Nigeria SEC Calls for Crypto Regulation Amid Record Loss to Ponzi Schemes

Nigeria’s Securities and Exchange Commission (SEC) claims that its residents have lost more than $218 million to Ponzi schemes. These authorities emphasized that many of these losses were due to greed and a lack of awareness. As a result, the SEC has called for swift crypto regulation to checkmate cryptocurrency-based frauds and protect investors.

How do Ponzi Schemes Work?

Nigeria’s SEC has reported losses up to $218 million, which is equivalent to N316 billion, to Ponzi schemes. 

For context, these are fraudulent investment operations that offer earlier investors high returns. The perpetrators lure investors through social media with mouth-watering deals that are too good to be true. 

Abdul Rasheed Dan-Abu, Head of the FinTech and Innovation Department at the SEC, highlighted the aggressive marketing approach of the bad actors on platforms like WhatsApp. 

He noted that these schemes solely depend on collecting funds to pay initial participants. Most times, they do not have any legitimate underlying business, but they still promise investors unrealistic returns.

Greed and Ignorance Fuel Ponzi Schemes 

They promise up to 30% ROI monthly with minimal risks. Eventually, they use funds from newer investors to pay the older ones in a system largely described as ‘robbing Paul to pay Peter.’ Therefore, it crashes as soon as inflows from the new investors run dry. Like the agency claimed, the losses were due to greed and ignorance. 

The Nigerian securities regulator has urged that robust regulation for the crypto industry be implemented to avoid the recurrence of such Ponzi schemes. 

So far, authorities in the region are showing support for crypto projects. Around July, the SEC publicly expressed its support for stablecoin businesses, acknowledging the need for regulations. It plans to leverage blockchain technology to improve the security and efficiency of payments.

US DoJ Sentence Ponzi Scheme Perpetrator

Globally, authorities are stepping up to protect crypto users within their jurisdiction by all means. 

In the United States, a 57-year-old man from Pennsylvania called Dwayne Golden, was sentenced to more than eight years in federal prison for running a Ponzi scheme. The US Department of Justice (DoJ) pronounced its sentence on June 28.

To achieve this operation, Golden worked with Gregory Aggesen and Marquis Demacking Egerton. Together, they operated three fake cryptocurrency firms: EmpowerCoin, ECoinPlus, and Jet-Coin, which attracted quite a number of investors. The victims were promised high, fixed returns for investing in crypto markets.