Nigerians Are Losing Billions to Investment Scams. Here’s How To Avoid Falling Victim

“It was as if the ground before me had opened when I realised that ReapWay Holdings was a fraud. As a Lagos boy, I never imagined I could be scammed, it looked so real and organised to be fake.”

That’s Adesoji Akande who just lost funds he was keeping for his house rent and wedding ceremony to an investment scheme promising high returns.

He’s one of the victims of a growing investment fraud impoverishing many young Nigerians capitalising on their desperation to become rich.

“Invest and fix as low as N200k for 12 months, earn 10% monthly ROI for 11 months, get paid back only your fixed capital on the 12th month,” reads a flier on the LinkedIn page of Darasimi Okanlawon, CEO of ReapWay Holdings that has now allegedly vanished with millions of naira belonging to investors. 

In April 2021, Okanlawon, a communication graduate from the University of Ibadan in his late 20s, invited some investors to a town hall meeting on Mixlr (a live audio broadcast app) where he made the announcement that shattered many hearts.

“One of the executives has absconded with the company’s funds and it will be difficult to pay the promised returns. Investors will get their capital back in six months,” he told the heartbroken investors who are mostly low-income earners.

Since then, his phone line and the company’s official phone line have been unreachable, and the company’s website shut down. He has not responded to inquiries by Neusroom on his LinkedIn page.

There are thousands of other investment scam firms swindling unsuspecting investors. MBA Forex, Megawill Integrated Global, Investment Company, B2 Consults, Swiss Gold Market, S.U Global, Wales Kingdom Capital, Quintessential Investment Company are on the long list of the fraudulent companies shared by victims under a Twitter thread initiated by a Financial Analyst, Kalu Aja in March 2021.

In March 2021, Lamido Yuguda, Director General of the Securities and Exchange Commission (SEC), said three million Nigerians lost N18 billion to ponzi scheme operators.

“Several other illegal investment schemes have cost Nigerians their assets and life savings,” said Yuguda who blamed the proliferation of these investment scams on the devastating impact of the COVID-19 pandemic on the Nigerian economy, the low-interest-rate environment, coupled with the increased use of online services to interact and transact.

According to the U.S Federal Trade Commission, investment scams promising high returns are a type of ‘income scam’ where con artists target victims who are trying to bring in extra income. The FTC said there was a 70% surge in income scams in the second quarter of 2020 compared with the same period in 2019 in the U.S.

Why Nigerians Ignore Red Flags

The companies appear very convincing and professional, some of the victims who spoke with Neusroom said.

A check by Neusroom also revealed that many of the companies have websites displaying the profiles of executives, and certificates of registration with the Corporate Affairs Commission (CAC). They also send a memorandum of understanding to investors after payments are made into the company’s account, and they have offices in business districts in major cities like Lagos, Abuja and Port Harcourt, to convince investors.

“Before investing in MBA Forex and Capital, I decided to visit one of their offices, you need to see the office arrangement. Trust me, you will believe them,” Samuel, a victim, told Neusroom.

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.”

The National Bureau of Statistics (NBS), in its poverty and inequality report from September 2018 to October 2019, said 40 percent of people in Nigeria lived below its poverty line of N137,430 a year, which represents 82.9 million people.

A report by the World Bank in 2020 also said before the COVID-19 pandemic, the number of poor Nigerians was expected to increase by about two million largely due to population growth, the number would now increase by seven million – with poverty rate projected to rise from 40.1% in 2019 to 42.5% in 2020.

Nigeria’s unemployment rate, which rose from 27.1% in the second quarter of 2020 to 33.3% in the fourth quarter of 2020, according to the NBS, is another reason why many ignore the red flags. They just want to make money.

An average fresh graduate in Nigeria with a job earns between N70,000 and N100,000 and some earn lower. Like other low and mid-level employees, they want more but many do not want to go into fraud and they are constantly looking for how to multiply their income.

To make extra income, they invest part of their little income in sports betting, lotto, Ponzi schemes, and other investments promising them up to 40% return in 60 days. Now they are being swindled of their little resources.

A report by NOI Polls says about 60 million Nigerians between ages 18 and 40 are actively involved in sports betting, spending almost N2 billion daily.

From a survey of investment scam victims and a review of more than 50 complaints by Neusroom, people in their 20s and early 40s, more than other age groups, have reported losing money to these schemes.

How They Operate

The investment schemes don’t just take money from investors and abscond. It’s a well-planned scheme that takes months before investors realise it’s a hoax.

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, they begin to default but always assure investors they would get their capital back in a few months.

“When they want to crash, you’ll hear stuff like – ‘we’re experiencing some internal issues, but we’re on top of the situation’, ‘we can’t pay out so much, EFCC is trailing us’, ‘we’ll be doing long term now, and won’t payout for the next three months’, etc. Or ‘we experienced a little loss in our trading account,” says Adebimpe, a journalist and entrepreneur, who lost over a million naira in 2020. 

“The urge to earn more made me invest N550,000 during my NYSC,” says Nnamdi (surname withheld) who is now a banker. “It was around December and I had projected that I would stop after collecting my money by December 13, but the site crashed by December 12.”

John, a Lagos-based blogger, who also lost over N500,000 in January 2021 told Neusroom, “they were consistent until they failed. We were told they were upgrading their system to be seamless. We were told they can’t afford to pay the ROI that our capital will be refunded but we haven’t seen anything since the past four months.”

Ajadu, the investment banker, believes many of the investors are driven by greed.

“When treasury bills are giving about 9% for 364 days, how can you listen to someone promising 20% in a few days?” Ajadu wondered.

“I’m not sure Dangote Cement makes up to 40% in a year.”

How ‘Reliable Sources’ Lure Investors Into The Scheme

Although many victims say they had suspicions before putting money into the scheme because it still leaves some hallmarks of professional fraud, the popular saying that “life itself is a risk” and the credibility of those promoting and inviting them to join the scheme cleared their doubts.

To make it look genuine, the companies now hire influencers to lure investors on social media.

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 @BriskCapitalLTDjust came in, nice one my gees,” he wrote in a tweet that was reshared over 1000 times and got more than 11,000 likes.

His tweet led many Nigerians to invest in Brisk, and barely a month later, Brisk turned out to be a big risk no one should ever take.

One of the victims, an Abuja-based banker who would not like to be mentioned, said “I’m always very careful, and I avoid anything ForEx, but when Brisk came and said their investment is in real estate, and the stock market, I thought it was a good idea. But it sadly turned out to be another hoax.”

She told Neusroom that “EFCC is presently investigating Brisk Capital and its management and we are hoping something good will come out of it because I invested millions.”

Samuel, who works with an oil company said one of his colleagues introduced him to MBA Forex and he decided to give it a trial before it ended in tears.

“A colleague at work used to mention MBA Forex anytime we talked and how he and his wife have been cashing out steadily (15% monthly ROI). Honestly, I wasn’t too comfortable with it, I had suspicions,” he said.

“I didn’t show interest until a colleague at my former campus fellowship explained how possible it is to make such ROI in Forex. So my wife and I decided to test the water with small money. She started it first and she got the return for like two months. I felt it was working, so I decided to put a small fund too, and boom! The return stopped the same month I started.”

We sent MBA Forex and Brisk Investment questions by email, they are yet to respond. Several attempts to speak with a representative of Brisk also met a dead end as the phone numbers displayed on the company’s website are unreachable.

Gabriel, a teacher at a private secondary school in Lagos, told Neusroom that in September 2020, “a former schoolmate shared a flier of ReapWay Holdings on his WhatsApp status promising 40% ROI after two months and 20% after a month. I thought it was a good offer and I spoke with him. He claimed to be the CEO. Because I trust him, I decided to invest.”

In April 2021, ReapWay told investors to wait for another six months to get their capital back.

But Adebimpe said “Investors never get their money back.”

How To Avoid Falling Victim

Ajadu suggests that the government should put up a structure that checks the proliferation of investment scams, and also inculcate investor education into schools curriculum and the NYSC orientation programme.

“SEC should have an active platform where prospective investors can verify the companies and confirm if what they are promising is genuine, while Asset management companies should also enlighten the public,” the investment banker said. “Investors should make deliberate efforts to verify the authenticity of the information, and consult a financial advisor before investing.”

Head of Investigation and Enforcement of the Security and Exchange Commission (SEC), Port Harcourt Branch, Enebeli Sussy Sulukwe, in a press statement, recently advised investors to do their due diligence in investigating, checking whether the market operator is genuine before putting money into any scheme.

She also told investors to visit the SEC website and check under the heading ‘illegal capital market operators,’ where they will find the names of all the companies that are doing Ponzi schemes that have been listed as illegal market operators.

“When someone is offering you a rate above what’s realistic in the market, you should apply caution before investing,” Ajadu advised.

Can Investors Recoup Their Funds?

Ajadu said it is possible if they have the right papers and with the appropriate legal backings.

“If you have the right papers and appropriate legal backings, they can petition the EFCC and they could consider investigating it,” he said. “But if you don’t have papers, or you have signed a document that has made it impossible for the EFCC to go after them, then you just take the lessons and move on.”

Kalu Aja in a tweet also advised investors to get together, hire legal representation and sue.