What Are Ponzi Schemes?

A Ponzi scheme is a type of investment fraud in which existing investors are paid with money raised from new investors. Organizers of Ponzi schemes frequently offer to invest your funds and earn better returns with little or no risk. However, the fraudsters in many Ponzi schemes do not invest the money.

Ponzi schemes require a steady flow of new funds to survive because they have little or no actual earnings. These schemes usually collapse when it becomes difficult to attract new investors or when a big percentage of existing investors pay out.

Trending Ponzi programs in Nigeria include: Ovaioza Farm Investments, 86FB, Chinmark Investment Program, MMM to just mention a few. In the light of these, what are the danger signs one should consider before investing in a business? The next subheading discusses this.

How To Recognize Ponzi Schemes

Ponzi schemes are frightening, but understanding what to look for can help you avoid falling for one. Here are a few danger signs thatyou should watch out for when dealing with an investment organization:

1. Unprotected Mode Of Payment

Ponzi schemes may frequently request that you invest with them using gift cards or cryptocurrency (such as Bitcoin), or a specificonline money transfer software. Ponzi schemes require payments in formats that do not provide protection to consumers. Paymentsmade with gift cards, for example, are usually non-reversible and difficult to track. Legitimate businesses will hardly, if ever, request that you pay with a specific method, such as gift cards.

It’s a smart option to utilize a secure provider like PayPal when making online payments. Secure payment systems might include features like end-to-end encryption to keep you safe.

2. Ponzi Schemes May Impersonate Other Legit Agencies

Many Ponzi scheme agencies impersonate agencies such as the Federal Internal Revenue Service (FIRS). Many can even make their phone numbers look legitimate on your caller ID using technology.

If you are contacted by someone claiming to be a representative of the government, go to the organization’s official website and look for an official support number or email address. To double-check the information in the initial message, contact them.

Many Ponzi schemes may pose as businesses, such as your utility company

3. Ponzi Schemes Are Often Have Cryptic Ways

A common aspect of many Ponzi schemes is the use of complicated and/or hidden wats. Because they’re ponzi, their genuine character shouldn’t be revealed. They will often tell you that the major reason why they’ve been successful is owing to their hidden ways. Another way they operate is that they tell you that their strategies is too complicated for you to understand.

4. Many Ponzi Schemes Promotes Low Risk, High Returns

Be wary of any investment organization that claims to offer very low risk and very guaranteed to deliver high profits. Considerable potential returns are usually accompanied with high risk. That is the way the financial world operates.

How To Avoid Being A Victim Of Ponzi Schemes

1. Don’t Be Hesitant To Ask Questions

Don’t be shy to ask serious questions like “What exact business am I investing in?” and “Who Is The CEO of this company?”, “What systems are in place to make profit?” to any investment company. Generally, honest investment companies do well to answer these questions in order to avoid doubt. In contrast, dubious investment companies find ways to avoid these questions and as a result, people who easily give their trust are duped of their money.

2. Make Proper Research

Understand the nature of the investment business, as well as its operational history, success rate, and who is in charge of its operations, as well as their education, experience, skill, and training, as well as its investment history. Annual reports, audits, and financial statements can be obtained. Find out if the promoter is properly registered with the appropriate bodies such as Corporate Affairs Commission (CAC) or have any criminal record especially with Economic Financial Crime Commission (EFCC) or the Nigerian Police.

3. Collect Relevant Documents/Information Regarding Investment Program

The majority of Ponzi scheme perpetrators give investors monthly updates with scant information. This is a huge warning sign. On a regular basis, honest investing firms publish very extensive, professionally generated reports, usually monthly, quarterly, annually, or all three. Most reports will inform you where your assets were invested and offer detailed information about any changes in your assets – whether you’ve made or lost money. Ponzi schemes survive and prosper because victims have enough faith in the primary concepts to overlook the lack of paperwork.

4. Think Before Investing

If something appears to be too genuine, it most likely is. Although an investment opportunity may appear to be a sure thing, investors must always think rationally rather than emotionally when making decisions. Most investments, like most businesses, do not guarantee a profit. Because markets vary, annual guarantees of 8 to 12 percent are impractical. You should be wary if an investment advisor claims you’ll get these returns.

5. Select The Right Personnel

If your have a business and want to invest with an investment company, selecting an investment manager is similar to selecting a doctor or accountant. Experience and skill, instead of personality or charisma, should be regarded. The majority of Ponzi schemes are run by exceptional salespeople with a strong personal CV but, seemingly, a lack of professional ethics. Inquire about professional certifications and whether the firm or persons involved have been the subject of any complaints.


While the prospect of huge wealth from a single successful investment is attractive, investing should be viewed as an intellectual rather than an emotional endeavor. Maintain skepticism. Consider what could go wrong rather than what could go right. Deal with experienced investment companies. Ask direct questionsconcerning your money’s whereabouts. Require detailed reporting on a frequent basis. If you own a business, consult your accountant or attorney before making any large investment.

We know you’ve learnt a thing or two from this article.

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