Be wary of these Ponzi schemes

BY: Daily Graphic
Why BitConnect is a Scam and Ponzi Scheme
Why BitConnect is a Scam and Ponzi Scheme

Once again the issue of Ponzi scheme has reared its ugly head in our financial circles and, as usual, it has become an issue in our national discourse.

Some years ago, the scheme was barely known in the country, but it has now gained ground, causing many to lose their investments.

A Ponzi scheme is a form of fraud in which a purported business lures investors and pays profits to earlier investors using funds obtained from newer investors.

 Investors are made to believe that those profits are coming from product sales or other means and are unaware that other investors are the sources of apparent profits.

Over the years, such schemes have assumed different shapes and forms, with some operating as online traders, while others operate in physical structures such as offices.

However, the Director of the Cybercrime Unit of the Criminal Investigations Department (CID) of the Ghana Police Service, Dr Herbert Gustav Yankson, has emphasised that the interests these online fraudsters put out are unrealistic, noting that they are taking advantage of people because the latter do not understand how the scheme works (refer to page 3).

From the examples of Pyram, DKM Diamond Microfinance Limited (DKM), God is Love Fun Club and many others that have happened over the years, with millions of cedis in people’s investments going down the drain after they had been lured into the scheme, we thought that some lessons have been learnt.

Apparently, people continue to patronise such schemes due to sheer ignorance, greed and lack of understanding of the schemes.  

The Mirror, therefore, backs the call by the police for people not to invest with these online fraudsters and financial institutions that run some suspicious operations and give out unrealistic interest rates on investments.

People must also desist from protesting vehemently against state institutions when they want to ensure that the right things are done, as was seen in the case of Menzgold Ghana Limited and the Securities and Exchange Commission (SEC).

We believe that the SEC must be allowed to do its job and not be seen as witch-hunting anybody.

The Mirror also calls for a close collaboration among institutions such as the SEC and the Bank of Ghana (BoG) to track down the activities of these Ponzi schemes.

 There is also the need for continuous public education to create awareness of how these schemes operate and the need to avoid them.

The bigger task lies with us, as a people, not to invest with any financial institution purporting to be offering mouth-watering interests on investments.

 Shortcuts can be dangerous.   

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