For the umpteenth time, many Nigerian investors have been thrown into pains and anguish as a result of the sudden crash of a digital assets trading platform — CryptoBank Exchange (CBEX) — widely believed to be a Ponzi scheme. Over the years, not a few of such illegal digital platforms had sprung up, swindled unwary Nigerian investors; and left them losing huge sums in the deal.
A Ponzi scheme is a type of investment scam where returns are paid to existing investors from funds contributed by new investors, rather than from profit earned. This usually creates a false impression of a successful investment, which is used to lure in more victims. The Ponzi schemes often promise unusually high returns, which are unrealistic and unsustainable.
In the CBEX case, investors were promised a mouthwatering return of one hundred percent on investment in just one month. The platform, which gained massive traction among Nigerians with its high returns offer, crashed a few days ago, leaving countless users in financial ruin. Specifically, CBEX, which claimed to use artificial intelligence (AI) for trading in crypto, collapsed last Monday, with an estimated N1.3 trillion lost.
The CBEX experience will be the umpteenth time such a financial crisis would befall unwary Nigerian investors. On March 11, 2025, the Economic and Financial Crimes Commission (EFCC) had issued a list of about 60 Ponzi scheme companies operating in the country. The EFCC warned that investors should stay far away from those fake financial managers.
According to the EFCC, “CBEX is a Chinese digital trading company with no jurisdictional link with Nigeria; and all the area offices that people say are in Ibadan and in some other locations are not functional offices. The entire thing is online,” Dele Oyewale, EFCC’s spokesman said.
On March 31, 2025, President Bola Ahmed Tinubu had signed into law, the Nigeria’s Investment and Securities Act (ISA) 2025, to strengthen the country’s capital market regulation, enhance investor protection, and promote market integrity, transparency, and sustainable growth. The Act repealed the Investment and Securities Act 2007, and introduced several key reforms.
The ISA 2025 expressly prohibits Ponzi schemes and other unlawful investment schemes, prescribing stringent penalties, including fines and prison terms, for their promoters. Under the Act, the Securities and Exchange Commission (SEC) is empowered to impose fines starting at N5 million and prison sentences of up to 10 years, or both, on individuals involved in illegal investment schemes.
While the ISA 2025 empowers the SEC to oversee digital assets, virtual asset service providers (VASPs) and tokenized securities, it also brings clarity to a space that has operated in a legal grey area for years. Indeed, it was a legal lacuna that provided the fertile ground for the mushrooming of Ponzi schemes in the country, until the enactment of ISA 2025.
No wonder, Ponzi schemes have always practically flooded the Nigerian market, operating so clandestinely and surreptitiously swindling unsuspecting investors of billions of their hard-earned money. Just last year, on July 31, 2024, it was reported that Ponzi schemes have defrauded Nigerians of over $1 billion (about N1.5 trillion) in the past one decade.
The most infamous scheme across Africa, Mavrodi Mundial Moneybox (MMM), attracted over three million Nigerian subscribers, who collectively lost about $50 million when it crashed in December 2016. MBA Forex, another Ponzi scheme, defrauded Nigerians of about $500 million when it folded up in 2021.
A number of other Ponzi schemes, including CALA Finance, 6Dollars Investment, Sidra Investment, WealthBuddy, and Compoundly, operated between 2023-2024, embracing the language of DeFi and online finance. They, too, ran aggressive online campaigns, offered unrealistic bonuses, and used fake testimonials before eventually shutting down/disappearing.
It is worrisome that while millions of Nigerians lose huge sums of money each time a Ponzi scheme crashes, many others still embrace the illegal gambling initiative each time one springs up. Somehow, there appears to be a correlation between economic crises and patronage of the Ponzi schemes.
Economic difficulties, such as poverty or unemployment, can lead people to seek quick fixes or get-rich-quick schemes. Also, the prospect of making quick and easy money can be tempting, leading people to overlook warning signs or red flags. Some Nigerians are usually skeptical of formal financial institutions and/or government-regulated investments, making them more susceptible to unregulated schemes.
In the face of the unrelenting galloping inflation in Nigeria, many gullible persons easily take to patronizing the Ponzi schemes as a way of attaining a positive rate of return on their investments. While inflation rate (as measured by the Consumer Price Index, CPI) was a single digit ten years ago (in December 2014), it almost hit 35 percent in December 2024.
This runaway inflationary trend, including a number of government policies, completely rendered the national currency unsuitable as a store of value; or as a standard for deferred payment. So, many Nigerians, including high net-worth persons, avid risk-takers and mere gamblers pander towards Ponzi schemes that offer mouthwatering returns.
As the Ponzi schemes offer attractions to investors, savings in deposit money banks (DMBs) offer little or nothing, as interest — very low single-digit interest rates. Also, while legitimate investments typically come with documentation and transparency, Ponzi schemes often lack these futures — which are attractions to the gullible public.
Apart from very high returns on investment (ROI) usually promised by the Ponzi schemes, many people also patronize them owing to lack of financial literacy. Limited understanding of investment products and strategies can make it difficult for people to distinguish between legitimate investments and Ponzi schemes.
All these are why the CBEX experience may not be the last of the Ponzi schemes in Nigeria. Despite the tight legal framework now provided by the ISA 2025, the underlying conditions and attractions that make many Nigerians easy prey to the Ponzi schemes are yet in place.
It is okay that the EFCC, SEC, Interpol and others have spread their dragnets globally to hook the promoters of CBEX, there is still the need to keep cleaning the Augean Stable that the Nigerian financial market has become. Soon, the current hullabaloo will evaporate.
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