By Barnabas Esiet.
The Securities and Exchange Commission (SEC) has sounded a renewed warning on the dangers of Ponzi schemes, highlighting their devastating impact on investor confidence, financial stability, and the Nigerian capital market.
Dr. Sa’ad Abdulsalam, Head of the SEC’s Enforcement Department, raised the red flag on Thursday in Lagos at the Capital Market Enlightenment forum organized by the Capital Market Correspondents Association of Nigeria (CAMCAN).
According to Dr. Abdulsalam, the proliferation of fraudulent investment schemes continues to erode public trust in formal investment platforms.
“The erosion of market confidence caused by Ponzi schemes leads to significant volatility and reduced investor engagement,” he said, adding that this damages individual finances and tarnishes the reputation of regulatory institutions tasked with protecting investor interests.
Dr. Abdulsalam highlighted that Ponzi schemes promise unrealistic returns and operate outside the regulatory framework, destabilizing investor sentiment and undermining participation in legitimate capital market activities.
The social and economic consequences of Ponzi schemes are far-reaching, with household financial losses intensifying socio-economic stress and threatening community cohesion.
Abdulsalam noted that “these losses represent broken trust, devastated livelihoods, and increased poverty in affected communities.”
Nigeria has a long and troubling history with Ponzi operations, from the infamous Umanah Umanah scheme in the 1990s to Nospecto in the early 2000s and the widespread MMM craze of the 2010s.
Dr. Abdulsalam attributed the rise of Ponzi schemes to several factors, including limited financial literacy, the lure of quick returns during periods of economic hardship, and the rapid spread of misinformation through social media.
To address the threat, the SEC has intensified investor education efforts and strengthened its enforcement toolkit.
Abdulsalam said, “Public warnings and notices have been issued regularly, while the names of registered capital market operators are published on the SEC’s official website to help investors verify legitimacy before committing funds.”
The Commission has also pursued both civil cases through the Investments and Securities Tribunal (IST) and criminal prosecutions in collaboration with the police and the Office of the Attorney General of the Federation (AGF).
The SEC has prioritized interagency collaboration as a core strategy in tackling financial crimes.
Abdulsalam emphasized that Ponzi schemes do not respect boundaries. “Our enforcement must be equally coordinated across regulatory jurisdictions.”
“Through the Financial Services Regulation Coordinating Committee, the Commission is working to establish a unified front in the fight against Ponzi operators.”
The new Securities Act (ISA) 2025 empowers the SEC to monitor, regulate, and prosecute illegal market operations.
Abdulsalam noted that the Act defines prohibited schemes, such as Ponzi and pyramid operations, and prescribes penalties for promoters, including a minimum fine of ₦20 million, 10 years imprisonment, or both upon conviction.
The SEC enforcement unit boss urged investors to exercise caution and verify information before committing funds.
“The law is not ambiguous. Any investment operator or promoter who is not registered with the Commission and invites public funds through fraudulent schemes is breaking the law and will be prosecuted,” he warned.
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