A Word. . . 

…what causes these schemes to crash at some point is when too many people or everyone asks for their money at the the same time.

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There’s something many Nigerians are currently involved in, something that not only promises, but more often than not delivers on its promise to increase the financial wealth of its participants (to varying degrees). 

In actuality, the entire thing is a clever ploy by some people to swindle an already poverty-stricken, and money-desperate population out of its money. It’s been called various names, MMM, iCharity, M. Givers, all depending on who’s in charge… Simple fact is that they’re all the same, known as Ponzi schemes to those in the know. A lot of participants are painfully unaware of how the scheme works; the perpetrators of any Ponzi scheme rely on the ignorance of participants or investors in matters of simple Economics. But for those of you who are considering participating or have already invested money in the hopes of doubling or tripling capital as the case may be, here’s a typical scenario of how a Ponzi scheme works:

John borrows #50 from Tolu on Monday with the promise that he will not only pay back the #50 owed, but double the money when paying back, an interest of 100%. John promises to pay the the money (plus interest), totalling a sum of #100 the following Monday. But rather than invest the money in some business in order to make profit, John goes to Kemi to borrow #100, promising her exactly the same thing he promised Tolu, 100% interest to be paid the following Tuesday. John then goes on to borrow money from many other people, promising promising to return the money at a later date, plus 100% interest. 

The following Monday, John pays  Tolu #100 as promised not with his money, but with Kemi’s #100! Tolu is happy and gives him another #50 to ‘invest’  for her.  The scheme goes on and on, and John pays people with money inadvertently  invested in his scheme by others! Frequently, he pockets some money, banking on the fact that there will always be new ‘investors’ with which to pay other ‘investors’. The scheme is also dependent on the fact that everyone will not not ask for their money back at exactly the same time! 

This mini-story best typifies how Ponzi schemes work. What causes these schemes to crash at some point is when too many people or everyone asks for their money at the the same time. It is inevitable, as it is a consequence of the greed of both the ‘investors’ and the organisers of the scheme. 

I have tried my best to explain how a Ponzi scheme works. For the the would-be participants and those currently participating… A word. 

To know more about Ponzi schemes and how they work, you can check out the links below 

https://en.m.wikipedia.org/wiki/Ponzi_scheme

http://www.investopedia.com/terms/p/ponzischeme.asp

https://www.sec.gov/answers/ponzi.html 

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