How to Spot a Ponzi Scheme: Your Guide to Safe Investing

Financial scams are a serious threat, and Emomotimi Agama, the Director General of Nigeria’s Securities and Exchange Commission (SEC), has a crucial message for everyone: stay vigilant. In a recent interview, he outlined the key red flags to help Nigerians avoid losing their hard-earned money to illegal financial schemes.

The warning comes at a critical time, as countless Nigerians have fallen victim to deceptive online platforms promising incredible returns. Agama emphasizes that the government’s priority is to protect citizens from these schemes, and being informed is the first line of defense.

According to the SEC DG, there are three primary indicators that an investment opportunity is likely a scam:

• Unbelievably High Returns: If an offer promises returns that seem too good to be true, they probably are. Financial markets operate on risk and reward, and legitimate investments do not offer guaranteed, unrealistic profits. These schemes often use the promise of extraordinary gains to lure in unsuspecting investors.
• Lack of Proper Registration: A legitimate investment firm in Nigeria must be registered with the SEC, not just the Corporate Affairs Commission (CAC). While the CAC registers a business, it’s the SEC that licenses and regulates its operations within the Nigerian capital market. Always verify a firm’s SEC license before investing. The SEC Act, specifically Section 3(a), gives the commission the sole authority to regulate securities and investment businesses in the country.
• Vague or Non-Existent Business Model: These scams often fail to provide a clear explanation of how they generate their returns. They might use vague language or claim to have a secret trading algorithm. In reality, a Ponzi scheme generates money by paying early investors with the funds collected from new investors, a cycle that is unsustainable and eventually collapses.

Agama’s advice is clear: interrogate and investigate. Before you commit any money, take these steps:

1. Ask for an SEC license. If the company can’t provide one, or provides a CAC registration instead, walk away.
2. Ask questions. Don’t be afraid to demand clarity on their business model, how they make money, and where your investment will go. If they are evasive or unwilling to answer, it’s a major warning sign.
3. Reach out to the SEC. The Commission has offices in Lagos, Kano, Port Harcourt, and Abuja. Agama notes that they are available 24/7 to provide information and guidance. The SEC is also developing a digital platform and an app to make it easier for people to verify information and make inquiries online.

The SEC’s warning is echoed by the Economic and Financial Crimes Commission (EFCC), which has also been cracking down on fraudulent schemes. The EFCC recently alerted the public to 58 illegal Ponzi operators, many of which are not registered with either the Central Bank of Nigeria (CBN) or the SEC. Some of these companies have already been charged in court, with a few convictions secured.

The EFCC identified the following companies as being involved in illegal operations:

• Wales Kingdom Capital
• Bethseida Group of Companies
• AQM Capital Limited
• Titan Multibusiness Investment Limited
• Brickwall Global Investment Limited
• Farmforte Limited & Agro Partnership Tech
• Green Eagles Agricbusiness Solution Limited
• Richfield Multiconcepts Limited
• Forte Asset Management Limited
• Letsfarm Integrated Services
• Bara Finance & Investment Limited
• Vicampro Farms Limited
• Brooks Network Limited
• Gas Station Supply Services Limited
• Brass & Books Limited
• Crowdyvest Limited
• Jadek Agro Connect Limited
• Adeeva Capital Limited
• Oxford International Group
• Oxford Gold Integrated
• Skapomah Global Limited
• MBA Trading & Capital Investment Limited
• TRJ Company Limited
• Farm4Me Agriculture Limited
• Quintessential Investment Company
• Adeprinz Global Enterprises
• Rockstar Establishment Limited
• SU. Global Investment
• Citi Trust Funding PLC
• Farm Buddy
• Eatrich 369 Farms & Food
• Globertrot Farmsponsors Nigeria Limited
• Farm Sponsors Limited
• Cititrust Credit Limited
• Farmfunded Agroservices Limited
• Adamakin Investment & Works Limited
• Cititrust Holding PLC
• Green Eagles Agribusiness Solutions Limited
• Chinmark Homes & Shelters Limited
• Emerald Farms & Consultant Limited
• Ovaioza Farm Produce Storage Limited
• Farm 360 & Agriculture Company
• Requis Technologies Limited
• West Agro Agriculture & Food Processing Limited
• NISL Ventures Limited & Estate of Laolu Martins
• XY Connect Investment Limited
• River Branch Unique Investment Limited
• Hallmark Capital Limited
• CJC Markets Limited
• Crowd One Investment
• Farmkart Foods Limited
• KD Likemind Stakeholders Limited
• Holibiz Finance Limited
• Ifeanyi Okpe Oil & Gas Services
• Servapps Nigeria Limited
• Barrick Gold Mining Company
• 360 Agric Partners Limited

The SEC and EFCC are working together to shut down these illegal operations and prosecute those responsible. Their collective message is clear: protect yourself by being cautious, informed, and by verifying any investment with the proper authorities.