By Chioma Obinagwam
The Securities and Exchange Commission (SEC) has issued a fresh alert on the dangers of Ponzi schemes, emphasizing their severe threat to investor trust, financial stability, and Nigeria’s capital market.
Confiance News gathered on Thursday.
Speaking at the Capital Market Enlightenment Programme organized by the Capital Market Correspondents Association of Nigeria (CAMCAN), Dr. Sa’ad Abdulsalam, Head of the SEC’s Enforcement Department, delivered a paper titled “Ponzi Schemes: Avoiding the Pitfalls of Illegality.”
He warned that fraudulent investment schemes promising unrealistic returns continue to undermine confidence in legitimate investment platforms, destabilize markets, and discourage participation.
“Ponzi schemes erode market trust, causing volatility and reduced investor engagement,” Abdulsalam stated. “Beyond financial losses, they damage the reputation of regulatory bodies tasked with safeguarding investors.
He highlighted the broader socio-economic impact, noting that losses from Ponzi schemes—often involving life savings or borrowed funds—devastate households, increase poverty, and strain community cohesion.
“These are not just numbers; they represent shattered trust and ruined lives,” he said.
Abdulsalam traced Nigeria’s history with Ponzi schemes, citing notorious cases like the Umanah Umanah scheme of the 1990s, Nospecto in the early 2000s, and the MMM frenzy of the 2010s. He revealed that over 400 unlicensed fund managers were exposed in 2010 alone, underscoring the persistent challenge.
The rise of these schemes, he explained, is fueled by low financial literacy, economic hardship, and the rapid spread of misinformation via social media. Despite efforts to curb the problem, evolving digital platforms and sophisticated fraudsters pose ongoing challenges, compounded by limited regulatory resources.
To counter this, the SEC has ramped up investor education through school curricula, workshops, radio, television, and social media campaigns. The Commission regularly issues public warnings and publishes a list of registered capital market operators on its website to help investors verify legitimacy.
“When we identify illegal operations, we act decisively, sealing off premises involved in fraudulent activities,” Abdulsalam said.
The SEC also pursues civil cases through the Investments and Securities Tribunal (IST) and criminal prosecutions with the police and the Attorney General’s office.
Collaboration is a key strategy, with the SEC working through the Financial Services Regulation Coordinating Committee alongside agencies like the Central Bank of Nigeria (CBN), Corporate Affairs Commission (CAC), and Nigeria Deposit Insurance Corporation (NDIC) to combat financial crimes.
“Ponzi schemes cross regulatory boundaries, so our response must be unified,” Abdulsalam stressed.
The SEC urged investors to stay cautious, verify information, and avoid schemes promising unrealistic returns. While the Commission is committed to fostering a safer investment environment, Abdulsalam emphasized that public vigilance is critical.
“Trust and transparency are the foundation of a thriving capital market,” he concluded. “Through education, collaboration, and shared responsibility, we can protect our economy from the destructive impact of Ponzi schemes.”
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