Ponzi or pyramid schemes are a form of financial fraud that promises large returns to investors but relies on new investors’ capital to pay returns to earlier investors rather than creating legal profits.
Named after Charles Ponzi, who became famous for such a scheme in the early twentieth century, these schemes take money through deception: the misrepresentation of information and identity. They promise financial benefits that don’t exist.
In April 2023, the National Assembly passed the Investment and Securities Bill, which includes provisions for possible jail sentences for those who promote Ponzi schemes in Nigeria.
Consider the following steps to avoid falling victim:
1. Thoroughly investigate every investment option, including the background of the organisation or individual offering it.
2. Insurance: The Central Bank of Nigeria (CBN) warns against depositing money in any institution that is not insured by the Nigeria Deposit Insurance Corporation (NDIC).
3. Don’t succumb to Pressure: Be wary if you feel pressured to make a rapid investment or to attract others, it’s usually a sign of investment fraud.
4. Seek Professional Advice: Before investing, consult a reputable financial counsellor or a lawyer.
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