Top 7 critical signs to spot a Ponzi scheme before you are scammed

Top 7 critical signs to spot a Ponzi scheme before you are scammed

  • Ponzi schemes have robbed a lot of Nigerians of their hard-earned money and wrecked many businesses and homes
  • Unfortunately, they don't present as Ponzi schemes when requesting investments from would-be investors
  • To avoid losing your hard-earned money to these fraudsters, these are the top 7 critical signs to watch out for is celebrating business personalities of 2022. See top entrepreneurs of Fintech, Startup, Transportation, Banking and other sectors!

Hundreds of Nigerians have lost billions of naira to several Ponzi schemes in the last decade. Earlier this year, the Economic and Financial Crimes Commission (EFCC) revealed that in the last three years, it has received no less than 1,000 letters filed against Ponzi scheme operators on a monthly basis.

Ponzi schemes are unverified investment platforms that promise investors high and mouth-watering interests on their investments.

The name comes from Charles Ponzi, a 1920s notorious fraudster who operated a scheme where he promised investors a 40% return on their investments in 90 days until its final crash.

Ponzi schemes' survival is dependent on a constant flow of new investor money which is used to pay existing investors while little to no actual investing is going on.

Nigeria’s rich history of Ponzi schemes

The Mavrodi Mundial Movement (MMM) will perhaps remain the most popular of these Ponzi schemes that have ever operated in Nigeria. So many Nigerians were victims of these schemes and so much money was lost when the scheme finally crashed in 2017. According to the Central Bank of Nigeria, investors lost about N12 billion to MMM.

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Even after the crash of MMM, you would think that many would learn their lessons. But no, more people seem to have shifted to patronising newer illicit schemes, repeating the same cycle.

From MMM to Loom; Ultimate Cycler to Givers Forum; Pennywise to Twinkas; Clarrita to Loopers Club, the list is endless. They come under the guise of offering outrageous Returns on Investment.

According to an earlier report by, the EFCC disclosed that it has arrested and is prosecuting about 10 Ponzi scheme operators who have allegedly fleeced Nigerians of over N12 billion between October 2020 and August 2021.

The EFCC Special Fraud Unit (SFU) had arraigned Dominic Joshua of Brisk Capital Limited for allegedly defrauding investors of over N2 billion with a promise of a 60 per cent ROI.

Also in Lagos, the anti-graft agency recently arrested a couple for allegedly defrauding unsuspecting victims in an N935million Ponzi scheme.

The suspects, Emmanuel and Victoria Jaiyeoba, who were arrested at their residence in Ibadan, Oyo State, are parents to Adewale Daniel, Marketing Director, Wales Kingdom Capital Limited.

Top 7 critical signs to spot and avoid Ponzi scheme on time
Ponzi scheme
Source: Getty Images

Signs that point to a Ponzi scheme

There are a lot of Ponzi schemes out there looking for victims to scam them of their hard-earned money. So it is only wise to learn how to spot them in order to save your resources. These are common traits among them.

Promise of High returns with no risk: When an investment scheme promises more than normal returns given by any conventional investment opportunity, then there is a need to be suspicious of it. Ponzi schemes, a lot of times promise up to a 100% return on investments. There’s no more obvious red flag than this.

Promise of consistent returns: Normally, markets fluctuate as investment markets rise and fall over time. When a promises consistently positive returns regardless of overall market conditions, then you should be skeptical.

Unregistered: Ponzi schemes usually have no registration history with a country's financial regulators. In Nigeria for instance, the Securities and Exchange Commission, the Central Bank of Nigeria and others license investment houses to operate in the country. Where these approvals and licenses are not available, it is only possible that one might be dealing with a Ponzi scheme.

Unlicensed sellers: Legitimate investments are usually sold by licensed operators unlike in the case of Ponzi schemes which are sold by unlicensed and unapproved operators. Always reach out to regulators to verify this.

Vague or Complex business model: It is advisable you refrain from dealing with investment schemes that finding concrete and complete information about the organisation and its representatives is a big problem. When the operations and how revenue is generated are too complex to understand, then you should be wary.

Unclear paperwork: When the mathematics of the scheme doesn't seem to be adding up, then one should be concerned. Also, errors in financial statements are also red flags.

Difficulty receiving payments: When the organisation begins to miss payments or you have difficulty making withdrawals, it is most likely a Ponzi scheme. A lot of times, they offer even higher returns to prevent investors from cashing out.

What the experts are saying about Ponzi schemes

Speaking on the thriving of Ponzi schemes in Nigeria, Dayo Oludare, a financial analyst said that the main reason is because of the declining economy. He said:

In a country where the cost of living is very high, salaries are nothing to write home about and investments are not yielding much, it is easy for people to get tempted when someone promises them 40%-100% returns, especially if they know someone who has already gotten paid.


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