Betrayal is more than just a word, it’s a feeling that we’ve all experienced a couple of times in our lives. Whether emotional, physical, or financial, betrayal leaves us feeling hurt, insecure, and unable to courageously take the risks that we ought to. Today we’ll be discussing the financial aspect of betrayal through the lens of Ponzi schemes, using Nigeria as a case study.
What are Ponzi schemes?
A Ponzi scheme is an investment scam that pays early investors with money taken from later investors to create the illusion of big profits. A Ponzi scheme promises a high rate of return with little risk to the investor.
Additionally, Ponzi schemes usually relies on rewarding early participants to recruit more participants but collapse when the supply of potential participants dwindles. Hence the term, Pyramid schemes.
Why is it called Ponzi scheme?
Before listing various types of Ponzi scams, it’s important that we know how all this came about. Historically, this form of “business” goes way back to the U.S in1920 from an Italian swindler named Charles Ponzi.
In 1919, Charles Ponzi devised a scheme involving international mail coupons, sparking his infamous Ponzi scheme.
By exploiting tiny differences in currency exchange rates, Ponzi promised high returns to investors.
Eventually, the scheme collapsed in 1920 after investigation by The Boston Post, leading to Ponzi’s arrest. He then served time in federal and state prison, eventually being deported to Italy.
However, an important factor to note is that Ponzi became a millionaire by promoting a nonexistent investing opportunity. Which, apparently, is the basic feature of all Ponzi schemes.
List of Top Nigerian Ponzi schemes
Reasons why many Nigerians fall prey to various online scams, could range from greed, ignorance or desperation from poverty and poor standards of living. While we cannot judge people for participating in Ponzi schemes, we can show them past experiences of popular Ponzi schemes which include:
Mavrodi Mundial Movement (MMM)
Launched by the Russian politician, Sergius Mavrodi, MMM made its way to Nigeria, where it was embraced as a safeguard for financial freedom amidst the economic recession which plagued the country in 2016. It swept across Africa with branches in Nigeria, South Africa, Zimbabwe, and some East African countries. Within the first few months of the scheme’s launch, 2.4 million people had signed up to join it.
After its collapse, the Nigeria Electronic Fraud Forum indicated that citizens lost N11.9bn to the scheme. The Central Bank of Nigeria also disclosed that investors lost N12bn.
The Nigerian Deposit Insurance Corporation also estimated that over three million Nigerians lost about N18bn to the scheme. This development led to cases of suicide and attempted suicide among many citizens, who invested in the fraudulent scheme.
Racksterli
Racksterli is an investment platform that gained attention in Nigeria and was promoted by notable figures like Davido and Dino Melaye. Owned by Michael Oti, It promised mouth-watering returns within a remarkably short period, attracting many participants. However, Racksterli has been identified as a Ponzi scheme, impacting thousands of Nigerians. Despite its initial popularity and promotion by influential individuals, Racksterli’s fraudulent nature led to significant losses for participants.
Twinkas
Twinkas, a Nigerian Ponzi scheme, offered high returns on investment in various packages. It gained popularity in 2017 but faced criticism for financial losses. Participants expected quick profits but later investors suffered losses. Twinkas operated on a structure where new investments paid returns to earlier investors. Despite claims of humanitarian service, it functioned like a typical Ponzi scheme. Twinkas rebranded as TwinKAS Re-branded with new features and compensation plans. The scheme aimed to empower members financially but still faced scrutiny. Unsustainable practices led to significant financial losses for many participants.
Givers Forum
The Givers Forum is a platform that operates as a Ponzi scheme in Nigeria, where participants provide financial assistance to each other through personal bank accounts without a central account. It is described as a forum where individuals help each other in need without earning money but rather fostering a spirit of mutual assistance. The scheme resembles a charity organization where individuals request financial help when needed. The alleged purpose of the Givers Forum is to create a system of aid and support among members, with bonuses and rewards offered for contributions and assistance provided. Despite its intentions of mutual aid, the Givers Forum has faced criticism and complaints from participants who have experienced issues with payments and system functionality, leading to concerns about its reliability and sustainability.
Meanwhile, other dangerous Ponzi schemes, including Ultimate Cycler, Zar Fund, I-Charity, Crowd Rising, Get-Help Worldwide, Claritta, and so on, have continually gained patronage across Nigeria since the recession. A report by the Norrenberger Financial Investments Scheme estimated that, as of 2022, Nigerians had lost over N300 billion to Ponzi schemes in five years!
Ten tips to Avoid Ponzi Schemes
To avoid falling victim to Ponzi schemes, consider the following tips:
- Conduct thorough research on any investment opportunity before committing funds.
- Be cautious of investments promising unusually high returns, as they may be too good to be true.
- Beware of schemes that rely on recruiting friends and family, as this is a common strategy in Ponzi schemes.
- Be wary if someone you trust tries to recruit you, especially if they have already invested and received significant returns.
- Check the legitimacy of the company offering the investment by verifying their license number.
- Consult investor alert lists to see if the scheme has been flagged as fraudulent.
- Report any suspicious investment schemes to the relevant authorities to prevent others from falling victim.
- Warn your family and friends about potential Ponzi schemes to protect them from financial losses.
- If you suspect you are involved in a Ponzi scheme, refrain from investing more money.
- If you believe you have been targeted by scammers, act quickly to protect yourself and prevent further financial harm.
Crypto Trading as a geniune way to earn money
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