Adnan Adams Mohammed
Several state regulatory and law enforcement institutions have cautioned the public against activities of some investment and network marketing companies in the country.
The Security and Exchange Commission (SEC), Economic and Organized Crime Office (EOCO), Bank of Ghana, Ghana Investment Promotion Center (GIPC) and the Security Agencies have all had to come out to caution the public against the flourishing and widely spread ‘ponzi schemes’ in the name of ‘smart investment’ promising higher returns as compared to other genuine investment returns.
EOCO, last week, issued a caution to the general public against dealing with Chinese Companies; Chy Century Heng Yue Group Limited and Sairuir-Commerce Ghana Limited, claiming they are operating Ponzi schemes.
“The Company which is registered as online trading and marketing services also solicits and takes/receives funds through investment packages from its customers with a promise of guaranteed returns/margins of various percentages over a fixed short period of time”, EOCO said in its statement. Noting that, “The Company operates a Ponzi/Pyramid scheme and the general public is cautioned to desist from investing and patronizing Chy Mall.”
“Therefore, anyone who transacts business with them does so at “their own risk”, It cautioned.
Commenting on the development of the nefarious investments companies, Deputy-Director General of SEC, Mr Paul Ababio said in an interview that most of these companies are operating fraudulent schemes.
Mr Ababio noted that “Network marketing has often been affiliated to pyramid schemes.
“It is a pyramid, so the guys are at the top then everybody below it is making less and less. And the last people inside it often times, put in quite a lot and don’t get much out of it.”
“It is like, you are getting at one level and when you recommend other people you get what they call day out. In a sense, those who are recommending other people are also expected to be selling some goods but the more people they recommend the more money they make so they may not actually be selling the goods themselves.”
“So, there is a combination and often times you might find that they operate with similar principles because the underlining item is what are you selling.””
In this regard, the Head of Research at Databank, Alex Boahen, has called for more investor education, on the operations of Ponzi schemes, to be made to the public by regulators.
He stressed that vulnerable groups especially need such education so they better know how to engage the services of such schemes in future.
“Looking at the regulatory side, I think the SEC has been up to task. They have been very aggressive trying to sanitize the investment environment, but it is always difficult to also do it because some of these companies are difficult to track, but the bottom line is that you must continue to provide investor education for the vulnerable groups; people who don’t really have education in investment,” he noted.
He further admonished the general public to be on the look out anytime they are attempting to engage in any form of business with companies.
“We also have to look at the rate they are promising. You also have to be very careful because those investments that are promising significantly above market return should always raise an eyebrow. Because as it is now, even government’s long-term bonds in Ghana are attracting a yield of around 19 to 20 percent. So, if you have an investment that is offering you a guarantee return of say 30 percent, then you should be careful. So, it is the pursuit of unrealistic investment returns by some investors that lead them to that,” he said.
The Bank of Ghana reports that data available to it shows that in 2018 alone, some 119,300 individuals lost their investments to four Ponzi schemes in the country, totaling over GH¢59 million.
Among those companies were Savannah Brokerage Investment Limited, Bitworld Investments Limited, FX Crypto Trading, and Global Coin Community Help (GCCH).
A ponzi scheme is an investment with various characteristics. First, Operators promise high returns on investments. Secondly, the perpetrators normally mount pressure on victims to invest in their packages.
The companies mostly do not save with banks or have bank accounts with registered names. They rather use victims’ monies for other ventures and businesses as well as the acquisition of different types of properties like houses which are normally not registered in their names.
Although the government of Ghana has announced that steps are being taken to curb the situation, it has insisted victims must take responsibility for failing to do due diligence before investing their money.
