Investment Scheme: Legit Or Scam?

By Barrister Monkey Jacket

Have you ever gotten a message from a friend on Facebook or WhatsApp asking you to invest a particular sum of money which would be doubled in few hours? Or invited by a friend to invest money in a scheme where by the more downliners (i.e interested investors) you bring to the scheme the more your money invested grows like the infamous Mavrodi Mundial Movement (MMM) that operated between 2015 and 2016 and many others alike?  Am sure most of us reading this article have gotten such messages, some received this messages or invitations and ignored it, others received such message and took a step further to investe their monies and are yet to receive the fruits of such investment after so much promises.

The truth is, not all investment schemes are scam (fraud), but then many Nigerians have fallen victim to the schemes which are scam either due to lack of knowledge, or not asking the right questions before  investing their money, and/or lack of proper background check on the company requesting the fund.

According to Investopedia, a ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors. It is a fraudulent investing scam which generates returns for earlier investors with money taken from late investors i.e using new investors’ funds to pay earlier backers and eventually bottom out when the flood of new investors dries up and there isn’t enough money to go around, at that point, the scheme unravels itself.

In simple terms, a company would ask people to bring money into a scheme with intent to double up the fund when others invest, to make the scheme look attractive and genuine, the company actually do pay up the first set of investors who bring fund in, and then eventually japa when many late investors have invested in the scheme. Any investment of this nature is a scam.

There is also another form of investment scheme called a collective investment scheme whereby a company invites investors to invest money with them, with the intent that the company would use such money to invest in other business e.g FOREX, CRYPOCURRENCY e.t.c and then pay back return on investment to the investor from proceeds made from the business. This form of investment is mostly called ‘mutual fund’, ‘hedge fund’, ‘exchange traded fund’ etcetera, etcetera, etcetera.

A collective investment fund when handled by professionally licensed managers are legit, but when handled by a group of people we call ‘Yahoo boys’, then automatically the matter don become scam. Which beg the multi-million dollar question, how can an investor decipher which investment scheme is scam and which is legit? The simple answer is sometimes when it is too good to be true, it is actually too good to be true.

In order to lure in investors, these investment companies advertise sweet and palatable incentives to their investors, promising them heaven on earth like the politicians do when campaigning for an election, all in a bid to get an investor to invest his/her money. To my mind, the one and important role a prospective investor can do to avoid falling into the schemes that are fraudulent, is to do sufficient and robust research before letting your money out of your pocket, simpliciter, my brother, my sister do research, I say again, do research before you invest in any investment scheme.

Check the history of the company asking you to invest your money (how long have they being in the industry), if they have been diligent for so long in the industry, their company profile should be visible on the internet, hear from investors who have invested in the company before you, i.e investors who have had dealings with these companies, they will tell you what is true and what is not about the promises made by the company, thirdly, find out exactly what kind of business they intend to invest your money in be it assets, shares, forex, agriculture, whatever, and do your own personal research on that business so you can have the right questions for the company.

In sum, avoid putting your money in any investment that has the look of a ponzi scheme irrespective of any name it is called, for all ponzi scheme are scam, and for the ‘mutual fund’, ‘hedge fund’ or any collective investment scheme, conduct a research before investing any money or you will have yourself to blame.

Godspeed!

God bless the Federal Republic of Nigeria.

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