Provide investor education for vulnerable groups about Ponzi Schemes – Alex Boahen


The Head of Research at Databank, Alex Boahen, has called for more investor education, on the operations of Ponzi schemes, to be made to the public by regulators.

He stressed that vulnerable groups especially need such education so they better know how to engage the services of such schemes in future.

The Economic and Organized Crime Office (EOCO) had cause to recently issue a caution to the public on the activities of the CHY Mall, under which Chy Century Yue Group Limited, and Sairui E-Commerce Limited operate, on the grounds that they are operating a Ponzi scheme.

“Looking at the regulatory side, I think the SEC has been up to task. They have been very aggressive trying to sanitize the investment environment, but it is always difficult to also do it because some of these companies are difficult to track, but the bottom line is that you must continue to provide investor education for the vulnerable groups; people who don’t really have education in investment,” he noted.

Speaking to Citi Business, he further admonished the general public to be on the look out anytime they are attempting to engage in any form of business with companies.

He added that they can easily do this by weighing the proposed returns on the investments with the general reasonable returns similar investments offer.

“We also have to look at the rate they are promising. You also have to be very careful because those investments that are promising significantly above market return should always raise an eyebrow. Because as it is now, even government’s long-term bonds in Ghana are attracting a yield of around 19 to 20 percent. So, if you have an investment that is offering you a guarantee return of say 30 percent, then you should be careful. So, it is the pursuit of unrealistic investment returns by some investors that lead them to that,” he said.

The Bank of Ghana reports that data available to it shows that in 2018 alone, some 119,300 individuals lost their investments to four Ponzi schemes in the country, totaling over GH¢59 million.

Among those companies were Savannah Brokerage Investment Limited, Bitworld Investments Limited, FX Crypto Trading, and Global Coin Community Help (GCCH).

How Ponzi schemes operate

A ponzi scheme is an investment with various characteristics. First, Operators promise high returns on investments. Secondly, the perpetrators normally mount pressure on victims to invest in their packages.

The companies mostly do not save with banks or have bank accounts with registered names. They rather use victims’ monies for other ventures and businesses as well as the acquisition of different types of properties like houses which are normally not registered in their names.

Although the government of Ghana has announced that steps are being taken to curb the situation, it has insisted victims must take responsibility for failing to do due diligence before investing their money.