Tackling investment fraud in Nigeria

Investment fraud globally is on the rise and Nigeria is not spared. In our clime, requesting funds from an investor with a promise of overnight appreciation is the norm. The investor only realises the scam after the business brand promising huge returns vanishes into thin air. Absence of reliable data and evidence to authenticate the amount claimed by victims of these Ponzi schemes in Nigeria as losses to the fraudulent business investment group has been difficult to prove as these fraudsters have never come out publicly to state their side of the story.

The issue is this and people need to be aware of it; fraudsters have their clear targets who are mostly those without clear knowledge of how financial systems operate; taking advantage of their ignorance in promising to triple cash assets within a short period of time.

Take the American Elizabeth Holmes, for instance, the first female self-made billionaire and the founder of Theranos which became Silicon Valley’s golden child at some point, expanding rapidly, and raising over a billion dollars in funding, whose investors are now seeking for their money following its collapse. The company crashed down when it became public knowledge that its technology intended for the medical revolution produced inaccurate test results about cancer and diabetes risking public health safety in the process. Holmes is now under trial for massively embellishing the firm’s performance to financial sponsors as a strategy to gain their investment support.

Like the Nigerian investment scam, Elizabeth Holmes targeted people with little or no experience in the financial sector. Her list of investors includes Henry Kissinger (former United States Secretary of State), Jim Mattis (retired Marine Corps four-star general), George Shultz (former United States Secretary of State), Media mogul, Rupert Murdoch, and William Perry (former United States Secretary of Defense).

People in the middle class desperate to increase their wealth are often the target in Nigeria by Ponzi scheme operators with the clear intention of defrauding them.

To avert investment scams, potential investors need to bother requesting for Security and Exchange Commission operating authorisation which is what legitimises capital market operations, and request for financial statements as audited by a reputable audit company to detect whether monthly/annual revenue is understated or overstated.

Knowing how much a company is worth before committing any investment is also important as it demonstrates a clue of how investment can be recovered back in case of heavy loss or liquidation, according to Harvard Business Online. This can be detected through a thorough examination of a transparent book value method if the company has any, using information from its balance sheet or using a discounted cash flow model.

Inquiry into how profit is generated if the company is profitable is also key – this will give room to check for discrepancies as some companies and Ponzi scheme operators tend to overstate profit to attract investors’ money. Theranos as an example inflated its annual profit by 1,000 times; from $100, 000 to $100,000,000.

The integrity and competency of a company’s financial helmsman should also not be ignored. From findings, fraudulent companies find it difficult to recruit a candidate with the grit to manage transparent financial operations and strategy.

Source: Punch

DISCLAIMER: Comments expressed here do not reflect the opinions of FraudXpose or any employee thereof.

1 thought on “Tackling investment fraud in Nigeria”

  1. What is the regulatory body doing about investment fraud ? Are the law enforcement agents ablento stop this kind of fraud before it even starts

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