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No much stories on this. Nigerians are already aware of the current Pyramid scheme trending called MMM Nigeria – a ponzi scheme which promises 30% Return on Investment (ROI) after 30 days.
MMM stands for Mavrodi Mondial Moneybox and takes its name from its founder, Sergei Panteleevich Mavrodi of Russia. He founded MMM in 1989 and the scheme was declared bankrupt three years later leading to the disappearance of Mavrodi until his arrest in 2003. While some people who were skeptical about the scheme started with small amounts, it is believed some poured in thousands of dollars anticipating higher returns. The RBZ said the schemes were fraudulent as existing investors were ‘paid money not from genuine market investment of their funds, but from contributions made by new investors, until a point when the scheme can no longer attract new investors.”
What is a Ponzi scheme? A Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned through legitimate sources. Operators of Ponzi schemes usually entice new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent.
Initially the promoter will pay out high returns to attract more investors, and to lure current investors into putting in additional money. Other investors begin to participate, leading to a cascade effect. The "return" to the initial investors is paid out of the investments of new entrants, and not out of profits. Often the high returns encourage investors to leave their money in the scheme, with the result that the promoter does not have to pay out very much to investors; he simply has to send them statements showing how much they have earned. This maintains the deception that the scheme is an investment with high returns.
The Securities and Exchange Commission has recently commented on the 'investment scheme' warning Nigerians to desist from it.
Ponzi schemes and other scams often share some characteristics. Here they are:
What are those things you should know to avoid ponzi schemes and financial fraud? Here are some tips below:
(1) Question everyone before handing over your money: Even if you are approached by a family friend, a relative, or a major financial institution, ask:
MMM stands for Mavrodi Mondial Moneybox and takes its name from its founder, Sergei Panteleevich Mavrodi of Russia. He founded MMM in 1989 and the scheme was declared bankrupt three years later leading to the disappearance of Mavrodi until his arrest in 2003. While some people who were skeptical about the scheme started with small amounts, it is believed some poured in thousands of dollars anticipating higher returns. The RBZ said the schemes were fraudulent as existing investors were ‘paid money not from genuine market investment of their funds, but from contributions made by new investors, until a point when the scheme can no longer attract new investors.”
What is a Ponzi scheme? A Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned through legitimate sources. Operators of Ponzi schemes usually entice new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent.
Initially the promoter will pay out high returns to attract more investors, and to lure current investors into putting in additional money. Other investors begin to participate, leading to a cascade effect. The "return" to the initial investors is paid out of the investments of new entrants, and not out of profits. Often the high returns encourage investors to leave their money in the scheme, with the result that the promoter does not have to pay out very much to investors; he simply has to send them statements showing how much they have earned. This maintains the deception that the scheme is an investment with high returns.
The Securities and Exchange Commission has recently commented on the 'investment scheme' warning Nigerians to desist from it.
Ponzi schemes and other scams often share some characteristics. Here they are:
- A guaranteed promise of exceptional returns with little risk
- Investments are not registered with the Securities and Exchange Commission or other regulatory body
- Subscribers are usually given very little in the form of formal documentation
- Subscribers do not usually understand what they are investing in
- Clients face difficulties when they wish to exit or withdraw even a part of their money
What are those things you should know to avoid ponzi schemes and financial fraud? Here are some tips below:
(1) Question everyone before handing over your money: Even if you are approached by a family friend, a relative, or a major financial institution, ask:
- How much money am I expected to put in the investment?
- What kind of returns am I likely to make and over what period of time?
- Are any of these returns “guaranteed,” and if so how and by whom?
- If the returns are not guaranteed, what is the upside potential and the downside risk?
- How and when can I get my money out?
- Make sure you keep asking questions until you are satisfied with the information. If answers are unclear or not forthcoming, you have the opportunity and maybe even the obligation to walk out of that 'deal'. If you are told not to worry about where your money is going, that they will take care of it, you should leave quickly.
2. Ask to see and keep written materials about any firm you are thinking of doing business with.
Look for academic credentials, professional certifications and designations, and a solid work history. Most professional certifications are backed by associations you can call or E-mail to make sure a person is an accredited designation holder.
(3) Check to make sure the firm has been in business for a suitable and sustainable length of time.
Do they have offices you can visit? And where they are known? What records do they have of fraud? Do you have good testimonials from people about it? Where have the business been successful and failed? If you can't get satisfactory answers to these questions, run away from it.
4. If something sounds too good to be true—it probably is.
Don’t fall in line because someone promises you the moon. If you want to take a risk, try this first: Every time you are interested in something that sounds attractive but incredulous at the same time, don’t leave until you have asked 20 additional questions about it. Watch the salesperson’s facial and body expressions while he addresses all your questions and determine whether this feels right for you.
5. Take more than enough time to think about it.
Don’t sign up for anything you must take advantage of that day. If something is good and honest, it will still be available to you 24 hours later. A salesperson who pushes you to sign something right away is not following a professional approach. There is likely to be another train coming down the same track. Back off from anything you can’t take time to think about or discuss with family members.
6. Avoid investments, advisors and approaches that are not clear.
Investment professionals talk about investment assets in terms of transparency—that is, they are clear to anyone who wants to look into them. The reverse of this is an asset that is opaque, that you cannot tell what it is, how it is handled, or what is happening with it. If you can’t see the individual securities or assets within the investment, and don’t know anything about it, don't give in for it.
7. Trust your instinct:
Your conscience is your guide for what feels right and what could be wrong for you. If your conscience is not clear about it, drop it.
