Charles Ponzi
Recently, Nigeria has been taken over by an investment epidemic called MMM. I understand that MMM stands for Mavrodi Mondial Moneybox. So pervasive has this rapid profit investment plan become that there is hardly any family that does not have some investors within their folds. In some cases, an entire family has invested hard-earned cash running into millions of naira – and probably dollars too. Before it recently announced a freeze in transactions, MMM was the rave of the moment as far as investment goes. The buzz was everywhere.
MMM may be a new name in Nigeria but the business strategy on which MMM is structured is not new. It has been tried in Nigeria in the past by the infamous Umana E. Umana in Port Harcourt and Uyo and by several other dubious outfits in Benin and Lagos which the imaginative Nigerian media came to dub as “wonder banks”. Of course, most rapid-profit investment plans are based on the Ponzi Scheme. What is a Ponzi Scheme? To understand what a Ponzi Scheme means, it is better, first, to understand who Ponzi was.
Between March 3, 1882 and January 18, 1949, there lived a man called Charles Ponzi. Ponzi was an Italian businessman and swindler in the U.S. and Canada. His name at birth was Carlo Ponzi but he adopted the English name “Charles” to facilitate his integration into the American society. His other aliases included Charles Ponci, Carlo, and Charles P. Bianchi.
Born and raised in Italy, Ponzi became infamous in the early 1920s as a con artist in North America for his fantastic money-making scheme. Put simply, Ponzi promised clients a 50% profit within 45 days, or 100% profit within 90 days on their investment – an irresistible offer at any time, in any age. Specifically, he offered to help them buy discounted postal reply coupons in other countries and to redeem them at face value in the United States at a time that inflation induced by the 1st World War made it highly lucrative to do so. In reality, Ponzi was only using funds deposited by early investors to pay later investors thereby creating the illusion of a formidable financial base to realize his grandiose investment scam.
Although the Ponzi Scheme became named after Charles Ponzi because it became so identified with him, this swindle predated Ponzi by several years. Charles Ponzi’s scheme ran for over a year before it collapsed, costing his “investors” $20 million. Ponzi may have been inspired by a similar scheme by William F. Miller, a Brooklyn bookkeeper who in 1899 used the same scheme to fleece investors of $1 million. Similarly, Charles Deville Wells, known as “The Man Who Broke the Bank at Monte Carlo” had operated a very similar scheme in France between 1910 and 1911 where, using the alias ″Lucien Rivier”, he set up a phony bank that cleaned out over 6,000 victims.
The success of the Ponzi Scheme is based on a simple strategy. Once the early investors are paid, confidence is built in the scheme. Then the story goes round that the investment is real, that people are being paid the high interests promised. Naturally, a scramble to invest ensues. Even those that were initially skeptical become convinced and people fall over each other to reap from the fantastic money making scheme. Even knowledgeable and responsible men and women who should ordinarily not be easily fooled join up. They lend greater credibility to the scheme by the mere fact of their participation. The story of the fantastic gold mine continues to spread like a bush fire in the Harmattan. Before long nearly everyone is struggling to join the scheme. The founders are overwhelmed with cash from investors from far and wide. The next step is that they launch the exit plan and the bubble bursts.
Every get-rich-quick investment plan ALWAYS ends in a crash and collapse at one point or the other. That is one lesson that people NEVER seem to learn from generation to generation. That, too, is understandable. The famous German Philosopher Georg Wilhelm Friedrich Hegel put it succinctly: “The only thing we learn from history is that we do not learn from history.” Is that true? Perhaps.
Now, to the original question that necessitated this discourse: Is MMM a Ponzi Scheme? Quite frankly, I do not know.
Mazi Ohia, a historian, lawyer and farmer lives in Arondizuogu
