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HomeExecutive BriefRise of Fraudulent Investment Schemes: Alpha Investment Trust Club under scrutiny

Rise of Fraudulent Investment Schemes: Alpha Investment Trust Club under scrutiny

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By Oludare Mayowa

In 2021, the Securities and Exchange Commission (SEC) reported that over three million Nigerians lost about N18 billion to Ponzi schemes and several other illegal investment schemes, while independent report estimated N254.43 billion was lost to ponzi scheme between 2018 to 2021.

This was just the tip of the iceberg, considering the quantum of money some innocent, naive, and greedy people have lost to various Ponzi schemes year in and year out, which are not reported by the media.

Ponzi scheme operators capitalised on the harsh economic climate to offer unrealistic returns on investment to unsuspecting investors.

While many people are familiar with Ponzi schemes such as MMM, Nupetrco, and pyramid marketing, some operators have also invented ingenious means to lure innocent investors into parting with their money for promises of mouth-watering returns that never materialized.

These illegal schemes deployed online marketing and used innocent people to recuit more victims from family and friends to patronise their schemes with the hope of luring more people into the net and hitting it big.

Named after the 1920s fraudster Charles Ponzi, who promised investors 40 percent returns on their investments in 90 days, compared with 5 percent interest earned in savings accounts, the Ponzi scheme is the oldest and most common type of investment fraud.

In its simplest form, a Ponzi scheme is essentially a pyramid scheme that operates on the basis of ‘robbing Peter to pay Paul’.

The promoter pays the initial investors enormous returns using the investments of later investors rather than from business profits.

Their survival is dependent on a constant flow of new investor money, which, if not found, will result in the ultimate collapse of the entire swindle.

In most Ponzi schemes, the promoter and early investors will make the most money and live lavish lifestyles, whereas the later investors will inevitably lose everything.

One such scheme is Alpha Investment Trust Club, otherwise known as ATIC, is currently in the eyes of the storm as about 33 Nigerians in the diaspora are seeking the intervention of the Inspector General of Police, Kayode Egbetokun, to come to their aid.

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A social media investment club is usually a channel to defraud naive people who are gullible enough to trust their sweat to strangers without conducting due diligence.

From day one, Alpha Trust Investment Club (ATIC) smelled horrid, and this medium followed through as far back as 2020 to investigate the structure behind the scheme.

Messages sent to the promoters were ignored and never responded to, while an attempt to speak to any of the names listed on the Facebook page as administrators of ATIC was rebuffed.

Global Financial Digest followed through with an email inquiry to the SEC to find out if the scheme was registered to carry out the activities being advertised by its promoters.

The SEC came back with a report that declared the operations of ATIC illegal due to the fact that it was not registered to carry out any capital market functions.

By all accounts, the writing was clearly on the wall that this was a fraudulent investment scheme.

While Ponzi schemes can take a variety of forms, they all follow the same intrinsic theme: investors are promised they’ll make a much higher return than can be achieved through any conventional investment opportunity.

The storyline was too good to be true—a fairy tale that ended up like Alice in Wonderland. Though the victims of this Ponzi scheme are seeking justice through the police and the law court, it is doubtful, from experience, that any of the victims of similar schemes in the past have ever found justice.

Such schemes keep evolving with new garments, and fresh victims are attracted to their den while billions of dollars are lost to this fraudulent scheme without regulatory authority doing something to prevent reoccurence.

The Nigerian government needs to step in through its regulatory agencies to establish a proper channel to help the diasporans invest in the country without falling victim to scammers like the promoters of ATIC.

A public-sector partnership with genuine private sector operators could evolve into a multipurpose investment scheme to boost the confidence of Nigerian citizens abroad and encourage them to bring in their funds to invest in genuine schemes.

Such an investment platform would improve confidence in the economy by ensuring that Nigeria receives needed foreign exchange from the diaspora while also helping them to invest in the country.

News such as the ATIC scheme will continue to serve as a major stain on the image of the country if the government fails to do something to curb such occurrences and ensure that registered and well-capitalised firms are encouraged to fill the vacuum being tapped by the promoter of the Ponzi scheme.

Fraudulent people should be stopped by all means, including the deployment of the existing regulations, to prevent them from further damaging the image of the country through such fraudulent schemes.

Those who fell victim to the antics of ATIC must have relied on the so-called reputation of the promoters to commit their hard-earned money into the sinkhole.

One way the government can attract funds from citizens in the diaspora is to float a diaspora bond targeted at financing property for interested parties.

States such as Lagos and other interested sub-regions could also float such bonds to attract diasporans to invest in them.

Housing, farming, and other viable options with a high return guarantee by the sovereign will build confidence and encourage foreign exchange inflow for development.

Rather than allowing our compatriots to continue to fall victim to fraudulent conmen and family members who regard funds from their relations abroad as a bonus and their share of their wealth, the government should establish a reliable scheme to attract funds from Nigerians abroad.

State-owned mortgage institutions could thrive through floating Diaspora bonds to raise funds tied to property investment and ensure the prompt delivery of such schemes in their chosen parts of the country.

(Contact; omayowa@globalfinancialdigest.com; Newsroom: +234 8033 964 138)

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