SEC: Tightening the noose on ‘Ponzi’ schemes

Acting DG SEC, Mary Uduk

With an estimated three million Nigerians losing about N18 billion to the Mavrodi Mondial Moneybox (MMM) Ponzi scheme some years ago despite warnings by the regulatory authorities against investment in such dubious schemes, many Nigerians today are still patronizing the schemes in their desperate bid to make it big financially.

A Ponzi scheme, which is also known as Ponzi game, is a fraudulent investment package through which  the operator, who may be either an individual or organisation, pays returns to investors from new capital paid to the operators, rather than from profit earned through legitimate means or operations.

After the failed MMM Ponzi scheme investment ‘disaster’, investigations by Sunday Trust indicated that fraudsters are re-strategizing and re-packaging new schemes such as Twinkas and an online investment scheme tagged ‘Loom Money Nigeria’, in their tricks to defraud Nigerians and cart away their ‘loot’ undetected.

Today, as regulatory requirements continue to make it difficult for promoters of illegal investment schemes to thrive in European, American and Asian markets, many of them are beaming their searchlight on emerging markets to make fortunes. Of course, Nigeria has remained one of the havens they are exploring.

Like a horde of preying locusts, scores of these managers are exploring Nigeria’s investment landscape with an uncommon aggressiveness in recent times to offer mouth-watering but ‘poisonous’ schemes that portend financial death risk to whoever decides to swallow their ‘wealth-creation’ prescriptions.

With the impact of the bitter experiences of millions of Nigerians that suffered huge losses in the MMM ‘investment voodoo’ still real in the nation’s economy based on the increasingly worrisome poverty level and in furtherance of its statutory mandate, the Securities and Exchange Commission (SEC) has, in the last few years, prioritized investor education in its activities in a move to protect investors from the ravaging onslaught of the ‘army’ of investment fraudsters.

Specifically, Section 13 subsections (a) and (s) of the Investment and Securities (ISA) 2007, the SEC is empowered to regulate investments business in Nigeria and; to promote investors’ education and the training of all categories of intermediaries in the securities industry. This is in line with the International Organization of Securities Commissions (IOSCO) requirements and global best practice standards.

Appreciating the enormity of the task before it, the SEC had in January 2017 signed a collaborative Memorandum of Understanding (MoU)  with the Economic and Financial Crimes Commission (EFCC)  which it renewed in 2019 and signed a new pact with Nigerian Financial Intelligence Unit (NFIU) to strengthen its anti-fraud campaigns in the investment space.

An appraisal of the commission’s enlightenment programmes indicates that the capital market regulator, in furtherance of its statutory roles and particularly to restore investor confidence in the market after the global financial meltdown of 2007-2008, has taken investor education drive to major cities in the country, advising people against investing in Ponzi schemes in view of the risks of such schemes to retail investors in particular and the nation’s financial system in general.

For instance, since January 2016, the Mary Uduk-led management of the SEC has moved to the grassroots in Kano, Lagos, Port Harcourt, Enugu, Karshi and Gwagalda in the FCT and other cities, to sensitise the public and members of the armed forces on how to identify fraudulent schemes and avoid being trapped in the promoters’ nefarious investment web.

Apart from the preventive steps to guide investors against the fraudulent activities of the monsters in the investment space, the commission has also, in collaboration with the Nigerian Educational Research and Development Council (NERDC), concluded plans to introduce capital market studies as part of mathematics, accounting, business studies and other subjects’ curriculum in primary and secondary schools.

Similarly, the commission is also intensifying its investment space sanitization drive by clamping down business premises of the Ponzi operators and exploring legal options to sanction them.

Last July, based on complaints by the public and in collaboration with SEC, the EFCC sealed off the premises of MGB Global, froze its accounts and the promoters were arrested and interrogated by the police. Other illegal operators whose premises had been closed in recent months were Money Rite, Bitcoin, No Failure Development company and X-World.

Commenting on the commission’s intensified drive to protect investors through sustained investor enlightenment campaigns across the country a few days ago, the Acting Director-General of the SEC, Mary Uduk, said what the SEC had done apart from continuing to educate people, is to also go after the promoters of these schemes, clampdown their illegal offices and prosecute them.

She said: “We are stepping up our enforcement mechanisms to ensure that they are apprehended and their offices sealed off. So many of them are being prosecuted in courts, we have secured convictions for some, and we have closed down so many.

“We verify ownership and return monies collected by them to the owners. It’s a problem around the world and we can tackle the problem by educating the public, telling them the right investments to make and the right places to put in their money”, Uduk stressed.

She cautioned investors against investing in any scheme that is proposing return levels that are unreasonably high by ensuring that the fund managers and the products they are offering are registered with the commission.

Uduk added: “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.”

Commenting on what SEC has being doing on investor education and the impact on ordinary Nigerians who have little or no knowledge about investments in the capital market or other platforms, a graduate of economics, Sunday Oluwasola, told Daily Trust on Sunday that the commission’s efforts were desirable in the economy in view of the low investment education of the people and the likelihood of many falling victims of the fraudsters.

He said:  “What the commission has been doing in the past few years to educate the people on the risks of investing in Ponzi schemes is commendable. I have read about the SEC’s investor education activities and how they are dealing with illegal fund operators and I feel that government should encourage them to do more in protecting investors in the country.

“I think an area the government should support them more is in area of improved funding so that they can do pamphlets in indigenous languages about these very dangerous schemes and take to the grassroots during their programmes. In this way, the message of their campaigns will get to the grassroots and the impact would be felt more and more”, Oluwasola advised.

An investment analyst, Nonah Awoh, while admitting that SEC’s initiatives are desirable to improving investors’ confidence in the nation’s investment space, argued that there was the need to take the various campaigns deeper to the grassroots for optimal impact on the financial illiterate masses.

“Let me say that the commission still has a lot of work to do in this regard. As against the current situation in which the enlightenment campaigns are concentrated in urban centres, SEC should be more concerned about the people in the rural areas and take these campaigns to them if the objectives are to be fully achieved”, he advised.


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