How to spot a Ponzi Scheme — SEC

The Securities and Exchange Commission (SEC) has launched a fresh campaign to expose the tactics of Ponzi schemes using the China Beijing Equity Exchange (CBEX) as a case study to warn the public and protect investors.

During a special episode of the SEC Nigeria Podcast, co-hosted by Amadou Ajagwala, Frana Chukwuogor, executive commissioner for Legal and Enforcement, explained how Ponzi schemes operate and how unsuspecting Nigerians can avoid falling victim.

She cited red flags to Ponzi Schemes which include unrealistic promises of high or guaranteed returns, pressure to recruit others before profiting, lack of transparency about the business model or how returns are generated and unregistered promoters or platforms.

Ponzi schemes often lure people in with promises of extraordinary returns with little or no risk, usually marketed through flashy social media campaigns and endorsements by online influencers, according to her.

“If someone is offering you an investment opportunity and asking you not to ask too many questions, that’s a red flag,” she warned. “If it sounds too good to be true, it probably is.”

“CBEX promised high returns and guaranteed profits, but it was built on nothing but deception,” Chukwuogor said. “It had no sustainable business model and relied entirely on new investors’ money to pay older ones, which is classic Ponzi behaviour.”

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What SEC is doing to protect investors

As part of its regulatory mandate, SEC enforces strict registration of investment operators, conducts market surveillance, applies sanctions where necessary, and carries out extensive investor education.

“A well-informed investor is a protected investor,” Chukwuogor said while adding that education is key to stopping the spread of financial scams.

To further strengthen its campaign, the commission is launching a nationwide outreach initiative aimed at educating Nigerians in markets, schools, churches, mosques, and other community spaces.

Chukwuogor highlighted the new Investment and Securities Act 2025, which introduces harsher penalties for Ponzi operators and their collaborators. Under the new law, perpetrators face a minimum of 10 years imprisonment, a fine of at least N20 million applies, and recruiters or facilitators of these schemes are also liable for prosecution.

“Many people who get others involved think they’re just helping, but under the law, they could also be charged for facilitating fraud,” she noted.

The commission continues to urge Nigerians to verify before they invest and to always ensure that any investment platform or operator is properly registered with the SEC. Chukwuogor noted that vigilance is key and calls to action, saying, “If you see something, say something,” implying that people should report suspicious investment schemes to the SEC through any of the available channels.