The recent crisis affecting gambling and investment service platform, 86FB has been a rude reminder to many Nigerians of the disadvantages of investing in Ponzi schemes and unverified investment platforms that promise higher than average mouth-watering yields.
The activities of Ponzi scheme operators have been on the increase in Nigeria, especially in the last decade. Nigerians will not forget in a hurry, Mavrodi Mundial Movement (MMM) which is perhaps the most popular Ponzi scheme ever introduced into Nigeria. When the scheme finally crashed in 2016-2017, the CBN revealed that N12 billion was lost by investors.
Since MMM, several others have come in and repeated the same cycle with many more Nigerians falling victim to these scams. The list includes Dantata Success & Profitable Company, Ultimate cycler, MGB Global, Bitcoin Company, Money Rite, No Failure Development, and X-World, Imagine Global Holdings Company Limited, most of which have been shut down by the Securities and Exchange Commission (SEC).
Read: Controversy as 86FB accuses Flutterwave of maliciously freezing its funds
Nigerians have shown time and again that they have a high appetite for high-risk, high-return investment, regardless of the lack of a business model inherent in most of these schemes. Many are ever willing to rush into the next get-rich-quick-scheme.
Taking advantage of the country’s large population and woeful economic condition, Ponzi scheme founders are ever-ready to introduce their scam to Nigeria as quickly as possible.
Why do Nigerians still fall for Ponzi schemes?
Despite the SEC’s countless warnings to investing public against the activities of these unlicensed market operators and promoters of fraudulent schemes, many seem to continue to fall victim. It now seems as though the more of these schemes the SEC shuts down, many more spring up and scam more victims by promising them mouth-watering returns on their investments.
Ken Odudu, a financial analyst told Nairametrics that the reason Nigerians keep investing in Ponzi schemes is due to a low amount of low-risk savings vehicles to hedge against inflation.
He said, “A big driver of the increased attraction towards Ponzi schemes arises from the limited availability of low-risk savings vehicles which deliver some protection against inflation.
Read: 86FB: Nigerians react to possible crash of investment platform, question ownership
“Nigeria’s monetary policy has historically been financially repressive which has meant that the default bank account option of saving delivered negative real returns. In the two decades since Nigeria’s return to democracy, the number of times monetary policy sought to deliver real risk-free returns has been less than the periods dominated by negative real returns.
“Thus, with the official financial system delivering deeply negative real returns as the default saving option, the allure of Ponzi schemes under an atmosphere of low financial inclusion is significant. In addition, a low level of financial awareness/literacy also poses problems. Overall, limited options to save long term wealth in real terms in the official financial system provides a great incentive in luring many people towards Ponzi schemes.”
He warns that the regulators also have some blame as, due to weak surveillance frameworks outside the official financial system, they are always behind the curve in identifying the promoters of these schemes and clamping down on these entities until it is too late.
Read: How to spot and avoid a Ponzi scheme
Olumide Adesina, a financial analyst at Quantum Economics, says, unlike a legitimate business, Ponzi schemes boast outrageous returns and this is a major factor why many people will patronise them.
“Many people fall into this trap because they would rather invest their money and get double the return within a short period of time than work for it.
“Ponzi schemes are attractive because of the high returns they provide. Unfortunately, it’s usually presumptuous to believe in something that sounds too good to be true.
“Any investment that promises you the moon deserves caution, especially those that use high-pressure sales tactics and lack any form of regulation, especially those that are not regulated by the SEC,” Adesina said.
In the last year, Ponzi schemes have witnessed an upsurge, prompting the SEC’s moves to clamp down on them. The SEC announced in February that it was working with the National Orientation Agency (NOA) and other government agencies to combat the operations of Ponzi schemes and illegal investment platforms.
We wait to feel the impact of the regulator’s hammer.
As much as articulated as this piece is, I have some very strong reservations, 86fb as I understood, is a GAMBLING PLATFORM, where you make an opposite scoreline prediction. Just like other gambling platform out there you have a chance to lose your money or gain more, it didn’t promise any outrageous return or any double of your investment like the writer is insinuating, I consider this highly misleading to say this is a Ponzi scheme, unless you’ll categorise the likes of sportybet, bet9ja, betway, nairabet etc has Ponzi schemes.
It’s just unfortunate that the customers of this betting platform have been defrauded by persons of questionable character, and as it usually is in Nigeria, the defrauded are seen as foolish and the defrauders as the smart ones.
Whereas your article should be about how some group of people come together to defraud some others ,not “why Nigerians keep interesting in Ponzi”, it’s very sad.
Poor journalism. Typical Nigerian. Leave the topic and talk around it. Go and investigate and come and tell us the details of what went on and/or wrong. 86fb used flutterwave merchants to receive deposits and make payments. Flutterwave in its wisdom and apparently from complaints by customers blocked these their agents from transacting with them having made refunds to the complainants. Now unanswered questions for you to investigate are 1. How much of 86fb deposits were in the merchants accounts when flutterwave stopped their transactions? 2. How many withdrawals were in transit when they blocked their transactions? 3. If they refunded some complainants who cried out by debiting these merchants and crediting the complainants why was their response to 86fb accusation that they are withholding their monies ( by proxy of the merchants ) not that 86fb members should formally complain and get back their deposits from the merchants who acted on behalf of 86fb but that they should direct their grievances at 86fb or their monies are in their 86fb wallets.
To jump to conclusion that it is ponzi is the shortest route not to do proper investigative journalism.
Until a BBC reporter does something now and opens a whole can of worms, armchair Nigerian journalist will publish anything to stay in the news.
Well said
I personally find your article to be misleading and a completely wrong interpretation of what transpired between the investors in Lucky Football and 86fb.
Both platforms, for your information, never guaranteed outrageous returns as you have led your readers to believe.
Where in the world does gambler, as you made it look, bet with a sum of N750,000.00 with an expected returns of between N14, 000 and N17,000.00 max? This was the case with the reverse betting platforms that neither permitted withdrawal even though it was guaranteed before the unfortunate gamble. Each of the participants understood that huge returns was not guaranteed unless you are willing to allow what was termed compounding interest by leaving the funds to grow. It sounded and looked like any investment where profit plow back could guarantee higher dividend. It wasn’t gambling like the rest of such businesses in Nigeria. If anything, Nigerians have once again been exposed to sharp practices under the watchful eye of the regulators.
You can’t condemn the investors who saw certificate of registration with CAC boldly displayed on the Telegram without anyone challenging such claims as false.
The investors were duped not because they wanted quick returns. In gambling, you expect quick returns and know that it’s either you win big or be prepared to lose.
The said platforms came in with a product promise called “Capital Preservation” but failed to keep their own side of the bargain. If you cared to dig deeper, you will find out that 30 percent of every game won was said to belong to the company including 5 percent of every withdrawals made each investor. This was in addition to the high probability of winning because it was a reversed form of betting.
Let’s assume that Nigerians are potentially gullible set of people, where in the world does a company present certificate of registration and other identifying items such as location and phone numbers and yet manage to evade the “eagle” eyes of our equivalent of Homeland security: SSS and NSO operatives? Who is responsible for the protection of these “gullible” and desperate Nigerians that are ready to invest in a presupposedly “certified business outfit in the country? Nobody.
These are just a few facts about what you have erroneously tagged, Ponzi to vilify the victims of a well orchestrated scam
Sincerely these platforms show every documentation that legalizes and makes their operation concrete, so it’s either the ministry issuing CAC should be vetted because in my opinion they are an accessory to crime, simply by issuing certificate’s to every body who can afford it wether the business is legitimate or not
Categorising 86fb as a ponzi scheme is just like saying every business in Nigeria is a ponzi and that will amount to fallacy of hesty conceptual conclusion and generalisation, 86fb has openly come out to accuse Flutterwave of maliciously freezing the monies of her subscribers and Flutterwave way issued an official statement and acknowledged that a registered agent with them was using their platform to make transactions for 86fb, meaning that they blocked the transaction thereby trapping the investors money in their account.
Nigerians are very hard working and are never scared of doing business in any way or form, even with the seemingly hard conditions and hostile environment. What this quack journalist should have done is to do an independent assessment and investigation of the allegations and the situation to ascertain who is crumbling the cookies so as to expose the fraud either from Flutterwave or Hadsol the operators of 86fb rather than blaming Nigeria for always looking for a better life.
In my opinion, Flutterwave has so many skeleton in their cupboard and the earlier they sought out things with the operators of 86fb, the better for them because of posterity
In my opinion, Nigerians citizens we need God ‘s mercy. The platform 86fb in question to me is not ponzi. It has a CAC registered certificate prisented to her investors but they failed to keep to their priservative plan, if we are in a country where citizens warfere is concerned this would not be a problem because the CAC certificate has a NAME AND ADDRESS also business name presented before fluttwave which security agent can trace. This is not get money quick as d article writer put it. So in my conclusion we don’t have government who care about the citizens.
I personally find your article to be misleading and a completely wrong interpretation of what transpired between the investors in Lucky Football and 86fb.
Both platforms, for your information, never guaranteed outrageous returns as you have led your readers to believe.
Where in the world does gambler, as you made it look, bet with a sum of N750,000.00 with an expected returns of between N14, 000 and N17,000.00 max? This was the case with the reverse betting platforms that neither permitted withdrawal even though it was guaranteed before the unfortunate gamble. Each of the participants understood that huge returns was not guaranteed unless you are willing to allow what was termed compounding interest by leaving the funds to grow. It sounded and looked like any investment where profit plow back could guarantee higher dividend. It wasn’t gambling like the rest of such businesses in Nigeria. If anything, Nigerians have once again been exposed to sharp practices under the watchful eye of the regulators.
You can’t condemn the investors who saw certificate of registration with CAC boldly displayed on the Telegram without anyone challenging such claims as false.
The investors were duped not because they wanted quick returns. In gambling, you expect quick returns and know that it’s either you win big or be prepared to lose.
The said platforms came in with a product promise called “Capital Preservation” but failed to keep their own side of the bargain. If you cared to dig deeper, you will find out that 30 percent of every game won was said to belong to the company including 5 percent of every withdrawals made each investor. This was in addition to the high probability of winning because it was a reversed form of betting.
Let’s assume that Nigerians are potentially gullible set of people, where in the world does a company present certificate of registration and other identifying items such as location and phone numbers and yet manage to evade the “eagle” eyes of our equivalent of Homeland security: SSS and NSO operatives? Who is responsible for the protection of these “gullible” and desperate Nigerians that are ready to invest in a presupposedly “certified business outfit in the country? Nobody.
These are just a few facts about what you have erroneously tagged, Ponzi to vilify the victims of a well orchestrated scam…
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86fb is a scam ,
And the government is on it on
Nobody care any body,if the govt will continue like this the name Nigerian can change anytime