Burton Gordon Malkiel, an American economist and writer who is most noted for his classic finance book, A Random Walk Down Wall, has the following to say on Ponzi schemes: “A bubble starts when any group of stocks, in this case, those associated with the excitement of the Internet, begin to rise. The updraft encourages more people to buy the stocks, which causes more TV and print coverage, which causes even more people to buy, which creates big profits for early Internet stockholders.
The successful investors tell you at cocktail parties how easy it is to get rich, which causes the stocks to rise further, which pulls in larger and larger groups of investors. But the whole mechanism is a kind of Ponzi scheme where more and more credulous investors must be found to buy the stock from the earlier investors. Eventually, one runs out of greater fools.” When Burton said the aforementioned, he must have had Nigerians on his mind. This is very clear and the realities today have proven that.
A Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.The scheme leads victims to believe that profits are coming from legitimate business activity (e.g., product sales or successful investments), and they remain unaware that other investors are the source of funds. A Ponzi scheme can maintain the illusion of a sustainable business as long as new investors contribute new funds, and as long as most of the investors do not demand full repayment and still believe in the non-existent assets they are purported to own.
Some of the first recorded incidents to meet the modern definition of the Ponzi scheme were carried out from 1869 to 1872 by Adele Spitzeder in Germany and by Sarah Howe in the United States in the 1880s through the “Ladies’ Deposit”. Howe offered a solely female clientele an 8% monthly interest rate and then stole the money that the women had invested. She was eventually discovered and served three years in prison. The Ponzi scheme was also previously described in novels; Charles Dickens’ 1844 novel Martin Chuzzlewit and his 1857 novel Little Dorrit both feature such a scheme.
In the 1920s, Charles Ponzi carried out this scheme and became well known throughout the United States because of the huge amount of money that he took in. His original scheme was based on the legitimate arbitrage of international reply coupons for postage stamps, but he soon began diverting new investors’ money to make payments to earlier investors and to himself. Unlike earlier similar schemes, Ponzi’s gained considerable press coverage both within the United States and internationally both while it was being perpetrated and after it collapsed – this notoriety eventually led to the type of scheme being named after him.
Today, the farming business is thriving in Nigeria at the moment. As the business grows, Ponzi schemes grow with it too. Beating your chest that all farming businesses /investments on Facebook are genuine is an extreme sport. Very risky, very daring. I don’t know why many Nigerians are Disney-level optimists who are also analogous to individuals who jump from one abusive relationship to another without learning anything. The ponzi operators falsely use forex trading as their basis of operations. We saw the way MMM went down. MBA did too. Then in the organised Ponzi where farming was used as a decoy, Eatrich Farms, by one Ambassador Sam Afolabi, was an example. When funds could not be traced anymore, the victims found their voices and that was when some of us knew about another scamming agency called Chinmark. The man has made his mark in the swindling industry too. There is an earthshaking groaning about the over a billion naira invested in food storage with one Ovaioza whose investors are currently complaining of being scammed. Heartrending. Gullibility. Greed.
I sauntered into the Facebook app recently and was overwhelmed by posts of complaints. While I tried to dodge them, I was arrested by another post that carried a popular farm name, and my heart sunk in sadness. Why?! Truly, an advertisement may be deceitful. With personality appeals, artists, kings, and social media influencers inundated their prospective investors with sweet tales. Poverty is painful. Its bouts of pain are immeasurable. Oftentimes, the poor feel oppressed and depressed. The poor, most times, are ready to do the unmentionable to break free from the shackles of destitution: Ponzi, the delusional expressway to liberation. Ponzi is a marriage between the crooked and the greedy who are conjoined by self-centered people— the influencers/enablers. To buy loyalty on social media, giveaways are the bait. Aliko Dangote, Abdulsamad Rabiu, Mike Adenuga and so on who are metaphors for money do not do giveaways on social media. When I see business owners doing giveaways with huge monies that are enough to start other businesses, I suspect them. I’m not against giving but I’m against “wasteful” giving. Undue charity from someone who is trying to build a business/brand is a red flag for me.
Given the sequence of swindling that has taken place in this land between last year and this year, I hope people would have learnt their lessons. It is my wish that government agencies in charge of financial misappropriation wade into the growing rate of fraudulent schemes in the country and ensure that the culprits are brought to book. Else, this may be the genesis of suicide among frustrated citizens, victims.
Adisa writes in from Abeokuta, Ogun State, via folorunsofatai03@gmail.com
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