Barely a few years after Mavrodi Mundial Moneybox (MMM), a popular Ponzi scheme, crashed in Nigeria, Loom, a similar money-making scheme, is fast catching up with Nigerians. SAMSON BENJAMIN in this report asks why Nigerians easily fall for quick money-making schemes.
The Securities and Exchange Commission (SEC) recently raised the alarm over the activities of some online fraudsters, who are currently running an online investment scheme, tagged Loom Money Nigeria.
The acting director-general of SEC, Ms Mary Uduk, while speaking during a press conference in Abuja on Thursday, last week, gave the warning, saying Ponzi scheme investors were at risk.
Uduk, who was represented by the acting executive commissioner (Operations), Mr Isyaku Tilde, said the fraudsters usually carry out their illegitimate business activities via social media platforms like facebook and whatsApp, luring young Nigerians to invest as low as N1, 000 and N13, 000 and get as much as eight times the value of the investment in 48 hours.
Uduk said the venture has no tangible business model, describing it as a Ponzi scheme where returns would be paid from other people’s invested funds.
She said: “We are aware of the activities of an online investment scheme tagged Loom Money Nigeria. The platform has embarked on an aggressive online media campaign on Facebook and WhatsApp to lure the investing public to participate by joining various Loom WhatsApp groups.
“Unlike MMM that had a website and the promoter known, the people promoting Loom are not yet known and this pyramid scheme operates through closed groups mainly on Facebook and WhatsApp. If it were a local Ponzi scheme with known offices, it would be very easy for the commission to seal their offices and freeze their accounts.
“We, therefore, wish to notify the investing public that the operation of this investment scheme has no tangible business model; hence, it’s a Ponzi scheme where returns are paid from other people’s invested sum. Also, its operation is not registered by the commission. ”
Uduk advised the general public to distance themselves from the scheme, saying, “Please note that anyone that subscribes to this illegal activity does so at their own risk.”
She also said an inter-agency committee, Financial Services Regulation Coordinating Committee, was already working on the issue while also collaborating with security agencies to shut them down.
How it works?
Speaking with Blueprint Weekend, an online business promoter, Charlse Babatunde, who also ‘invested’ in the scheme, explained how the scheme works. He said, “Once users are invited to join the WhatsApp group chats, they are asked to invest N1, 000, N2, 000 or N13, 000 with a promise that they will make eight times the amount once the participants recruit new entrants.
“After payments, participants are thereafter told to invite at least one person to join the system. There are four levels in Loom Nigeria – Purple, Blue, Orange and Red. Each time eight people join the group chat, the person in the centre — usually on the red spot — will get the target amount and leave the group.
Any lessons from MMM?
The announcement of the latest Ponzi scheme in town and the enthusiasm with which it is being promoted shows that Nigerians have once again failed to learn from history.
Speaking on the gullibility of Nigerians to be easily lured into quick money schemes, Joseph Alozie, an investment banker, said: “When the Sergey Mavrodi MMM scheme came to Nigeria in early 2016, it found lots of die-hard apostles as the economic policies were biting harder on Nigerians. It was too good to be true as the returns of 50 per cent ensured that ‘brave investors’ stayed afloat. It was so popular that a song was composed in its honour.
“The most lucrative job at the time was to become a ‘guider’ – they made tonnes of money by ‘guiding’ the people under them in the pyramid box and made a fortune doing next to nothing under than just sweet talking potential customers.
“Then came the great bust in December 2016, when it was suspended with the promise to re-open it in January 2017. That promise was never fulfilled as billions of naira disappeared without a trace as they had no physical office in the country.
Similarly, Nigerian Deposit Insurance Corporation (NDIC) in 2017 said about three million Nigerians lost N18 billion in the Ponzi scheme (MMM).
The managing director of the corporation, Alhaji Umaru Ibrahim, said, “The Ponzi scheme is the phenomenon of illegal fund managers, popularly called Wonder Banks , which have continued to defraud unsuspecting members of the public of their hard-earned money. This phenomenon has been a source of concern because despite our repeated warnings over the years, some members of the public have continued to fall victims of their fraudulent practices.”
Also, The Nigeria Electronic Fraud Forum (NeFF) said Nigerians lost N11.9 billion to the Mavrodi Mundial Moneybox (MMM) Ponzi scheme in 2017.
According to NeFF, Nigerians invested over N28.7 billion in the scheme between June and December 2016.
Other notable similar schemes with promises of higher returns for subscribers that have emerged and ‘crashed’ since include Money Rift, Stable Power, Earntech, Analysis Human, Bitbox, Capitaller, e-Cyclix, Traffic Power Line, Money Grows, First In First Out, Cube Assets, Reliable Coin, Hyip-a, Unorex, True Bit, Invest Villa, Synvestment, Top Bit Hourly, Margin King, Prisma Invest, Coin Time, Icycle365, Winterstory, Blue Chip Lab, Stance Coin, Flash Coin, Rempay, Biteminer, BetX Siriuss Copy, Doubler Bitcoin, Coin Drill Bot, Steady Income, Incredible 5, Lundin Mining, Eleon Live, Fast Funds, GetHelpWorldwide, Get2Help, Mac, Elite Givers, Mzansihelp, among others.
Why Ponzi schemes thrive in Nigeria?
The proliferation of Ponzi schemes in Nigeria and the rate Nigerians subscribe to these schemes have, however, been blamed on the inability of the government to ameliorate the sufferings of the people as the economic situation bites harder.
Speaking with Blueprint Weekend, an online business expert, Aanu Ajewole, said Nigerians will continue to patronise Ponzi schemes until the government is able to mitigate the effects of the harsh economy on the people.
“It is no news that a lot of people can’t meet their basic needs and most of them feel the best way to stay afloat is to invest their little available resources on ponzi schemes,” he said.
A subscriber to one of the Ponzi schemes, Gbenga Akinwummi, who described the scheme as a “lifesaver,” also blamed the rush by Nigerians for the schemes on economic recession.
“What some call Ponzi scheme is what others refer to as life-saving scheme. The country, at this point of our historical development, is facing the worst economic challenge, no thanks to recession. The scheme has been a major life-saver for many Nigerians. Though there are many sponsored adverts and write-ups against the scheme, you can’t blame the participants for taking such risks; the government doesn’t have a better option,” he said.
Similarly, Dr Abel Abimaje, an economist with Kogi state University, said: “Things have never been this terrible – company closures, massive job losses, harsh operating environment for businesses, and suicides have taken a new dimension in a country once ranked as the happiest in the world.
“It’s no surprise that hunger has made us develop a collective amnesia that makes us rush like ‘pigs to the slaughter’ at every Ponzi scheme that comes our way.
“The Securities and Exchange Commission issued a stern warning against the participation in the scheme. While we commend this, its warning is weak as a hungry man is an angry man. The biting fangs of hunger makes a man take leave of his reasoning faculties. You can’t force Nigerians to comply with the warnings when their daily lives are plagued with needless sufferings and avoidable hardships.
“While we commend SEC for putting out the warnings, the government should take it as a challenge to come up with sound economic policies that will make the creation of jobs take the centre stage. Nigeria needs heavy industrialisation to get back on track. At this level, we should be talking of running a 24-hour economy powered by 24-hour electricity supply.
For the head, Corporate Communications, Yudala, an e-commerce platform, Mr Gideon Ayogu, Ponzi schemes are thriving in the country due to depression.
He said: “With the descent of the Nigerian economy into its first full depression in over two decades, many embraced the rise of these money-spinning schemes as a way out.
“With job losses in various sectors and inflation rising to double digit figures, many distraught Nigerians were in desperate search of a lifeline; then came all manner of Ponzi schemes promising incredulous returns on investments.
“At the height of its fame, Mavrodi Mundial Movement (MMM), one of the most popular, had over three million Nigerians on its subscriber list.
“Despite the crash of this and many others that came after it, many are still succumbing to the lure of Ponzi schemes,” Ayogu said.
Experts’ warning
Dr Abimaje advised Nigerians to invest their hard-earned resources into real and tangible businesses that may take time to yield profit rather than Ponzi schemes. He said: “There are people that know they need to invest, but they are afraid of losing money. The fear is fuelled by stories of friends, relatives or colleagues who had lost money in one investment or the other. But there are also stories of people who invested and did not lose money. To achieve this, all you need to do is observe the five basic laws of money.
“Three of the laws reveal what to do or not do to avoid losing money in investment. The last two editions focused on two of these three laws i.e. Money stays with those who entrust it to wise people; Money is lost when invested in things you are not familiar with.
“According to the third law, money is lost at a fast rate when invested in ‘Get Rich Quick’ Schemes. Why? You need to understand that there is nothing like ‘Get Rich Quick.’ When you study the lives of people celebrated today as the richest people in the world, you would realise that none of them achieved it overnight or even in a year.
“For example, it took our own Alhaji Aliko Dangote, 30 years of hard work in the challenging world of business before he became the richest man in Africa. The reality is that besides those who inherited their wealth, none of the top richest people in the world achieved it in a jiffy or through jackpot. Until you acknowledge this fact, you are not ready to be rich.
“Secondly, what are referred to as ‘Get Rich Quick’ schemes are actually ‘Lose Money Quick’ schemes. They are designed by dubious and fraudulent people to rob people of their hard-earned money. To achieve this, the schemes are designed to exploit the natural desire inherent in man for quick and huge returns. So, they offer mouthwatering returns or profit within a very short period.
“To avoid being a victim, you must beware of any scheme, business or investment that offers huge returns within a short period. It does not matter how many people are patronising such scheme or their testimony. If it offers what is far above what other similar businesses or investment is offering and it offers to deliver it within a short period of time, run away from it. The huge, quick return is actually a bait to make you lose your money faster than you can ever imagine.
Way out
Speaking on the solutions to the unending resurgence of one Ponzi scheme after another, Ayogu advised Nigerians to be resilient and gear up for the times that the country is currently going through.
He said: “Despite the economic hardship, we should be thick skinned to resist quick fixes which these Ponzi schemes are full of. Adolf Hitler was once quoted to have said that ‘pain sharpens the brain.’ Let this present hardship sharpen our brain to come up with creative solutions to survive or even thrive in our clime rather than seek salvation in schemes that will further impoverish them.
“We are naturally resilient people as we have proven to the world that we can make it anywhere if the climate is right. The never say die spirit, especially of our brothers in the East who thrive as businessmen under the worst conditions known to man is a testimony to our collective bravery.
“We should use the same energy to avoid all sorts of Ponzi schemes as they do nothing but breed sloth in us. The anxiety of not knowing when the party will end does nothing but rub you of your much-cherished peace of mind and even the priceless commodity called sleep. Participation in it is not worth the stress at all. One can’t build anything tangible or substantial on its back.
“Nigerians should do all they can within their powers to resist any form of Ponzi scheme and rather channel their energies towards productive ventures in spite of the daunting challenges. We should be visionary in leaving something behind for the next generation to enjoy – Ponzi schemes are never designed that way.”
