyone who subscribes to these illegal activities, according to Ms. Uduk, does so at his or her own risk, adding that the commission had undertaken various initiatives to make the capital market more user-friendly so that people can participate with greater ease, comfort, and convenience.
According to her, SEC has done so much in terms of investor education for a better understanding of the workings of the capital market, so Nigerians do not fall victim to the antics of fraudsters who promise to double any amount of money you make available to them as investment value.