Over the years, numerous money-doubling platforms, called Ponzi schemes, have defrauded thousands of Nigerians of their hard-earned money. It is worrisome that Nigerians continue to fall victim to these phoney schemes. However, economists and financial experts claim that Nigerians’ persistent susceptibility to these frauds is tied to the country’s economic collapse in 2016.
Michael Oladele, the director of the Bank Examination Department at the Nigeria Deposit Insurance Company (NDIC), revealed in December 2022 that during the previous 23 years, different Ponzi schemes and associated crimes cost the nation a minimum of N911.45 billion.
Ponzi schemes, or pyramid sales frauds, are a money-laundering system that operates slightly cyclically by paying existing investors with deposits from new ones. This cycle typically breaks down when there is a backlog of older investors due payments larger than the sum of new investments made.
This shady vice has thrived due to Nigerians’ need to withstand the economic hardships that have made life difficult for citizens since the country entered a recession in 2016. Amid the 2016 economic crisis, Nigeria’s economy experienced a recession. The consequences were seen in the country’s significant economic activity decline and increased hardship, unemployment, low output, and rising inflationary pressures.
At that time, several Nigerians started looking for alternate sources of money, turning to these phoney schemes that seemed realistic but had devastating long-term effects. This explains why many Nigerians fell for the well-known Mavrodi Mundial Movement (MMM) Ponzi scheme run by Russian con artist Sergius Mavrodi in 2011.
MMM entered Africa promising a return of “30 per cent per month” in addition to further, reachable bonuses. The scam reached Nigeria in 2016 and quickly gained popularity before it crashed.
According to Nigeria’s Securities and Exchange Commission, three million Nigerians lost N18 billion in 2016 when MMM failed. These were the fates of Nigerians who decided to ‘invest’ in this misleading money-doubling scheme.
With several suicide attempts due to the failure of MMM, the Lagos State Emergency Management Agency tasked Lagosians to call their emergency numbers if they saw someone attempting to end their life.
However, Nigerians have continued to be susceptible to Ponzi schemes as a way of making money, and not even the terrible failure of the MMM scheme was able to deter them from these fraudulent quick-money schemes, one of which is the 86Fb scheme.
In 2022, 86FB, a football-focused investment platform that claims to collaborate with William Hill, a major international online gambling enterprise based in London, England, gained popularity in Nigeria. Some of its agents at that time asserted that 86FB operates a reverse betting site where investors can make three per cent of their capital every day (90 per cent monthly ROI) if they follow the team’s suggested game plan.
All the guarantees of generous returns on investments proved to be too good to be true, as the platform promised unthinkable ROIs, which quickly enticed many Nigerians as a quick means to make fast money.
However, the phoney scheme’s undoing was its decision to adopt Flutterwave as its payment processing channel.
How Flutterwave saved Nigerians from ‘MMM-like recurrence ’
One very big question to be asked is what would have been the faith of many Nigerians if Flutterwave had not taken swift action against the phoney scheme that was beginning to gain wide acceptance from many Nigerians. It would have been a recurrence of the 2016 MMM-like disaster where many Nigerians lost their livelihood to Ponzi scheme investment.
Cash belonging to Nigerians who invested in 86FB’s scheme was trapped in May 2022 when the online gaming firm ceased payments to investors. Nigerians labelled 86FB a Ponzi scheme due to its refusal to pay investors their accrued monies. However, the sports betting platform issued a statement accusing Flutterwave of conspiring with the authorities to freeze its account, making it unable to pay investors, to transfer responsibility for its inability to keep up with payments.
However, in the wake of the controversies, Flutterwave explained in a statement that it conducted a routine review of transactions and KYC of its registered customers, which exposed the shady activities of the unregistered 86FB/86Z scheme, hence its decision to suspend the platform’s account.
It revealed that some of Flutterwave’s direct merchants were illegally processing transactions for 86FB/86Z without approval from the fintech company.
“During our investigation, we identified direct merchants of Flutterwave who were processing transactions for 86FB/86Z without our approval or authorisation to do so on the Flutterwave platform. As a result, we notified the merchants to cease processing and suspended their use of the Flutterwave platform. We also settled all funds due to these merchants. No funds currently due to the merchants are with Flutterwave,” said the statement.
Flutterwave further explained that “where transactions are done contrary to the registration of a business, we are required to take appropriate actions up to and including termination. For example, if a merchant is registered to sell tomatoes and without approval starts selling cars, the merchant is in breach of our terms of service and regulatory requirements.”
Meanwhile, while Flutterwave settled all funds due to the merchants that aided the 86FB/86Z shady scheme, Nigerians that invested in the platform did not get their funds back. Keshinro Seyifunmi, who invested N100,000 in the platform in 2022, told Peoples Gazette on Thursday that he had yet to be paid back since the platform blocked withdrawals in 2022.