Resisting Ponzi schemes in Nigeria

Many Nigerians who entrusted CBEX with their hard-earned money faced a sobering realization.

Outraged investors took to social media to complain that CBEX had locked them out of their accounts and vanished with their funds, despite its alluring guarantee of a 100% return after just one month of investment.

The Economic and Financial Crimes Commission (EFCC) and the Securities and Exchange Commission (SEC) have pledged to track down the masterminds behind such Ponzi schemes.

Although the SEC has stated that it has not yet received formal complaints regarding the collapsed digital asset platform, the EFCC confirmed that individuals who invested in the CBEX trading platform will be refunded.

Dr. Emomotimi Agama, the SEC Director-General, mentioned that the Commission will actively pursue the fraudsters and emphasized that the SEC has consistently warned Nigerians against investing in schemes that appear too good to be true.

He also noted that the Senate recently approved the release of N10 billion for a market education program. This funding will allow the Commission to open more offices across the country.

Ponzi schemes are a particularly painful form of investment fraud, as they prey on unsuspecting investors.

These schemes have existed since the 1920s and are characterized by exaggerated promises of large, risk-free returns. The fundamental idea behind a Ponzi scheme is “robbing Peter to pay Paul.” Instead of generating profits, returns paid to investors come from the money contributed by new investors.

Organizers maintain a steady cash flow by using the initial returns to lure more people in.

One distinguishing feature of Ponzi schemes is that the business model depends on new investors to pay returns to earlier ones.

The scheme’s survival hinges on a constant inflow of fresh capital, allowing perpetrators to fabricate the illusion of profitability—as long as new members continue to join and existing investors don’t fully cash out.

All investments carry a degree of risk, and those that promise unusually high returns also come with greater risk. Be extremely cautious if a business opportunity offers high returns with little or no risk.

Unattainable Goals: Even well-intentioned investments can fluctuate over time. Ponzi scheme operators often attract investors by promising steady returns regardless of market conditions, steering them away from more reliable opportunities.

Lack of Regulation: Ponzi schemes frequently involve investments that are unregulated by the government, particularly the Securities and Exchange Commission.

Refusal to Provide Clear Information: These illegal schemes often use opaque business models to deceive even astute investors. A legitimate investment should be transparent. If a proposal seems overly complex or difficult to explain, it should raise red flags.

Refusal to Provide Clear Information: These illegal schemes often use opaque business models to deceive even astute investors. A legitimate investment should be transparent. If a proposal seems overly complex or difficult to explain, it should raise red flags.

Questionable Documentation: Ponzi schemes often lack proper paperwork or provide documents that appear altered. Legitimate investments should always offer clear and credible documentation.

Difficulty Withdrawing Funds: If investors face challenges when trying to cash out, it’s a strong sign that the scheme is unsustainable and may be on the verge of collapse.

To avoid falling victim to Ponzi schemes, individuals should watch for a few key warning signs. The most obvious red flag is the promise of excessively high returns with little or no risk.

The best way to protect yourself from investment scams is to stay vigilant and learn to recognize the warning signs. If an opportunity promises fast, high returns with zero risk, be skeptical—this is not how legitimate investing works. Always research any investment opportunity thoroughly to ensure your funds are being managed responsibly.

Search online by entering the company’s name along with keywords like “scam,” “fraud,” or “complaint” to see if others have reported problems.

Check Registration Status: Verify whether an investment is legitimate by consulting the SEC Nigeria database or contacting them directly. Review the company’s financial statements and disclosures to assess whether the investment is sound.

Be Especially Cautious if You’re a Senior: Seniors should be particularly careful when presented with investment offers that could jeopardize their pensions or retirement savings. These schemes can lead to devastating losses due to theft or financial fraud.