A supposed lawyer and a member of the popular Ponzi Scheme has written an open letter written to the Securities and Exchange Commission, SEC to defend the scheme.
While the lawyer profusely defended MMM, the letter shows that he is a member of the popular Ponzi Scheme. The letter is apparently written as a follow up to the news about SEC warning Nigerians to stay away from MMM and its rumoured collapse in Zimbabwe.
CHALLENGE TO EXAMINE THE EVIDENCE AGAINST MMM – AN OPEN RESPONSE TO THE WARNING OF THE SECURITIES & EXCHANGE COMMISSION OF NIGERIA
In the news recently Securities & Exchange Commission in pursuance of their statutory duties issued a well-intentioned but I dare say misinformed warning to the general public about MMM being a Ponzi scheme and most recently making the news rounds is the purported report of the warning of Central Bank of Nigeria against the activities of MMM which was penned by one Obinna Chima of ThisDay newspaper on the 14th September 2016 edition. First as an aside, the CBN never issued a categorical statement against MMM. In fact, the quoted statement of its acting Director of Corporate Communications, Mr. Isaac Okoroafor never referred to MMM. The only mention of MMM was the subjective and unsubstantiated opinion of ThisDay newspaper’s reporter. CBN’s warning was against “wonder banks” and “deposit money institution” in other words CBN was warning against patronizing institutions that physically seek deposit of funds in a central account (or any account subject to their control) on the promise of high yield interest rates nothing more ( Here is the link to the original report athttp://www.thisdaylive.com/index.php/2016/09/14/cbn-warns-nigerians-against-investing-in-wonder-banks/ for you to read it for clarity).
Consequently, I will not burn intellectual fuel in analysing the ostensible false warning attributed to CBN. Now to the SEC warning. As a legal practitioner of many years standing and as a prudent ordinary citizen like any other reasonably informed person my curiosity was pricked by SEC’s warning against MMM and that has led me to seek to understand the facts that will aid a reasonable conclusion. In my view the pertinent questions begging for answers are Who or what is MMM? Why are its activities illegal? And the what are the evidence proffered by SEC to support their allegation and disclaimer?
Permit me I shall proceed in the manner of my training to examine the relevant facts. To arrive at a just determination of the issues raised it is pertinent to examine the statement of SEC and their supporting evidence or proof of culpability and then deconstruct the activities of MMM to see if it is guilty as charged. I will quote SEC’s statement:
“The attention of SEC, Nigeria has been drawn to the activities of an online investment scheme tagged ‘MMM Federal Republic of Nigeria (nigeria.). The platform has embarked on an aggressive online media campaign to lure the investing public to participate in what it called ‘mutual aid financial network’ with a monthly investment return of 30 percent. “The commission hereby notifies the investing public that the operation of this investment scheme has no tangible business model hence it’s a Ponzi Scheme, where returns are paid from other people’s invested sum. Also, its operation is not registered by the Commission. “The general public is hereby advised to distance themselves from this online scheme. Please note that anyone that subscribe to this illegal activity does so at his/her own risk.” (underlining mine for emphasis)
What is noteworthy is that MMM the subject is described as an online investment scheme, a mutual aid financial network which promises a monthly investment return of 30 percent. Note the reason SEC declares it illegal is that the unlicensed online investment scheme has not tangible business model hence it is a Ponzi scheme where returns are paid from other people’s investment. First it important to state that a monthly return of 30 percent on an investment is not illegal. So what makes the activities of MMM illegal under SEC’s regulatory purview? Simple. It is operating an unlicensed investment scheme with no tangible business model. So the question is, is MMM an investment scheme subject to registration with SEC? only an examination of the activities of MMM can reveal the answer so let’s examine MMM.
MMM describes itself as a voluntary union or association of persons voluntarily providing financial aid or donating their spare money to one another with no obligation on the receiver’s part to pay back. Participation in the community does not give rise to a lender and borrower obligation. As an incentive to encourage the “voluntary giving or donation” the community rewards the giver with a 1 percent daily interest which accumulates or grows for 30 days hence the promise of 30% return. MMM operates no central structure or bank account to collect money. In fact, money is never paid to MMM, participating members directly pay the money to one another. MMM merely provides the platform and rules for such engagement and gets nothing in return because it is an ideologically based “people movement” organization which leverages on the power of freewill community giving as a gateway to financial freedom from the established financial institutions which propensity is to favour only the rich.
Of significant note is that MMM clearly and explicitly warn participants on its site to only participate with their spare money (money they can afford to lose) as they stand the risk of losing all. and that there are no guarantees whatsoever as no member is under the obligation to repay any donation and MMM fully discloses that the expected 30 percent reward for donations is gotten from old satisfied members who continue to give or donate and also from the donations of new members joining the community nothing else. It states clearly that there no investment or any relationship with the capital market, no goods or products to sell, no obligation to refer or bring anyone to join and no requirement to make any number of donation. Nothing, just people giving each other money with no guarantees. SEC’s charge that MMM pays returns “from other people’s invested sum” with respect is ignorant and stems from a lack of understanding the workings of MMM. No participant is under any illusion as to how the 30 percent is obtained. It is from participants. Take it or leave it.
I will now address the pertinent issues sequentially as they arose in SEC’s statement.
First, it is important to note that the word “investment” has a technical meaning apart from the everyday ordinary meaning. Though under Investments & Securities Act 2007 the term “investment” was never defined the Second Schedule, Section 304 of the Investments & Securities Act 2007 however it stipulated broad categories and registrable activities like shares, stock, bonds, government and public securities etc. that constitute investment business in Nigeria. On the allegation of operating an “online investment scheme” I do not see how any of the activities of MMM which is essentially freewill giving described above fit under any of the categories or activities under the Second Schedule of Investments & Securities Act 2007. I must say no matter how broadly interpreted this section cannot co-opt or designate “freewill or voluntary donation or giving” as an investment. It will be most absurd and illogical. For academic postulation sake, assuming without conceding the least that MMM activities can be described as an investment under Investments & Securities Act 2007 it is even doubtful if SEC’s has the powers to regulate an “online investment scheme” whose computer server or origin is based outside Nigeria. It will be a legal nightmare and a complex watery grave of conflict of laws to navigate even for the best legal team.
Secondly, on the charge that its operation is not registered by SEC, I must say that SEC lacks the power to registered or regulated online investment schemes. However, MMM as a voluntary association of whatever complexion whether as a mutual aid society or a social network of financial aid (call it whatever you like) is guaranteed the freedom of association under the 1999 Constitution of the Federal Republic of Nigeria (as amended) thus the requirement to register with Sec is non-sequitur, it’s a none starter. It is irrelevant where MMM engages in a non-regulated activity like voluntary donation among members. Members of MMM also have the freedom and indeed the right to own and dispose of their property which include their money in whatever manner they deem fit. This is a right to private property guaranteed by the 1999 Constitution (as amended). And to the best of my knowledge it is not illegal under Nigerian Law to give or make a donation of your money to a charitable cause or to any cause not explicitly declared illegal and you don’t need a license for that, thus it will be futile to label the freewill giving in MMM illegal.
Thirdly, on the charge of MMM being a Ponzi scheme, let juxtapose the features of a Ponzi scheme and the activities of MMM. A Ponzi scheme in essence is a clever investment scheme which lure people to invest in a supposedly legitimate business with a promises a high yield interest rate for the investment. In a Ponzi scheme the scam artiste relies on the inflow of cash to its central account from new members to satisfy old members and to maintain a façade of prosperity in order to continue entice new members. This in the long run is unsustainable and he disappear with the cash leaving people broken. Note that in a Ponzi scheme members trust and give their money to “investment guru” to make them more money from opaque transactions. In all instances of Ponzi schemes there is a central account where money is paid to (show me one that does not have a central account?). This makes it easy for the scam artiste to bail with the money of members. In MMM members are told clearly that there is no investment or any relationship with the capital market, no goods or products to sell, no business to invest in, no obligation to refer or bring anyone to join MMM. Nothing, just people giving each other money with no guarantees. There is no central account to pay money to. Members directly share their money with each other. Members understand that money is gotten from but old and new members donating. Nothing more. Nothing less. What can be more transparent? Member of MMM knowingly and willingly accept he associated risks of their participation. Now I ask how is this a Ponzi scheme? It is not. Yes, MMM defies logic but that does not make it a Ponzi scheme. If it is, SEC failed to provide the damming proof. A mere wishy-washy warning statement does not cut it for a serious minded regulatory agency like SEC.
Another important consideration is who is complaining? It is hard not to notice the comments online which typifies the wave of support MMM enjoys from millions of Nigerians who are benefitting from it.
SEC’s perception of the organization is fundamentally flawed as it erroneously describes MMM as an investment which it is not. The activities of MMM described above does not fit under any of the categories or activities under the Second Schedule of Investments & Securities Act 2007. I vaguely suspect SEC never carried out any proper investigation of the activities of MMM before rushing out a warning statement. It must have been manipulated by some overbearing interests whose jobs are being threatened by the ideology of MMM which is catching on like wildfire.
I know that in this discourse only time and superio r proof can be the final arbiter but before then SEC don’t sell me your reputation. I am a man of full baseless accusa intellect. Take tions on the platter of your it from me MMM is not a scam. It is a revolution. I stand to be counted me as a member.
Signed 17/09/20 1 6
Ataguba S. Aboje, Esq