The Sunday Mail
Tendai Chara
A FEW weeks ago, Zimbabwe, perhaps for the umpteenth time, woke up to news of another group of unsuspecting people who had allegedly been swindled through a Ponzi scheme reportedly fronted by a company called E-Creator.
It is believed the victims were defrauded of more than US$1 million in the four months (April to July) that E-Creator operated.
A Ponzi scheme is a carefully orchestrated venture, where money from new investors is used to pay off earlier ones.
Victims
Harare resident Ackwright Zimbudzana, one of the victims, was left counting his losses after investing in the scheme.
“I had set aside US$3 000, which I wanted to use to pay lobola. My fiancé had warned me against investing in the scheme but I went against her advice. I am now back to square one and chances of recovering my money are next to none,” he said.
For Abel Nkomazana, another victim from the capital city, the scandal is tearing his family apart.
“I borrowed US$10 000 from my brother-in-law. He now wants his money back and I have no clue as to where I can get it,” said Nkomazana, who now regrets investing in the scheme.
Barely days after the E-Creator scam was made public, there were other reports that some women had lost up to US$30 000 to another scheme.
Vulnerable
But what makes people susceptible to falling for the same trick and get-rich-quick schemes over and over again?
Dr Nimrod Ndove, a psychologist, said fraudsters usually have the uncanny ability of reading people’s minds and influence them into making certain decisions.
“Basically, con artists take advantage of economic hardships to defraud vulnerable people. Fraudsters read people’s minds and promise them heaven on earth,” Dr Ndove said.
Archbishop Johannes Ndanga, the grand president of the African Christian Council International, believes those seeking “easy” money are easy targets.
“Those who are being duped will be trying to cut corners and get easy money,” he said.
Mr Brian Kashangura — a former police officer, public prosecutor and a law student at the University of Zimbabwe — said Ponzi schemes offer a get-rich-quick option for people who “want to get paid without doing anything”.
Despite numerous warnings from the police and the Reserve Bank of Zimbabwe, people continue to be duped.
“This is probably because they have an appetite to save and invest,” said Mr Denford Mutashu, a financial expert and president of the Confederation of Zimbabwe Retailers.
“The banking sector should introduce favourable conditions, where the public have trust and confidence in the banking sector so that they come and save their money and get interest,” he said.
“It is sad that people continue losing money to these fraudulent schemes.”
There are growing calls for the authorities to come up with specific laws that punish and deter schemers who prey on unsuspecting members of the public.
Zimbabwe Republic Police (ZRP) national spokesperson Assistant Commissioner Paul Nyathi urged the public to be careful whenever they are investing their hard-earned cash.
“We continue to implore the public to exercise due diligence before making any payments to Ponzi or pyramid schemes purportedly offering quick investment returns,” he said.
Jokes out of tragedy
In recent weeks, the social media has been awash with people who have been creating jokes out of the tragedy in a bid to blow off steam. Among them are victims of the E-Creator scandal.
When news of the scam broke, one victim quickly formed a WhatsApp group called “E Creator Victims”.
With close to a thousand participants, the group was lively, as the supposed victims shared jokes to console each other.
Some of them openly joked about their misfortunes.
One participant said in jest he was a professional psychologist and was offering counselling services for a US$15 fee to those who lost money through the scam.
Some of the members laughed it off, while others were not amused.
History
The Ponzi scheme derives its name from Charles Ponzi (born Carlo Pietro Giovanni Gugliemo Tebaldo Ponzi), an Italian swindler and con artist who operated in the United States and Canada.
He became popular in Boston (US) in 1920 for his arbitrage scheme, which ultimately proved to be a mere masquerade for paying off early investors with the deposits of later ones.
He claimed he would double investors’ money in 90 days through a bizarre plan to buy and resell international postal-reply coupons. These, according to the United States Postal Service (UPS), then operating as the Post Office Department, actually cannot be redeemed for cash.
Ponzi collected more than US$8 million from about 30 000 investors in just seven months, before the scheme collapsed.
While this type of fraudulent investment scheme was not invented by Ponzi, it became so identified with him.
Ponzi served 14 years in prison and was deported from the US and spent the rest of his life vainly seeking ways to provide restitution for the losses of his investors.
Global
Major international Ponzi schemes include the following:
Bernard Lawrence Madoff (US)
Madoff was an American financier, who was the mastermind of the largest Ponzi scheme in history, worth about US$64,8 billion. He was at one time chairperson of the Nasdaq stock exchange. Madoff’s firm had two basic units: stock brokerage and asset management. The Ponzi scheme was based on the asset management business.
Lou Pearlman (US)
Lou Pearlman, the man behind platinum-selling boy bands NSYNC and the Backstreet Boys, was the mastermind of a massive Ponzi scheme. In addition to being sued by the very boy bands he created for stealing money, Pearlman swindled investors and banks out of more than US$300 million on the basis of companies that only existed on paper. In 2008, he was convicted of conspiracy and money laundering, and was sentenced to 25 years in federal prison. He died in 2016 at the age of 62.
Allen Stanford — US$7 billion (US)
Texas tycoon R. Allen Stanford masterminded a 20-year scheme via his offshore bank in Antigua, cheating almost 30 000 investors from more than 100 countries out of billions. The scam involved fake certificates of deposit, and prosecutors accused Stanford of funnelling funds into his personal interests, including real estate and cricket tournaments. In 2012, Stanford was sentenced to 110 years in federal lockup.
Gerald Payne and Greater Ministries International — US$448 million (US)
In the 1990s, Gerald Payne and the leadership at his Greater Ministries International convinced nearly 20 000 investors to hand over millions in a programme that claimed it could “Double Your Blessings”. The Internal Revenue Service began to conduct investigations based on suspicious bank activity and by 2001, Payne was convicted and sentenced to 27 years in jail.
