Ponzi schemes, a threat to investor protection, says SEC

The continued activities of Ponzi schemes have been described as a threat to the protection of investors and may hurt the development of the economy at large.

Director-General of the Securities and Exchange Commission, Mr Lamido Yuguda stated this during the opening of a two-day webinar organised by the Attorney General Alliance-Africa in collaboration with the Securities and Exchange Commission, 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 have capitalized on the harsh economic climate to offer unrealistic returns on investment to unsuspecting investors.

Yuguda however stated that the SEC has 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.

According to him, “This capacity building programme will allow participants to learn contemporary and innovative ways of combating and curbing the menace of Ponzi schemes in Nigeria.

“I believe the knowledge gathered from this programme will provide participants with new ways of approaching, assessing and tackling the growing problem of Ponzi Schemes”.

He described the theme of the programmes apt, and its organization timely, because of the contemporary challenges confronting the Nigerian financial sector and its regulators, by the activities of Ponzi Schemes.

“The pervasiveness of Ponzi schemes undermine 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 Naira. 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 are therefore geared towards investor protection and preserving market integrity, emphasising that the Nigerian capital market should be a safe destination for investors.

In his remarks, Mr Markus Green, AGA-Africa Board Member, stated that due to the pandemic, businesses are operated online and criminals have taken advantage to attract people to Ponzi schemes, adding that the seminar is timely to build capacity on how to track these schemes, apprehend the perpetrators and prosecute them.

He said “We bring in experts from the United States to combine with others in Africa for training on these activities and how to curb them. COVID-19 has changed the way we do business but it has not stopped us from our work”.

Also speaking, Mr Abubakar Malami, Attorney General of the Federation and Minister of Justice said there is no underlying investment for the Ponzi scheme, so it can never deliver the returns on investment as promised.

Malami stated that they are fundamentally different from legitimate investment opportunities, as the perpetrators are simply fraudsters who take advantage of even the wealthy, intelligent, the sophisticated people