Everyone yearns for financial stability and the opportunity to lead a fulfilling life. This fundamental desire drives our quest for economic opportunities and motivates individuals to seek investments or alternative income streams, relocating when necessary to improve their livelihoods.
The recent collapse of CBEX, a Ponzi scheme that resulted in over N1 trillion in losses, underscores the damaging effects of financial scams. Although this incident grabbed headlines, Ponzi schemes are far from new, having deceived countless people with promises of high returns for decades. From the notorious cash-washing schemes of the ’80s and ’90s to the MMM scam that defrauded Nigerians of N18 billion in 2016, these scams have adapted with technological advancements, preying on those eager for extraordinary profits.
The cycle of losses from Ponzi and pyramid schemes highlights a serious issue requiring urgent attention. Many victims fall prey to one scam after another, perpetuating a destructive pattern. In a Ponzi scheme, early investors are paid using funds from new contributors rather than legitimate business revenues. Pyramid schemes, meanwhile, rely heavily on recruiting members and redistributing newcomers’ funds to those higher in the chain. These scams often blur the line between illegitimate schemes and legitimate Multi-Level Marketing (MLM), demanding vigilance and awareness.
Named after Charles Ponzi—who swindled $20 million in 1920—this fraudulent model dates back to 1899 when William Miller defrauded victims of what equates to $35 million today. In modern times, Bernie Madoff’s 2009 confession revealed a $65 billion fraud, and the FTX crypto scam in 2022 reportedly resulted in $8 billion in losses.
Scams like these hit Nigeria particularly hard, eroding trust in institutions and leaving many citizens grappling with financial distress. Victims often face feelings of shame and vulnerability, manipulated into making risky decisions by fraudsters who exploit their emotions and hope for recovery.
Society must act to protect investors and mitigate the economic harm caused by Ponzi schemes. Governments should enforce strict regulations, educate the public, reward whistleblowers, collaborate with banks and tech firms, and ensure swift legal actions against fraudsters. Empowering citizens through technology and financial education can prevent these scams and channel resources into legitimate investment opportunities, fostering economic growth and stability.
If the over N1 trillion lost to CBEX had been invested wisely, the benefits could have significantly boosted the economy. Governments must broaden investment options, making them accessible to everyday people and creating an environment where everyone has the potential to thrive.
I like to ask a simple question ” why is it difficult for government to prevent the incessant happening of this event?”