If you’ve ever thought that the victims of Ponzi schemes were a bunch of dark minds, lacking the brain power to process the facts needed to make solid judgments, think again. You may be totally wrong. It turns out that greed and sleaze have a way of obscuring the human sensorium and completely filling our cerebral cortex with a deadly concentration of endorphins. Or how else to explain that a reputable university professor would invest all his savings in a company that promises a constant return of 30 percent.
In the aftermath of World War I, the cost of postage in Italy, expressed in United States dollars, fell due to the high rate of inflation there. This meant that an international reply coupon (IRC), something that allowed a person in one country to pay the postage for a reply to a correspondent in another country, could be purchased relatively cheaper in Italy and exchanged for higher value US stamps. The stamps could then be sold for a profit through arbitrage. Charles Ponzi, an Italian immigrant to America, sold the idea to his clients, making false claims that the net profit from these transactions, after fees and the exchange rate, exceeded 400%. He managed to convince many of his clients that he would double their investment in just three months. In fact, he later shortened it to 45 days at 50 percent interest. Investors from across America have made their way to his door. Of course, Mr. Ponzi knew from day one that such a return was not even possible, but he nevertheless knew how to harness human greed.
As with any pyramid scheme, it attracted investors by paying out profits to previous investors with funds received from newer investors. This made his victims believe that the profits were coming from legitimate business ventures, not realizing that the whole scheme was an act of robbing Peter to pay Paul. His world fell apart when authorities began to wonder how he could have reaped such a huge return at a time when banks were only offering a 5% return. This worried its investors, many of whom later came in en masse, leading to the collapse of the program. Charles Ponzi was arrested. He then confessed to his crime and served a prison sentence. Finally, he died miserable on January 18, 1949 in Rio de Janeiro, Brazil, a place far from his home. Although Mr. Ponzi has come and gone, his pyramid scheme, now known as the Ponzi scheme, has exploded. It has now become a popular business model, gaining new customers (insert victims) every day, all over the world and, of course, including in Nigeria.
In May, the Economic and Financial Crimes Commission (EFCC) arrested one Amos Olugbenga Olaniyan for allegedly defrauding Nigerians to the tune of around 128 million naira. As CEO of DHIL Nigeria Limited, he ran a weekly radio show, through which he promised a monthly return of 30% to anyone willing to invest in his entity called Crime Alert Security Network. In the end, he neither paid any interest nor returned the principal to his clients, which included artisans paid by the day and civil servants living on minimum wage. At the time of his arrest, he was living tall and seen in possession of five exotic cars and prime real estate.
It was just three months after Mr Olaniyan’s arrest that in September another 24-year-old Nigerian named Adewale Jayeoba, who owns and operates a company called Wales Kingdom Capital Limited, was also said to be wanted by the EFCC. Wale took the game a step further and reportedly used a whopping N935 million in customer funds.
The losses suffered in the situations described above, while enormous, are however pale compared to the 18 billion naira that Nigerians lost to the Russian-born Mavrodi Mundial (MMM) pyramid scheme in the space of two years. years only. Even with the difficult economic situation in the country, Nigerians continue to lose billions of dollars a day because of these blue collar criminals.
Of course, we are quite familiar with the story of a certain Phillip Akor, CEO of Abuja-based Benignant Forte, a criminal enterprise billed as a real estate investment company. Her marriage was overkill and included a madness of 4.5 million naira just for the cakes, obviously paid for with investor money. He has since disappeared without a trace. Stories like these are so common in Nigeria’s torturous investment landscape, causing a crisis of confidence that runs counter to real businesses.
The losses suffered in the situations described above, although enormous, pale compared to the 18 billion naira that Nigerians lost to the Russian-born Mavrodi Mundial (MMM) pyramid scheme in just two years. Even with the difficult economic situation in the country, Nigerians continue to lose billions of dollars a day because of these blue collar criminals. There must be something in our DNA that makes us vulnerable to get-rich-quick scams.
If you’ve ever thought that the victims of Ponzi schemes were a bunch of dark minds, lacking the brain power to process the facts needed to make solid judgments, think again. You may be totally wrong. It turns out that greed and sleaze have a way of obscuring the human sensorium and completely filling our cerebral cortex with a deadly concentration of endorphins. Or how else to explain that a reputable university professor would invest all his savings in a company that promises a constant return of 30 percent. Why such gullibility? Did he do his research and what happened to the due diligence? Where in the world is this possible, even from a distance?
Every major problem that plagues Nigerian society at all levels, public and private, could be attributed to a common denominator, namely; our poor value system; the type who celebrates quick wealth without work and glorifies ostentation. A society of everything where the end is what justifies the means. This explains why Nigeria is known worldwide as the Mecca of no-advance fraud syndicates. Since then, we have gone by default to a Hobbesian state of nature, where there are no enforceable criteria of right and wrong; where life is “wicked, brutal and short”. Shouldn’t we know better and do better?
Above all, our young people must realize that there is no quick money except when it comes to a Nigerian criminal or politician. Wealth takes time to build. We must constantly remember the golden rule that in business as in life, if it sounds too good to be true, it probably isn’t.
If someone comes up with this revolutionary and one-of-a-kind business idea for you, be on your guard and ask questions. From time to time, a genius is born, but the fact remains that there is hardly a monopoly on wisdom. Often times someone else may know or even have tried the same idea if indeed it is that good.
We need to cultivate the habit of always seeking the opinion of one or two people we trust when investing in a new business. It’s a little harder for two to be caught up in the euphoria of the moment. Forget the idea of taking the world by storm when the windfall falls. If you’re lucky enough to have business mentors ready to take you in their wings, don’t hesitate to grab them and follow their leads.
For aspiring crooks, think about the fate of Charles Ponzi, Bernie Madoff, and what happened to the many fugitives like Olugbenga Olaniyan, Adewale Jayeoba, and Phillip Akobi. Decide on the kind of life you want to live and ask yourself if a year or two of luxury offered by these plans is worth a life of misery.
Above all, our young people must realize that there is no quick money except when it comes to a Nigerian criminal or politician. Wealth takes time to build. We must constantly remind ourselves of the golden rule that in business as in life: If it sounds too good to be true, it probably isn’t.
Osmund Agbo, Public Affairs Analyst, is the coordinator of the African Center for Transparency and responsible for the Save Nigeria project. Email: Eagleosmund@yahoo.com
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