How influencers, friends and family members lure us into Ponzi schemes and investment scams
“Good morning. Sorry to ask, if I introduce you to a platform where you would make 3% of your capital daily, would you be interested in starting with ₦3,500? If yes, Ask me how to get started NOW! Thanks.”
That was the message Chinatu Ogbonna, a 25-year-old stock and crypto trader, received from his friend around 3 am on March 25, 2022.
“I did a little maths and found that 3% Return on Investment (ROI) daily is 90% in a month and roughly 1080% in a year, and you can start with just ₦3,500. It sounded too good to be true. So, I ignored his message,” Ogbonna told Neusroom.
While knowledge of stocks helped Ogbonna to spot the red flag, millions of Nigerians are constantly falling victims to Ponzi and investment schemes. Some victims who spoke to Neusroom said they wouldn’t have fallen for the schemes, but trusted colleagues, family and friends convinced them to invest.
Elisha Ubiah, a 24-year-old creative designer, told Neusroom he was depressed for six months after losing ₦2.7 million in January 2021 to themap.ng, a Ponzi Scheme.
Ubiah told Neusroom he was introduced to the scheme by a ‘very close friend’ who assured him he would get a 100% ROI in six months.
“I invested ₦2.7 million after my close friend introduced me to the scheme and was expecting ₦5.2 million in six months, but I never received a dime. The investment scheme crashed a month after I invested,” he said.
Ubiah’s monthly earnings at the time was around ₦400, 000, and the loss left him devastated for a long time. “I thought I was under a spell,” he said.
Emmanuel (who does not want his surname mentioned) was a 200-level student at the Enugu State University of Science and Technology (ESUT), supporting his education with a barbing job, using the social media parlance, a ‘side hustle’, when he lost ₦300,000 to MMM in December 2016.
“It took me three years to save the fund,” he said. “I gathered the money from my side hustle as a barber while at university.”
“The other person I was paired with paid ₦450,000 into my account, but my student account couldn’t receive up to that. So I went to the bank to upgrade my account; before I could finish the process that Friday, the bank had closed, and the fund was reversed to the sender. By Monday, MMM had crashed. I tried calling the person to pay up, but she refused.”
Emmanuel said the loss left him traumatised for several months and further compounded his ailing financial state.
From MMM to MBA – The rise and rise of Ponzi schemes and investment scam schemes
Lamido Yuguda, Director-General of Security and Exchange Commission, said Ponzi schemes operate with unsustainable operating models that ultimately lead to huge losses for investors.
He revealed that over three million Nigerians lost about N18 billion to MMM after its crash in December 2016.
“Several other illegal investment schemes have cost Nigerians their assets and life savings,” Yuguda said.
A recent report by The Guardian Newspaper also estimated that Nigerians had lost ₦300 billion to Ponzi schemes in the last five years.
While the proliferation of investment scams and Ponzi schemes in Nigeria can be traced to the rise and fall of MMM, other fraudulent schemes have continued to rise and crash, with their operators absconding with billions of Naira invested by Nigerians.
A Neusroom report in October 2021 detailed how investors accused a couple, Bamise and Elizabeth Ajetunmobi, of Imagine Global Solutions Limited (IMF), of absconding with about ₦2 billion invested in the company.
From Twinkas to Givers Forum, Ultimate Cycler, ReapWay Holdings, MBA Forex and Capital, Brisk Capital, Megawill Integrated Global, B2 Consults, Swiss Gold Market, S.U Global, Wales Kingdom Capital, Quintessential Investment Company and Chinmark group, among many others, Nigeria appears not to ever run out of Ponzi schemes.
The crash of Chinmark in April 2022 reportedly claimed the life of one of its victims, identified as Mrs Nuella.
Despite the warnings and the constant social media outrage sparked by the crash of these schemes, many Nigerians continue to fall victim to new schemes. Just two weeks after outrage trailed Nuella’s death over the crash of Chinmark, another scheme Ovaioza Farm Produce Storage Business (OFPSB), an agricultural service company that claimed to specialise in buying, storing, and reselling agricultural produce, also made news for failing to account for ₦3 billion invested by Nigerians.
Why do people ignore red flags?
While some victims claimed they didn’t see the red flags, many victims say they had suspicions before putting money into the scheme because it still leaves some hallmarks of professional fraud. They were just willing to take the risk because a family member, friend, neighbour or colleague convinced them to invest.
Aside from family and friends who are recruiting investors into the schemes, some of the platforms are now engaging influencers to recruit investors.
On March 11, 2021, a notable pop artiste Rema tweeted a photo of naira notes to endorse Brisk Capital Ltd.
“Hustle Thursday. ROI from my investment with @BriskCapitalLTD just came in, nice one my gees,” he wrote in a tweet that was reshared over 1000 times and got more than 11,000 likes before it was deleted a few weeks after Brisk Capital crashed.
Rema’s tweet led many Nigerians to invest in Brisk, and barely a month later, the scheme crashed.
Ten months after losing ₦70,000 to Racksterli, Toyin, a 22-year-old fashion designer, told Neusroom that her best friend introduced her to another investment promising 10% ROI monthly.
“After the Racksterli, I gave someone ₦65,000 from the remaining part of my savings to help me trade with. He had promised a monthly return of 5%. But my best friend told me that I was being cheated on, that the ROI was too low. So I pulled my money from the guy and gave it to my friend, whose brother-in-law, a Forex trader, promised a monthly return of 10%,” she said.
The loss grounded her business, and Toyin is still struggling to get her fashion business back on its feet.
Earnest Ajadu, an Investment Banker and Head of Wealth Management at Afrinvest Ltd, a financial advisory firm based in Lagos, told Neusroom that poverty and greed push people into such schemes.
“The level of poverty in the country is alarming,” Ajadu said. “People fall prey to these scammers out of the desperation to get additional income to take care of their basic needs like food, shelter, and clothing, and it’s not even because they want to live an extravagant lifestyle.”
Nigeria’s unemployment rate rose from 27.1% in the second quarter of 2020 to 33.3% in the fourth quarter of 2020, according to the National Bureau of Statistics (NBS).
Obinna Promise, a 300-level student at the Federal University of Technology, Owerri, who lost his school fees to one of the investment scams, confirmed to Neusroom that he was partly moved by greed.
While Emmanuel, who lost ₦300,000 to an investment scam during his university days, later moved to Turkey, he told Neusroom he almost lost his residency permit, which may have led to his deportation to Nigeria after losing funds for the renewal of the permit in another investment scam.
“My brother living in the UK introduced me to Wazobia Investment in Nigeria because he also invested and was making a lot of money from it. I think the first investment on the platform, you get credited within three days and afterwards weekly.”
With a promise of 40% ROI within the first three days of investment, Emmanuel put $250 into the scheme.
“I was broke and desperate for money. I already had $250 in my account for the renewal of my residency permit, and it was due in months, so I told myself I would make more money than the amount before then and maybe take out the capital and continue with the gains I made,” he said.
“After my third investment, I was told to upload a video on social media testifying that the platform is great and I have gained from it. I did as instructed, but that was the end; they never paid my ROI. My girlfriend and a friend in Turkey whom I introduced to the platform also lost their funds.”
The accounts of many victims confirmed that the investment schemes operate based on trust. They don’t just take money from investors and abscond. The scheme takes months before investors realise it’s a hoax, and most times, early investors are the bait. After receiving the promised returns in the early days of the scheme, they invest more and invite friends and family to join. A few months later, the system would crash.
Chinatu Ogbonna, who was able to spot some red flags in his friend’s investment offer said “as Prince (my friend) tried to convince me over the phone that the investment was not a Ponzi scheme, I became more convinced that it was a ruse.”
A recent advisory released by Security and Exchange Commission (SEC) listed some of the red flags investors should look out for in an investment scheme.
They include – “high Investment Returns with little or no risk, overly Consistent Returns, unregistered by SEC, Complex Strategies and Fee Structures.
“For almost 30 minutes, my friend tried effortlessly to convince me that what he was introducing to me wasn’t a Ponzi, ‘I know a Ponzi when I see it was a line he repeated often. But the harder he tried, the more convinced I was that it was Ponzi,” Ogbonna said.
“3% daily capital returns is roughly 90% in a month and 1080% in a year. Tesla, Apple, and Meta stocks hardly make 90% ROI in a whole year. Apple’s ROI in 2021 was 38%, 82% in 2020, and 89% in 2019. What my friend is offering me is a Ponzi schemes. It will burst someday.”
