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How to detect a Nigerian Ponzi scheme



How to detect a Nigerian Ponzi scheme

So you have a certain amount of money saved up and you want to invest it. You have spotted a juicy investment plan that could fetch you a lot of money but you are scared and you want to avoid making a big mistake with your money.

That’s fine. The good thing is there are a lot of telltale signs that will show you whether the investment is safe or not. In other words, whether the platform you are considering going into is a Ponzi scheme or a legitimate investment platform, but just to be clear, what is a Ponzi scheme?

What is a Ponzi scheme?

It may interest you to know that the words Ponzi scheme originated from Charles Ponzi, a scammer who in the 1920s promised the investors in New England a 40% interest on their investments. This was in sharp contrast to the 5% returns they were receiving from the existing savings accounts. Unknown to the investors, he used the money gotten from the new investors to pay the older investors. Decades after, Ponzi schemes still operate with the same core goal which is to lure new investors in and use their investment money to pay the older investors.

A Ponzi scheme is a type of scam that involves the promise of unrealistic returns in a short time to encourage the recruitment of new investors whose investments are used to pay the older investors. Without the recruitment pattern, Ponzi schemes cannot survive because that means the source of income is taken away.

MMM, Loom, and Rackersterly turned the lives of Nigerians upside down. Many have lost their savings, properties, and even their lives to these platforms. All three of them I just mentioned are Ponzi schemes and they all have certain traits in common which are outlined below. It pains me to see people getting caught in the trap of Ponzi schemes when they are easily avoidable. The list below exposes some of the more glaring and the lesser-known traits of a Ponzi scheme so that you can easily avoid them.

How to detect a Ponzi scheme

1. They are too good to be true

100% return in one week? Pay 10k to get 100k in one month? These offers are too good to be true. No genuine investment platform will offer you such outlandish returns because it is simply not sustainable. Unfortunately, Nigerians keep falling for these sorts of Ponzi schemes because of greed. That’s because typically, these returns are too good to refuse.

These Ponzi schemes don’t just promise high returns, they promise high returns with no risk, which is practically impossible. If you receive an offer that promises you a huge percent of the money as returns in a ridiculously short time, please beware. This is no magic land, it is reality. Like they always say, if it looks too good to be true, then it probably is too good to be true.

2. They don’t have any company registration

Official platforms are supposed to be registered as required by the law. If the company you are thinking of partnering with is not registered, it means you need to be cautious about depositing your money into such a venture.

When I talk about company registration, Corporate Affairs Commission registration (CAC) is not enough. Some companies have a CAC registration and still manage to carry out illicit activities. If the company is an investment platform, then they are supposed o be registered with the Securities and Exchange Commission (SEC).

Do your research and ensure that the company has a complete company registration. Most Ponzi schemes do not have SEC registration because it would make it easier for investors to have information about the company’s operations, finances, products, and services.

This link will help you in verifying whether the company you have in mind is registered with SEC. always remember that Ponzi schemes deal with unlicensed and unregistered individuals.

3. They cannot do without recruitment

While not every platform that incorporates recruitment is illegal, a lot of Ponzi schemes are characterized by aggressive recruitment. Let me show you why that is so. The scammer in charge of the Ponzi scheme pays the older members from the money gotten out of the newer investors. The problem is that when the new investors are in short supply, there is no longer any money to pay the members. This is the point where the scheme usually crumbles and folds up.

If there is an investment you are currently considering, ask them if you must recruit people before you can invest, if the answer is yes, then I’ll advise you to run as far as your legs can carry you. A legit investment should never have recruitment as a prerequisite for you to be allowed to invest.

4. Unclear and complicated operations

If you are considering an investment with a complex confusing mode of operation, then you need to reconsider. If you want to easily detect a Ponzi scheme, take note of how their operations are being conducted. Is the founder of the company hidden? Do they have an open accessible office? Are they traceable? Do they have open lines of communication like phone numbers and social media handles for easy contact?

What are the sources of revenue? How is the profit being generated? Ask all these questions and more and if there are no reasonable answers, it is a very big red flag. Before you entrust your money into the hands of any company, make sure that they are very open about their strategies and operations.

5. They don’t have any track record

If the company in question just sprung up 2 months ago, there is every reason for you to be skeptical about its legitimacy. A company that started barely weeks ago does not have any solid track record and that is a red flag. Before you agree to invest in any company. Make sure they have been around for at least 2 years. Even if they claim to be in existence for more than that, it would still be wise to find out if that is a false claim or not.

A company that has not been consistently giving back returns to its clients for a few years is most likely a Ponzi scheme. If you notice, a lot of Ponzi schemes collapse a few months or at most 1 year after they start, usually because they can no longer sustain the investment returns they have been paying out to their investors.

6. They have very good reviews. But only from a few people

Good reviews often indicate that a company is doing something right, but with Ponzi schemes, this is not the case. A Ponzi scheme might have good reviews, but those reviews are not circulated among everyone in the company. Ponzi schemes usually pay out the first set of people to register so that these same people will be their very own supporters and advertisers. Because these people have truly gotten their returns, they usually don’t hold back in praising and defending the company in question.

The best way to detect the scheme is to ask other members questions about how often they have been paid and how much. If other newer members have not received any returns yet older members have received theirs multiple times, then it may be an indicator that you are dealing with a Ponzi scheme. Good reviews shouldn’t be limited to a chosen set of people, if the company is truly delivering on its promises, the majority of its members should have something positive to say about them.

If you happen to find reviews from newer members, they will most likely be negative ones. Ensure you do your research. You may find complaints all over their social media handles. It is always a good idea to learn from the experience of others instead of yours

7. You are pressured to join

All Ponzi schemes have this effect. They practically choke on your neck until you cannot breathe. Most times the members who have benefitted and still want to benefit some more will be the ones to put pressure on you. They usually try to convince you with several points about why you should register as soon as possible. Most times, you won’t even be given time to think because they convince you that every second wasted is the money going down the drain.

If you feel like you are pressured to join the so-called investment platform without being given the chance to think, then it just might be a Ponzi scheme. The pressure to join the investment is a cause for alarm, but that’s not all. There’s also another kind of pressure which I will discuss below.

8. Pressure to reinvest

After you have succumbed to the pressure to join, this is the point where the owners of the company will begin to pressure you to reinvest. Ponzi schemes thrive on capital obtained from investors. This means a large number of investors pulling out at the same time is detrimental to the health of the company. Because of this, Ponzi schemes create a sense of urgency to pressure investors into reinvesting with the hopes of earning a ridiculous amount of money

9. The promise of guaranteed returns

Are you being offered consistent, guaranteed returns? That is a warning sign of a Ponzi scheme. Genuine investment platforms will not hesitate to tell you that their investment is risky. They’ll tell you plainly that you might lose some money due to fluctuations in the market. Ponzi schemes are not so honest about things.

Instead, they lie blatantly to get you to believe that the investment you are about to go into is a sure way to make money with no possibility of losing. Greed is the major reason why the promise of a guaranteed return appeals to a lot of people. Meanwhile deep within us, we all know that there is no such thing as 100% guaranteed returns.

10. Leverage on trust

Ponzi schemes work by gaining the trust of people that are closest to you. Have you ever noticed that the person bringing that suspicious opportunity to you is either your family, friend, or co-worker? Most times, your loved ones bringing the opportunity might not even be aware that it is a Ponzi scheme. These platforms leverage the trust of those that are in closest association with you. Even if family and friends cannot stop raving about this new “investment”, I would advise that you dig a little deeper.

11. No real business model

Nigerian Ponzi schemes often claim to deal with gold, silver, and other products that you will never set your eyes on while working with them. Ponzi schemes don’t have any solid business plan and that is why they don’t make any real profit. The company doesn’t have any real source of income; they just recycle money from one investor to the other. If the company cannot present a solid source of their profit, then it just might be a Ponzi scheme.

12. It isn’t easy to get your money out

Ponzi schemes promise to reward investors with even higher returns for not withdrawing their funds. They will claim that you can withdraw your money at any time, but in reality, it gets difficult to withdraw funds after a while. When people start to get suspicious, the company owners start to bring up excuses like the need to restructure as the reason why you cannot withdraw your money.



The tips outlined are intended to help you detect a Ponzi scheme so you don’t fall for it. Even if you are already in one, this is your sign to pull out immediately while you still can. After this detailed list, there is no reason why you should fall for any Ponzi scheme ever again. This article has exposed everything you need to know about Ponzi schemes and the common traits that characterize them. Now you are equipped with everything you need to know about how to detect a Ponzi scheme. In this bustling world of opportunities, there are a whole lot of scams that have the potential to make you go bankrupt. Stay safe out there!

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