Enough of these SCAMs in Africa— Ponzi/MLM/Wonder Bank Schemes

I cannot continue to watch fellow citizens getting scammed under an organised fraudulent schemes. Its high time for us to speak up, according to John Lewis “When you see something that is not right, not fair, not just, you have to speak up. You have to say something; you have to do something.”

A Ponzi scheme is a fraudulent investing scam promising a high rate of return within a short term with little risk to investors. The Ponzi scheme generates high returns for only early investors or its promoters, little returns for few others who try to convince lots of people to refer more investors to the fraudulent scheme and generate nothing for the majority of the later investors.

The PONZI scheme is just an example of a Pyramid Scheme which can also be referred to as Multi-Level Marketing MLM. The schemes are based on using new investors’ funds to pay the earlier backers.

Regardless of the technology, products used, or service offerings this fraudulent scheme, mostly share similar characteristics as stated below:

1. A promise of high returns with little risk. For example 100% return in 15–30days (some are even promising hourly return in Nigeria), Vacation in different destinations every year, Authentic products (Coffee, Gold, Diamond, House Hold Items, Medical Products etc) and a lifetime opportunity to belong to an affluent Club.
2. A consistent flow of returns regardless of market conditions.
3. No public marketing but rather exploring people’s personal relationship and your networks/communities (Church, Alumni, Colleagues, friends and families)
4. Investment strategies are focused on what you will make and little or no explanation on the business source of your benefits. For example, A product that cost 10$ could be sold under the scheme for the selling price of 200$ and they may give an instant 50% discount for members based on your level and ask to pay say 100$. The simple arithmetic is that 90$ is going into the fraudulent scheme.
5. Clients not allowed to view official paperwork for their investment or you have to pay first before a legal document is shared which is always in favour of the promoters of such scheme.
6. Investors are encouraged to retain their investment in the scheme or facing difficulties removing their fund.
7. While one pyramid is crashing another one is created without the knowledge of investors. So the promoters will continue to enjoy the flow of funds as long as the schemes continues. Some of these schemes may even have been in existence for over 5years.
8. Using public figures, celebrities and peoples personal testimonies to promote their fraud.

Let me state categorically that there is no business model behind these type of schemes. The schemes usually collapse at the bottom when the flood of new investors dries up and there isn’t enough money to go around. At that point, the schemes crashes. But like I said earlier the promoters will create another Pyramid ahead of time either by countries, demographics or locations. So the scheme may run un-ending until the fraud is discovered by the government or investigated.

Let’s try to understand the MLM/PONZI scheme a bit. It is an investment Fraud which clients are promised a large profit at little to no risk, some without doing any form of referrals like Wonder Bank, some with flexible work at home model or with referrals for genuine products and services. Companies that engage in this scheme focus all of their energy into attracting new clients to make investments. The training for most of their existing members is focused on Marketing and how to attract new investors to the scheme.

Recall that the only way a new income flows is when new investors joined the scheme and income generated is used to pay original investors their returns, although they make it seem like the profit is from a legitimate transaction. All of the schemes rely on a constant flow of new investments to continue to provide returns to older investors. When this flow runs out, the scheme falls apart.

Let check the history a little bit. The term “Ponzi Scheme” was coined after a swindler named Charles Ponzi in 1919 according to investopedia.com.

Charles Ponzi’s original scheme in 1919 was focused on the US Postal Service. The postal service, at that time, had developed international reply coupons that allowed a sender to pre-purchase postage and include it in their correspondence. The receiver would take the coupon to a local post office and exchange it for the priority airmail postage stamps needed to send a reply. This type of exchange is known as an arbitrage, which is not an illegal practice. But Ponzi became greedy and expanded his efforts. Under the heading of his company, Securities Exchange Company, he promised returns of 50% in 45 days or 100% in 90 days.

Due to his success in the postage stamp scheme, investors were immediately attracted. Instead of actually investing the money, Ponzi just redistributed it and told the investors they made a profit. The scheme lasted until August of 1920 when The Boston Post began investigating the Securities Exchange Company. As a result of the newspaper’s investigation, Ponzi was arrested by federal authorities on August 12, 1920, and charged with several counts of mail fraud.

We have loads of such schemes in Nigeria and other African countries. My humble advice is that people should desist from patronizing these schemes. We all remember Wonder Bank experience in 2008, recalled MLM in 2018 and a host of others.

There are loads of opportunities in Africa, this continent has been predicted as the next frontier for economic growth. The problems around here remains our best options to make money legitimately. Let’s do business and patronize indigenous products and services.

Please share this article and make a comment about how — if you have been scammed by any of these schemes in Africa.

For example I was scammed by Hemingways Safari in Lagos about 10 years ago when they invited my wife & I to a private meeting that we just won a vacation trip and they made us part with money (about $2,000) same day. https://www.nairaland.com/590794/hemingways-safari-knows