Why Ponzi schemes thrive in Nige­ria de­spite N18bn loss to MMM

Sunday Trust - - ANALYSIS - By Si­mon Echewo­fun Sun­day

About 109 Ponzi schemes and cryp­tocur­rency sites are still trend­ing in the Nige­rian cy­ber sphere de­spite the crash of the pop­u­lar Mavrodi Mun­dial Money­box (MMM), which caused the loss of an ac­claimed N18 bil­lion in De­cem­ber 2016.

In March 2017, the Nige­ria De­posit In­sur­ance Com­mis­sion (NDIC) said Nige­ri­ans lost N18 bil­lion to the MMM in 2016. The man­ag­ing di­rec­tor of the com­mis­sion, Mr Umaru Ibrahim, who spoke at the 38th Kaduna In­ter­na­tional Trade Fair, said the MMM had over three mil­lion par­tic­i­pants be­fore the or­gan­is­ers sus­pended pay­ment to in­vestors be­cause its sys­tem “ex­pe­ri­enced heavy work­load.”

How­ever, Daily Trust on Sun­day ob­served that most MMM par­tic­i­pants who suf­fered the dis­ap­point­ment turned to other schemes to re­claim their funds.

Ponzi schemes have been ex­plained by ex­perts to be an un­sus­tain­able fi­nan­cial sys­tem, whereby old in­vestors are paid with pro­ceeds of in­vest­ments from new ones. The scheme sur­vives only when it gets new in­vestors; the dearth of such marks its end, leav­ing the most re­cent in­vestors with huge losses.

The fi­nan­cial pyra­mid sys­tem be­came pop­u­lar in Nige­ria from Septem­ber 2016 af­ter the Fed­eral Gov­ern­ment of­fi­cially an­nounced eco­nomic re­ces­sion.

Many par­tic­i­pants said they en­tered into such schemes as an al­ter­na­tive means of sur­vival. Pop­u­lar among them were the MMM, Ul­ti­mate Cy­cler, Swiss Gold, iChar­ity and Get Help World­wide (GHW).

By Jan­uary 2017, the schemes had added a new twist - the crypto-cur­rency, an­other name for vir­tual cur­rency. While ‘bit coin’ has ex­isted for long in the United States and other coun­tries as in­ter­net cur­rency for vir­tual trade and casino gam­ing, the an­gle of us­ing it for the Ponzi scheme be­came pop­u­lar in Nige­ria from late 2016.

The dig­i­tal cur­rency be­ing cre­ated by many Ponzi sites does not have any value out­side the group; hence it be­comes use­less when many peo­ple tend to with­draw from such site, our re­porter ob­served.

Be­low are some of the pop­u­lar sites and the headaches of par­tic­i­pants.

MMM Nige­ria: It is said to have been founded by a Rus­sian, Sergei Mavrodi. It be­came pop­u­lar in Nige­ria by July 2016 and col­lapsed in De­cem­ber 2016, af­ter it sus­pended pay­ment to the ac­counts of ac­claimed three mil­lion par­tic­i­pants. It was restarted in Jan­uary 2017, but with most of the old par­tic­i­pants’ fund still hang­ing. Some par­tic­i­pants be­lieve the site is still pay­ing.

Lawrence Ekha­tor said he paid some­one N20,000 on Fe­bru­ary 10, 2017 and got back N149,000 12 days af­ter, in­clud­ing bonuses. “This is an in­di­ca­tion that MMM

Nige­ria is work­ing and has been do­ing their best to get the sys­tem back in full blast. I am very happy and proud of it,” Ekha­tor noted.

Aniri Ebere Syl­vanus is not happy with MMM. She said: “De­ceivers! Pay me my old Mavro to show that you are mak­ing life bet­ter!”

Oth­ers con­firmed that the MMM is pay­ing a lit­tle part of their lost fund of 2016. One of them, Paschal Maduemesi, said on a Face­book page, “MMM paid a lit­tle part of my 2016 money and four of my down­lines.”

Get Help World­wide: This plat­form be­came pop­u­lar in Nige­ria on Oc­to­ber 2016. The founders, on their site, said they ex­am­ined the flaws of the MMM and cor­rected them. Those who par­tic­i­pated said it worked per­fectly un­til Fe­bru­ary 2017 when peo­ple be­gan de­fault­ing in pay­ment. The prob­lem was said to have wors­ened in March, prompt­ing the site to move mem­bers to a new site known as Get Help World­wide Ex­clu­sive.

Speak­ing on the sta­tus of the scheme, a par­tic­i­pant, Hammed Olaide Salam, called for help from ad­min­is­tra­tors over a dis­pleas­ing rule. He said they were be­ing com­pelled to pay oth­ers (Pro­vide Help), even when they had not been paid

“What do we do? There is no money to Pro­vide Help again and they said our ac­count would be blocked if we fail to do it,” Salam said.

Ab­dul John, who has been in the scheme for four months, said one should never ex­pect to get back 100 per cent of the fund in­vested. “Peo­ple often de­fault in pay­ment; and oth­ers could up­load a fake pay­ment re­ceipt, which hooks your money for a very long time while the site au­then­ti­cates it,” he said.

Olug­bade Olug­benga, an­other par­tic­i­pant, was vis­i­bly an­gry on his Face­book page as he de­manded for his money. “GHW, bring back my money,” he wrote.

Twinkas: It was founded in De­cem­ber 2016 for Nige­ri­ans, with a claim that it was based in the United Arab Emi­rates (UAE). Some par­tic­i­pants said the site was crash­ing heav­ily as many in­vestors were yet to be paid since Fe­bru­ary 2017. Many of the par­tic­i­pants, how­ever, said Twinkas was bet­ter than all oth­ers in the first two months it started. It is 100 per cent of what­ever one in­vests, with op­tions of up to N200,000 in­vest­ment.

Many par­tic­i­pants are not happy with the scheme. When Twinkas apol­o­gised for the slow pay­ment this week on its Face­book page, it was greeted with dis­con­tent.

Osayande Rawl­ings Onuwa said it wasn’t work­ing.

“Guys are not smil­ing oh,” re­sponded a par­tic­i­pant iden­ti­fied as Obende Topaz For­tune.

But a few oth­ers think the scheme is do­ing well. One of such is Nazzy Good­ness Michael. “Twinkas rocks!” he ex­claimed.

“Long live Twinkas,” an­other par­tic­i­pant, Ak­in­tade Ay­o­dele re­sponded.

OneCoin, a crypto-cur­rency site: OneCoin be­came pop­u­lar in Jan­uary 2017, with sem­i­nars or­gan­ised in some Abuja ho­tels. Some mem­bers told our re­porter that they were hav­ing dif­fi­cul­ties to get paid as many ac­counts are be­ing frozen. How­ever, to at­tract more par­tic­i­pants, the site does a N1,000 air­time con­test daily. On its site, the scheme stated, “From 2015 to 2017, our two-year track record has proven how safe and suc­cess­ful OneCoin is.”

Mur­tala Garba, one of the par­tic­i­pants of the scheme, said he was ex­pect­ing his pro­ceeds af­ter he in­vested and hoped to do busi­ness with his money.

Ekalo SB At­tah­son said: “I will in­vest in a small or medium busi­ness, earn more profit and be­come a sup­porter to OneCoin when it is suc­cess­ful.”

An­other am­bi­tious par­tic­i­pant, Bless­ing Ebere said, “I will use part of the money to in­vest back by up­grad­ing to a higher pack­age, use part of the re­main­ing money to buy a plot of land and the re­main­ing to start up a busi­ness.”

It was, how­ever, gath­ered that most of the par­tic­i­pants are yet to get any real pro­ceed from OneCoin as they were promised a six-month ma­tu­rity pe­riod, prob­a­bly start­ing from June this year.

As at April 2017, the new and ac­tive schemes in­clude Fast Re­cy­cler, Esusu, Giver­scorner and Naira Do­na­tion.

It was re­ported that the Se­cu­ri­ties and Ex­change Com­mis­sion (SEC) had closed two of such won­der banks. Mar­ian Moses, founded by Moses Sa­manja and Tine God Net­works, with an un­known founder were af­fected.

An econ­o­mist and fi­nan­cial an­a­lyst, Mr. Og­buja Ogbu, told our re­porter in Abuja that an av­er­age of two Ponzi sites opened in Nige­ria on a weekly ba­sis. He said they were thriv­ing be­cause of the vul­ner­a­ble na­ture of Nige­ri­ans.

“Many par­tic­i­pants of the MMM scheme were dis­ap­pointed, yet other sites are be­ing pa­tro­n­ised. Some of the sites even said they had learnt from the flaws of the MMM and made their sites more sus­tain­able.

“A Ponzi scheme can never be sus­tained. The only al­ba­tross it needs to crash is man­ag­ing the in­flux of crowd on such sites. But by then they would have made huge sums of money for them­selves,” Ogbu ex­plained.

As Nige­ri­ans still flood these un­re­li­able schemes, the NDIC has re­peat­edly warned of its in­her­ent dan­gers.

Speak­ing at the 28th Enugu In­ter­na­tional Trade Fair last week, the NDIC boss, Umaru, warned par­tic­i­pants against pa­tro­n­is­ing the var­i­ous Ponzi plat­forms and other forms of trend­ing dig­i­tal cur­ren­cies. He noted that the plat­forms were nei­ther au­tho­rised by the Cen­tral Bank of Nige­ria (CBN) nor in­sured.

Umaru, who was rep­re­sented by the Enugu zonal con­troller of the com­mis­sion, Ni­cholas Ayuba, said the NDIC had com­mis­sioned a study on the vir­tual and dig­i­tal cur­ren­cies to help pro­tect con­sumers, ed­u­cate them fi­nan­cially and se­cure the na­tion’s eco­nomic devel­op­ment.

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