Inside the devastating cycle of hope and ruin, from MMM’s ghost to CBEX’s collapse, and the desperate search for a way out.
Besides lost money, the tears streaming down the faces of Nigerians gathered in Ibadan were tears of betrayal, of shattered dreams built on digital promises. The collapse of the cryptobank exchange (CBEX) platform, allegedly vanishing with a staggering N1.3 trillion (over $1 billion USD) of investors’ funds, is the latest, brutal chapter in a story Nigeria knows all too well. “I go Libya go work,” lamented one man, recounting how he survived hardship abroad and only lost his savings back home. “My neighbour tell me say if I do [invest], e go help me… Now it’s all gone”.
His suffering stretches across time and affects millions who have been drawn into deceptive money schemes like Mavrodi Mundial Moneybox (MMM), Planwell, MBA Forex, Chinmark, and Racksterli. Despite dramatic failures and repeated warnings, these scams keep appearing in Nigeria, attracting new victims. The pattern is the same: big promises, a short period of exciting payouts funded by fresh investments, and then a sudden collapse, leaving most people devastated and financially ruined.
How does this keep happening? What makes Africa’s largest economy so vulnerable to these phantom fortunes? And is anyone truly fighting back?
The Scam Playbook: Old Tricks, New Tech
A Ponzi scheme is a trick that makes it look like investors are earning money, but in reality, their profits come from the funds of newer investors—not from real earnings. It got its name from Charles Ponzi, who became famous in the 1920s for a scam involving postal coupons. This scheme only works as long as new people keep joining and investing. Once fewer people join, the whole system collapses, leaving many with huge losses.
Nigeria’s experience with MMM provides a stark blueprint. Arriving in 2015 and booming during the 2016 recession, MMM wasn’t just selling returns; it was selling hope and a twisted form of “social justice”. Promising an unbelievable 30% monthly return, it framed itself as a “mutual aid fund” where members “helped” each other, cleverly tapping into distrust of traditional banks. Before its inevitable collapse in December 2016, it had lured over 3 million Nigerians, leaving behind estimated losses of N18 billion (around $50 million then) and a wave of despair.
Modern scams are more polished and take advantage of technology. CBEX operated in the complicated world of cryptocurrency, while others pretend to invest in agriculture, forex trading, or logistics. They offer returns of 15-50%, which seems more realistic but is still suspiciously high. These schemes create professional-looking websites and use social media like Facebook, WhatsApp, and Telegram to reach many people. They also use aggressive marketing, sometimes featuring celebrities or influencers, to make them seem legitimate.
However, their tricks remain the same:
- Unrealistic Promises: They lure people in with profit guarantees that don’t match real market conditions.
- Using Personal Networks: They rely on recruitment through friends, family, and community groups. Early investors who earn money become unintentional promoters.
- Fake Transparency: Some platforms look like real investment sites or talk about “helping” and “community,” making them seem open and trustworthy when they’re not.
A Trail of Tears: Counting the Human Cost
The numbers are staggering, though likely underestimated. Nigerians are thought to have lost over N300 billion in the five years leading up to 2022, perhaps N500 billion ($1 billion) in the last decade, and maybe over N911 billion in the past 23 years. MBA Forex alone accounted for a suspected N213 billion ($500 million) loss. The alleged CBEX fraud dwarfs even that at N1.3 trillion.
Behind these figures are millions of ordinary people: retirees who lost their life savings, students who gambled away tuition fees (one case involved 4,000 university students), small business owners, farmers, the unemployed, a cross-section of Nigerian society united by vulnerability.
The emotional wreckage is immense. Victims speak of losing everything. The MMM collapse reportedly triggered panic and suicide attempts. After the Chinmark Group imploded, owing over 5,000 investors potentially billions, one woman tragically took her own life after losing N30 million of family funds. The shame and despair are often overwhelming. As one observer grimly noted, Nigerians often “learn the hard way”.
The damage extends beyond individual loss. These schemes suck capital away from legitimate businesses, erode trust in the financial system, and can even fuel social unrest. The personal data collected, including names, phone numbers, and even Bank Verification Numbers (BVNs), creates a high risk of future identity theft.
Why Here? Why Now? The Roots of Vulnerability
Nigeria has become a hotspot for Ponzi schemes because of severe economic struggles. With significant number of the population living in poverty and inflation rising, many people feel desperate. During tough times, like the 2016 recession when MMM became popular, these scams seem like a chance to escape financial hardship. One expert put it simply: “Poverty pushed people into the arms of fraudsters.” A survey found that 60% of investors felt pressured by their financial situation.
This desperation is worsened by the widespread desire to get rich quickly. The idea of making fast, easy money is tempting, even when it seems unrealistic. While greed isn’t the main reason most people fall for these scams (only 0.7% of victims cited it in one study) it does drive the scammers and lure people in.
A critical vulnerability is the financial literacy gap. Many Nigerians, even those with formal education, lack the practical knowledge to assess investment risks or spot the red flags of a scam. Enhancing Financial Innovation and Access (EFInA) data shows low financial capability among a third of adults, with significant gaps based on education, location, and age.
These schemes also masterfully exploit Nigeria’s strong social fabric. A friend’s recommendation is often more powerful than any official warning. Trust is placed in the referrer, not the scheme itself. When familiar faces, community leaders, or even celebrities promote a platform, it lends a powerful, often deceptive, air of credibility.
Can Regulators Keep Up?
Nigeria has lots of watchdogs. The Economic and Financial Crimes Commission (EFCC), the Securities and Exchange Commission (SEC), the Central Bank of Nigeria (CBN), and the Nigeria Deposit Insurance Corporation (NDIC) are all tasked with policing the financial landscape. They issue warnings, listing dozens of illegal operators. They launch investigations, make arrests, and sometimes, achieve convictions. The EFCC is collaborating with Interpol on the CBEX case.
Yet, the scams persist. Why? Critics point to several weaknesses:
- Reactive Responses: Warnings often come too late, after billions have vanished. “What is the use now when the regulator comes out after everyone has lost their money?” asked one financial expert.
- Legal Gaps: Until recently, laws didn’t explicitly outlaw Ponzi structures, focusing instead on registration failures. A new bill aims to fix this, but its impact remains to be seen.
- Enforcement Hurdles: Investigating complex digital schemes, especially those involving crypto or crossing borders, is challenging. Resources may be limited.
- Low Conviction Rates: Compared to the sheer number of schemes, successful prosecutions seem rare. The EFCC recently listed 58 illegal operators, reporting only five convictions and five guilty pleas among them. This contrasts sharply with cases where Nigerian fraudsters targeting victims abroad face lengthy prison sentences when prosecuted in places like the US or UK.
- Victims Left Empty-Handed: Recovering lost funds is incredibly difficult, and often, victims get nothing back, even if assets are seized. “Investors, they are going to have their money back,” an EFCC spokesperson assured regarding the CBEX case, but cautioned, “it might not be in the short term”.
- Questions About Banks: Concerns linger about whether banks and fintechs do enough due diligence, potentially allowing fraudsters to operate easily.
This creates a “deterrence deficit”: the potential rewards for fraudsters seem to outweigh the risks of getting caught and punished severely.
A Global Plague, A Local Fight
Ponzi schemes are a worldwide problem, preying on universal desires. MMM operated globally. Bernie Madoff’s infamous US scheme targeted the wealthy elite. Scams have flourished from Romania to India, the UK to South Africa.
What differs is often the response. The US and UK have shown greater success in prosecuting complex financial fraud, securing long sentences, and cooperating internationally. South Africa saw banks proactively freezing MMM-linked accounts. China outright banned MMM. While no country is immune, stronger enforcement and judicial resolve clearly make a difference.
Can Nigeria Break the Cycle?
Ending this destructive pattern requires more than just reacting to the latest collapse. It demands a fundamental shift.
- Get Proactive: Regulators need to monitor social media and online platforms, stepping in before schemes gain critical mass. Early warnings and swift investigations are key.
- Strengthen Laws & Enforcement: The new anti-Ponzi legislation needs teeth, meaning rigorous enforcement, specialized training for the investigators, and faster court processes. Collaboration between agencies (EFCC, SEC, CBN, NFIU) and with international partners like Interpol must be seamless.
- Empower Citizens: Massive, ongoing financial literacy campaigns are essential, reaching people in simple language through channels they trust. Teaching critical thinking about investments needs to start early. May be introduce financial literacy in the primary and post primary level of education.
- Address the Root Causes: Tackling poverty, creating real jobs, and controlling inflation will reduce the desperation that makes people vulnerable.
- Help the Victims: Clearer pathways for reporting fraud and improved chances of recovering some funds are vital for rebuilding trust.
- Hold Enablers Accountable: Banks, fintechs, promoters, and influencers who lend credibility to scams must face consequences.
Stopping Ponzi schemes is essential for Nigeria’s financial stability. It takes strong government action, strict regulations, honest institutions, and, most importantly, vigilant citizens. Ignoring the problem doesn’t just cost billions of naira, it destroys lives and dreams. The first step to change is rejecting the temptation of quick money and demanding accountability, so future headlines tell stories of strength and recovery instead of loss.
