As a lawmaker, Bernard Atiku (Ayivu County) earns over sh25m per month, a figure way out of reach for majority of Ugandans struggling on the lower rungs of the pay ladder. Yet, four years ago, he lost $50,000 (about sh190m) in a ponzi scam, one would have expected to lure low-income earners, desperately struggling to extricate themselves from poverty.
In an animated debate yesterday, preceding the passing of a motion by the Western Youth MP, Mwine Mpaka, urging the Government to ban all manner of ponzi and pyramid schemes in Uganda, Ayivu and Lydia Chekwel (Kween District), revealed that their experience is a microcosm of the painful experience of thousands of Ugandans. The development comes hardly a week, after Charles Nwabuikwu, a director of Development Channel — a genre of ponzi scheme — was arrested for allegedly defrauding hundreds of Ugandans of colossal sums of money.
Nwabuikwu, a dual Nigerian and British citizen, had convinced thousands of Ugandans that buying from him an I-pad at $200 (about sh750,000), would entitle them to a monthly pay of $100 (about sh370,000); and many fell for the bait. A ponzi scheme is a fraudulent investment scam, promising high rates of return with little risk to investors.
Investors may be led to believe that the profits are coming from product sales or other means, and remain unaware that other investors are the source of profits. Mpaka told the House that a ponzi scheme is able to maintain the illusion of a sustainable business, as long as there continues to be new investors willing to contribute new funds. A ponzi is similar to a pyramid scheme, in that, both are based on using new investors’ funds to pay the earlier backers. One of such ponzi schemes is D9, which was recently closed at the City Centre.
“The temptation to join was simply irresistible. When I went to the office of this company, I found MPs seated. I first invested $20,000 (about sh75m) and then another $30,000 (about sh111m) borrowed from friends, before the whole thing imploded (collapsed),” Atiku said.
Chekwel told the House how she took a loan while she was still a teacher, to join a ponzi scheme, which knocked her back many years when reality set in. Early this year, Bank of Uganda issued a circular warning Ugandans against trading in crypt currencies and other unregulated schemes like ponzi. But the allure of promised returns seem irresistible to many. However, with Parliament’s resolution not binding, but directory to the executive, and the Government will have the final say on ponzi and pyramid schemes.