Six Easy Ways to Spot Ponzi Schemes

A Ponzi scheme is a ‘supposed’ investment but a fraud that uses the funds from new depositors to pay old depositors without creating any sustainable value.

In 2008, during the financial crisis, there were several Ponzi schemes, both locally and internationally. Locally we had the wealth solutions, penny wise, club freedom, diamond cash club, Nospetco and the likes. People were making so much money in weeks, especially in the ancient city of Ibadan. People threw caution to the wind and lost so much after the expected crash. There are usually a few winners and so many more losers. After all, they need a few winners to appeal to our greed. I will be sharing some signs that you will most likely see when what you want to get into is a scam.

Please note that the signs are not fail-proof, but please tread carefully before investing when you see them more often than not.


1. Their returns are incredibly high or excessive. Depending on the market involved, relativity is essential here. For example, an opportunity promises to pay above 10% monthly consistently for an extended period in Nigeria. Remember, don’t be so concerned about the returns that you risk your principal

2. Your investment vehicle is not regulated by any government regulator (like CBN, SEC). Still, everyone is talking about it as the town’s deal. If that investment has generated so much buzz, then a regulator should be there. The regulator may also be telling you don’t invest in it.

3. There is no underlining value the business offers to customers. Ask yourself, if I were an unbiased customer, would I consistently buy this product? Most don’t have any product. Also, try and find who are the customers purchasing that product. Are they real people? If they were not also constrained to make quick money, would they buy it?

4. They want you to invest immediately. There are even discounts for you investing today rather than waiting for the next 24 hours. They don’t want to give you time to think it through, and you must invest now!

5. They emphasize how some people invested and are now very rich rather than the merits of the investment and how it works. They are feeding on your greed. They want you to suspend logic and act emotionally.

6. You can’t point to the people behind the idea. You may hear rumours that ‘so so and so’ influential person is involved or is the chairman, but they all hearsay. The promoters either have no track record, or you can’t even point to them at all. 

In 2016, we saw the return of Ponzi schemes again locally and most fizzled out in 2017. Soon they will return, and I hope you will be wise enough not to fall prey to them.