Students emerge as prime targets for Ponzi fraud
This after at least 4,000 students from one university were threatened with expulsion after they diverted their tuition fees worth a total of US$6.5 million into an online Ponzi scheme which has since suspended its operations without explanation.
The management of the scheme, known as Mavrodi Mundial Moneybox, or MMM, sent out a terse statement in December 2016 announcing it was closing temporarily, leaving about 3 million Nigerians, including students, without their initial investments totalling US$570 million.
A Ponzi scheme is a fraudulent system whereby early investors receive quick returns as a result of deposits by later investors.
At Osun State University over 4,000 students were served with notice that they may be expelled from the university if they failed to pay, by the end of February, all outstanding tuition fees. At a time of severe economic recession, the loss of the investment adds pressure on parents, many of who are victims of Nigeria’s massive unemployment rate.
According to local press reports earlier this month, the National Association of Nigerian Students in collaboration with the Joint Campus Committee, Osun State Axis, cautioned the management of the university over its threat to expel the students and have called for restraint.
Following a recent intervention by Rauf Aregbesola, the governor and visitor of the university, it was resolved at an emergency meeting of the university governing council that students involved should pay outstanding tuition fees in three instalments.
Those who pay the first instalment would be allowed to sit for the first semester examinations which commence in the last week of March. However, results would be placed on hold until each student pays the entire fee at the beginning of the next semester.
In February, Professor Labode Popoola, vice-chancellor of Osun State University, summoned a meeting of the university senate, the highest academic decision-making body, to discuss the non-payment of tuition fees by 4,000 students for periods ranging between two and 11 semesters amounting to a total of US$6.5 million. The multi-campus university has a total enrolment of 15,000 students.
Popoola revealed that the State Security Service had been engaged by the university to determine the cause of such unprecedented indebtedness on the part of students, an investigation which revealed the students’ involvement in the Ponzi scheme. According to Popoola, the MMM scheme was introduced into Nigeria by a Russian gambling company.
The senate unanimously decided to condemn the students’ diversion of their tuition fees and gave students four weeks to pay their fees in full or face automatic expulsion.
The issue, although now partly resolved, has sparked concerns from vice-chancellors in other institutions in Nigeria who fear their own students may be tempted by similar schemes. In the case of MMM, it emerged that the scheme networked with student organisations, particularly religious organisations, to market tempting returns on investments.
Some students were recruited and paid handsomely by MMM officials to manipulate others into investing.
A top ranking official of the State Security Service who declined to be identified, told University World News investigations had revealed that on each of the campuses very few students who invested in the scheme harvested large sums of money.
But those who did had their names and faces posted on social media where they appeared in video clips testifying to their enormous returns.
“Since these names and faces are familiar with students in the respective campuses, students were encouraged to dip their own hands into their savings; they went borrowing from their relatives and even some parents were convinced by their children to invest,” said the source.
“When MMM made the sudden announcement of its suspension, stories emerged on social media of affected students having nervous breakdowns. One experienced a stroke. In one university a student committed suicide and left a note stating that he took his life because he invested his father’s pension income into the gambling scheme… the father subsequently died.”
Some academics have accused the Nigerian state of complicity in the MMM scheme and others like it.
Dr Ibrahim Kotoka, political science lecturer at Bayero University, Kano, where he said some of the students had also fallen victim to the scam, the MMM model is “consciously encouraged by the Nigerian capitalist state with the complicity of its international partners”.
“The negative multiplier effects are there for all of us to see. Young naïve students from poor homes have been manipulated into embracing Ponzi lottery schemes, supposedly to get rich without hard work. Nigeria should be expecting very soon a large number of sophisticated thieves, criminals and well-informed thugs that will unleash similar schemes,” he said.
Dr Kayode Adesgun, sociology lecturer at Ekiti State University, accused the “Nigerian neo-colonial state and its agents” of being “part” of the scam and said the government should come to the rescue of these students by giving them an “amnesty bail-out”.
“Those involved should be exposed and prosecuted,” he said.
Professor Kizito Folorunso, provost of the college of humanities and culture at Osun State University, said he is of the view that some of the students who got involved in the MMM scheme did so as a direct consequence of their home training and culture. He said a student from a disciplined family would not dare venture into investing his or her tuition fees in a scam.
Dominant social culture
“The new crazy of blind love for cheap money as part of the current dominant social culture in Nigeria has become a driving value amongst the student population. This sickening trend is a carry-over from the larger society where people don’t care about how some powerful individuals accumulate illegal wealth,” he said.
“These students who patronise MMM are members of this sick society. And they want to join the bandwagon of these dishonest members of the larger society. Some of them also got involved in this scam because they believe that it is an alternative means of escaping from penury and poverty.”
Folorunso said the government should conduct a campaign against “all sorts of scams” in the media. “State governments should ensure that salaries of workers in both public and private sectors should be paid as and when due.
"To forestall the situation whereby students deliberately divert their tuition fees into such a scam, online payment of fees directly by parents should be encouraged and enforced. Government should not only disallow this kind of scheme. It should be outlawed immediately”, he said.
Following a public outcry against the effects of the Ponzi scheme, the National Assembly convened a series of public hearings on the matter.
Obsession for quick profit
Making his submission before members of parliament, Umaru Ibrahim, director of the Nigeria Deposit Insurance Corporation, said: “Despite our repeated warnings about the inherent dangers in investing in a non-registered financial institution such as MMM, some Nigerians with an obsession for quick profit, continued to patronise this scam."
At the end of the hearings, the National Assembly recommended that the Economic and Financial Crimes Commission immediately arrest and prosecute the principal staff of MMM, outlaw their operations and have all monies reimbursed.
While the first two recommendations are enforceable, it will be very difficult for the Nigerian government to ensure that MMM reimburses those who lost their monies because MMM is not registered in Nigeria with Nigeria Deposit Insurance Corporation.