At the 16th Annual Business Law Conference of the Nigerian Bar Association’s Section on Business Law (NBA-SBL) held in Abuja on July 28, 2022, themed “Recent Developments in the Business Law Environment,” Mrs. Anastasia Braimoh, Principal Partner at Laurel Francis & Associates, defined a Ponzi scheme as a fraudulent operation where participants are lured with promises of high, quick returns for minimal effort, primarily by recruiting others to invest.
The conference, attended by public and private sector leaders, regulators, and industry practitioners, featured 11 plenary sessions tackling critical business law issues, including the rising prevalence of Ponzi schemes in Nigeria.
Identifying and Tackling Ponzi Schemes
Mrs. Braimoh emphasized the challenge of identifying Ponzi schemes, noting that even educated individuals, including professors, have fallen victim. She outlined key red flags:
“Ponzi schemes are unregistered, unregulated, and illegal, often only registered as companies with the Corporate Affairs Commission (CAC). They promise unrealistic returns misaligned with conventional investments, use complex structures and jargon, and attract investors with low entry costs.”
She cautioned that legitimate businesses can transition into Ponzi schemes, urging investors to remain vigilant to protect their funds.
Braimoh, who previously served as head of enforcement at the Securities and Exchange Commission (SEC) until December 2021, highlighted the surge in Ponzi schemes, driven by available capital seeking investment opportunities.
She referenced Section 153 of the Investments and Securities Act (ISA), which defines a collective investment scheme as one where multiple investors pool funds into a portfolio, sharing risks and profits. Ponzi schemes mimic this structure without regulatory approval, violating ISA provisions.
Section 67 restricts public investment invitations to authorized public companies, statutory bodies, or banks, making unregistered schemes illegal.
Braimoh noted gaps in the ISA that hinder regulators’ ability to combat Ponzi schemes effectively, calling for amendments to strengthen enforcement.
Challenges in Recovery and Legal Remedies
Okorie Kalu, a panelist from PUNUKA Attorneys and Solicitors, attributed the rise in Ponzi schemes to their perception as a poverty alleviation tool, appealing to Nigerians seeking high returns.
He discussed remedies for victims, stating, “Victims face limited options as existing legal tools were not designed specifically for Ponzi schemes.”
Common approaches include extrajudicial measures like police intervention, administrative complaints to the SEC (especially for schemes that started legitimately), or civil actions such as seeking restitution for unjust enrichment, debt recovery, or Mareva injunctions to freeze promoters’ accounts.
Braimoh revealed that no seized funds have been returned to victims due to lengthy investigation and prosecution processes.
“By the time complaints reach the SEC, most funds are gone. The SEC investigates, refers cases to its police unit, and freezes assets, but restitution awaits court judgments,” she explained.
In some cases, frozen funds are managed by trustees to compile victim lists for eventual disbursement, but delays persist.
Braimoh cited a case where promoters were convicted and imprisoned, but the court did not grant SEC’s request for victim restitution, leaving funds frozen pending further court orders.
Regulatory and Legal Context
The ISA 2007 governs investment activities in Nigeria. Section 153 defines a collective investment scheme as a structure where investors pool assets and share risks and benefits, while Section 67 limits public investment invitations to authorized entities.
Violators of these provisions face legal consequences, but enforcement challenges remain due to regulatory lapses and the complexity of tracing Ponzi scheme funds.
Recent developments underscore ongoing concerns about financial fraud. On May 6, 2025, the SEC warned against investing in schemes like PWAN MAX, Risevest, and Stecs, citing Ponzi-like characteristics.
On June 17, 2025, the Economic and Financial Crimes Commission (EFCC) arraigned Precious Williams for an alleged N13.8 billion Ponzi scheme, while clarifying that another case involving Achimugu was unrelated to prominent figures like Atiku or Sanwo-Olu.
Key Takeaways
The conference highlighted the growing menace of Ponzi schemes in Nigeria, driven by economic pressures and inadequate regulatory frameworks. Experts urged investors to scrutinize investment opportunities, avoid unregistered schemes, and seek legal recourse promptly.
Strengthening the ISA and enhancing SEC’s enforcement capabilities are critical to curbing this financial fraud and protecting investors.
