The continued activities of Ponzi schemes have been described as a threat to the protection of investors, the functioning of a fair and orderly financial market as well as the development of the economy at large.
The Director-General of the Securities and Exchange Commission (SEC), Mr. Lamido Yuguda stated this during the opening of a two-day webinar organised by the Attorney General Alliance-Africa in collaboration with the SEC on Tuesday.
Yuguda said 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, has helped the proliferation of Ponzi schemes.
He said Ponzi schemes operators had capitalized on the harsh economic climate to offer unrealistic returns on investment to unsuspecting investors. These illegal schemes have also been able to solicit new investors and expand their operations through the increased use of online services.
Yuguda, however, stated that the SEC had a statutory duty to promote investor education and the training of persons in the capital market, saying that the programme is organized in furtherance of that statutory mandate.
He said the capacity building programme would afford participants the opportunity to learn contemporary and innovative ways of combating and curbing the menace of Ponzi schemes in Nigeria, adding that the knowledge gathered from the programme would also provide participants new ways of approaching, assessing and tackling the growing problem of Ponzi Schemes.
The SEC boss described the theme of the programme as apt, and its organization timely, in view of the contemporary challenges confronting the Nigerian financial sector and its regulators, by the activities of Ponzi Schemes.
“The pervasiveness of Ponzi schemes undermines regulatory efforts in developing the capital market, and also negatively impacts investor confidence.
“Ponzi schemes operate with unsustainable operating models that ultimately lead to huge losses for investors. Following the collapse of the MMM Ponzi scheme, the Nigerian Deposit Insurance Corporation (NDIC) had estimated that over 3 million Nigerians lost about N18 billion. Several other illegal investment schemes have cost Nigerians their assets and life savings” he stated.
The SEC Boss said the Commission’s efforts in addressing Ponzi schemes were therefore geared towards investor protection and preserving market integrity, emphasising that the Nigerian capital market should be a safe destination for investors.
Yuguda assured that the SEC would continue to apply innovative measures to combat the activities of Ponzi schemes while seeking the cooperation of relevant stakeholders.
In his remarks, Mr. Markus Green, AGA-Africa Board Member, stated that due to the pandemic, businesses are operated online and criminals had taken advantage to attract people to Ponzi schemes, adding that the seminar is timely in order to build capacity on how to track these schemes, apprehend the perpetrators and prosecute them.
He said the Commission brought experts from the United States to collaborate with others in Africa for training on these activities and how to curb them, saying that COVID-19 has changed the way businesses were done but it has not stopped the Commission from our work”.
Corroborating him, Mr. Abubakar Malami, the Attorney General of the Federation and Minister of Justice, said there was no underlying investment for the Ponzi scheme, so it could never deliver the returns on investment as promised.
Malami stated that they were fundamentally different from legitimate investment opportunities, as the perpetrators were simply fraudsters who take advantage of even the wealthy, intelligent, sophisticated people.
“They are usually, people who are very good at what they do and they thrive on trust and friendship promising easy cash in the short term and financial succor to the naïve. Ponzi scheme is operational, social, and economic risk and the fight against it is now a war, and in fact a full-blown war. It is everywhere, not peculiar to us.
“The investment climate is not simplistic, it can be highly sophisticated and that is why the law regulates the space to ensure that the requisite duty of care by operators is not breached in any way, that there is a proper disclosure as required by law and that there is a generally level playing field for all stakeholders” he added.
Malami added that the nation had relevant laws to ensure that offenders are punished, stating that the government is doing its best to tackle economic problems and committed to ensuring that Nigerians are lifted from poverty through a number of incentive-based loans and a number of programmes.