IN the light of the predictable crash of the China Beijing Equity Exchange (CBEX), Economy Post has found it necessary to educate readers all over the world on how to identify a Ponzi scheme and avoid it.

Several investors across the world fell for CBEX, which promised to double their stakes, without doing due dliigence. Nigerian investors lost N1.3 trillion to the now-rested Ponzi scheme.

The platform had convinced Nigerians that it deployed artificial intelligence for trading even though this was not confirmed. Like a typical scam, the CBEX platform persuaded investors to part with their money, claiming that it had a physical office in Nigeria. Some individuals even claimed that they were working from CBEX’s Chinese office.

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The platform enticed Nigerians with sky-high returns on investment and even ensured that the first set of individuals got their returns. When it was clear that the company was a Ponzi scheme, it began offering investors $100 or $200 in verification fees to unlock $1,000 or $2,000, respectively.

Financial analysts at that point began warning investors to flee the platform, cautioning that this was a red flag. But investors had little or no option at that time, having lost millions and billions to the Ponzi scheme. The platform has now joined the notorious class of Ponzi schemes in Nigeria such as Twinkas, Mavrodial Mondial Movement (MMM) Ultimate Cycler, Crime Alert Security Network Investment, Zar Fund, Givers Forum, iCharity, Get Help Worldwide, among others.

Identifying a Ponzi scheme

How then does a potential investor identify a Ponzi? According to the finance-focused CFO Hub, “The initial warning sign of a Ponzi scheme is the assurance of exceptional profits with minimal or no risk. A genuine investment typically correlates high returns with increased risk. Exercise caution when encountering investments that guarantee returns or appear too attractive to pass up,” it admonished.

When a platform offers an investor returns that are too good to be true, such as 100 percent yield in the case of CBEX, it is simply a Ponzi scheme. Have you ever heard of the name Charles Ponzi? That is the charlatan and con artist who began this kind of investment scheme. An Italian who operated in the United States and Canada in the 1900s, Ponzi’s tactic was to promise people extremely high returns, knowing that only very few in the world would resist the temptation. Many people fell for it and parted with their money. And they lost all their life’s savings.

Secondly, financial experts have advised investors to always find out the returns of genuine investments before putting their money in any scheme they aren’t sure of. Think about this, when Charles Ponzi set up his company in the US stock market in 1920, he offered to double investors’ money in 90 days. This was when banks were paying only 5 percent annual interest. People avoided banks and flocked to Ponzi’s investment. From initial $5000 investment, the scheme grew to $1 million a day by July of that year. But this eventually led to the collapse of six US banks, including Hanover Trust. Investors lost at least $20 million.

Furthermore, most genuine investors offer returns that are lower than the Central Bank of Nigeria (CBN)’s monetary policy rate (MPR), which is the benchmark interest rate. In fact, no matter where you are in the world, any investment whose returns are higher than the repo or benchmark interest rate should be avoided. In Nigeria, the benchmark rate is 27.5 percent. It is 10 percent in Kenya, 4.5 percent in United States, 4.5 percent in United Kingdom, and 11 percent in South Africa.

To prove this point, as of March this year, the Nigerian stock market returned 3.20 percent. The Nigerian government’s 2-year savings bond this month had a 16.046 percent return on investment per annum, while the 3-year bond attracted 17.046 percent per annum return. Most mutual funds’ returns year-to-date returns hovered between 10 and 25 percent.

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Zedcrest Money Market Fund, which is among the highest in terms of returns, had a year-to-date yield of 24.69 percent. Chapel Hill Denham Money Market Fund returned 23.65 percent between the beginning of 2025 and March 7. These are all below 27.5 percent. Do this in any part of the world you reside before putting money in any scheme.

According to the Securities and Exchange Commission (SEC) of Nigeria, “Ponzi schemes do not appear on our list of people/organisations registered to do investment business in Nigeria https://sec.gov.ng/cmos. They never make legitimate investments or assets sufficient to sustain the promised payouts.

“They require the entrance of new investors to pay existing investors. These new entrants are likely to lose their investment as they will not be able to recoup their investment before the collapse of the scheme. They promise high returns on investment, usually higher than the prevailing Central Bank of Nigeria’s Monetary Policy Rate (MPR). Their promoters are not known to the investing public.”

Also, always watch out those who are promoting it. Are they financial experts or agents? Are they investment gurus or simply social media infleuncers? When social media influencers promote a scheme, please be circumspect. Unless they offer clarity on where the money is invested, please avoid putting your money there. Most influencers and agents are paid to promote even what they know nothing about, But financial experts can hardly promote what they know nothing about as this would even affect their work and capacity to get new clients in the future.