SEC Vows Crackdown on Ponzi Schemes to Protect Nigerians’ Investments

The Securities and Exchange Commission (SEC) has raised a red flag over the proliferation of Ponzi and pyramid schemes in Nigeria, urging investors and the public to remain vigilant and avoid falling victim to fraudulent investment operations that promise high returns with little or no risk.

Speaking at the Capital Market Enlightenment Programme organized by the Capital Market Correspondents Association of Nigeria (CAMCAN) during their monthly forum held today in Lagos in May 2025, Dr. Sa’ad Abdulsalam, Head of the SEC’s Enforcement Department, delivered a compelling paper titled “Ponzi Schemes: Avoiding the Pitfalls of Illegality”. His presentation offered a sobering flashback to the costly outcomes of such schemes and detailed the SEC’s legal mandate to shut them down.

The SEC’s Regulatory Mandate

Established under the Investments and Securities Act (ISA), 2025, the SEC is empowered as Nigeria’s apex regulatory authority for investments and capital market activities. Key sections of the Act — including Sections 3, 61, 95, 196, and 357 — clearly empower the Commission to monitor, regulate, and prosecute illegal market operations.

According to the Act:

• Only registered entities can operate investment and securities businesses in Nigeria.
• The SEC can enter, seize property, seal premises, and obtain court orders for asset forfeiture in cases of illegality.
• Prohibited schemes, such as Ponzi and pyramid operations, are defined as any structure promising returns from funds paid by new investors rather than actual profits.
• Promoters of such schemes face a minimum fine of ₦20 million, 10 years imprisonment, or both upon conviction.

Dr. Abdulsalam reiterated: “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.”

Ponzi and Pyramid Schemes: A Growing Threat

SEC defines Ponzi schemes as fraudulent ventures that:

• Promise exorbitant returns with minimal risk.
• Use new investor funds to pay earlier investors, creating an illusion of profitability.
• Eventually collapse when recruitment slows down and the money runs out.

Closely related pyramid schemes often entice participants to make money primarily by recruiting others rather than selling a legitimate product or service.

Common fronts for such schemes in Nigeria include:

• Forex and Cryptocurrency “platforms”
• Real estate investment offers
• Agriculture-linked ventures with vague structures
• Online “cooperatives” and peer-to-peer donation programs

Dr. Abdulsalam noted: “These schemes typically lack any genuine business model or value-adding service. Their sustainability depends entirely on new entrants. Once recruitment dries up, the entire structure collapses, and investors lose their money.”

Investor Responsibility and SEC’s Call for Vigilance

The SEC’s mission to regulate a dynamic, transparent, and efficient capital market is anchored in investor protection. The Commission advises the public to:

• Verify registration status of any investment company or offer via the SEC’s official channels.
• Be skeptical of investment offers that guarantee fixed, high returns with no associated risk.
• Avoid schemes that require constant recruitment of others for profit.
• Report suspicious platforms or individuals to the SEC promptly.

The Commission encourages journalists and capital market correspondents to amplify public enlightenment and serve as watchdogs against such financial traps.

The SEC’s ultimate goal remains to develop and regulate a capital market that contributes meaningfully to Nigeria’s economic development. As part of its vision to become Africa’s leading capital market regulator, the Commission vows to intensify its clampdown on illegal investment schemes and protect the hard-earned resources of Nigerian citizens.

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