Did you catch the news last week about the Facebook Fraudster? We woke up to the news that a lady – Imu Ovaioza Yunusa, had been arrested by officers of the Force Criminal Investigation Department (FCID), Abuja for defrauding Nigerians of billions of Naira…yes, billions with a ‘B’!
Yunusa is the founder of Ovaioza Farm Produce Storage Business (OFPSB) and the allegation against her is she claimed to engage in processing, storage, distribution and retailing of farm produce such as garri and plantain, and she convinced thousands of Nigerians to invest in her farm storage business promising investors a huge return on investment, but in the past months, she defaulted, neither paying partners their profits nor returning their capital. She reportedly refused to answer enquiries, and this led to people reporting her to security operatives.
We should state that Yunusa disputes the allegations, her defence is that issues with the Securities and Exchange Commission (SEC) were affecting her business and her ability to send funds out of her bank account. She blames her lawyer who advised her incorrectly stating she did not need to register her business with the SEC.
Whatever the case, if you believe her or you do not, the point of this newsletter is not the guilt or innocence of Yunusa. The point of this newsletter is to talk about investment frauds and what you can do to spot one.
Investment fraud is when an individual obtains money from others promising them guaranteed returns on their investment, but it turns out to be a scam and the individuals lose all their money.
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Just in the last 12 months we have heard of the following alleged investment fraud scams:
The average Nigerian is very wary and often distrustful of everyone around them. That’s why expressions like ‘no loose guard’ are very common.
So, for a country so cautious by default it’s so strange that we continue to hear of so many cases of investment fraud.
In a country where justice moves slow, the odds are if you have been a victim then it is extremely unlikely you will get your money back. Even if the fraudsters are arrested and successfully prosecuted. In 2020, the people behind Bara Finance were arrested, prosecuted and were convicted of engaging in illegal capital market activities and operating an unregistered investment scheme, contrary to the provisions of sections 38, 54 and 67 of the Investments and Securities Act 2007. The court sentenced the promoters to one year imprisonment, but importantly no pronouncement was made by the court on the SEC’s request for the defendants to refund all outstanding monies due to their “investors”. So, they were convicted, but their investors did not get their money back.
So. as with all things, prevention is better than cure. So, what do you do to prevent being defrauded? Two words – Due Diligence.
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100% of all investment scams have these two red flags:
No Regulatory approval – All investment schemes must be registered with the Securities and Exchange Commission. Therefore, if you get an offer to invest from a company, then check with the SEC to confirm if they are registered. You can check here – https://sec.gov.ng/
Abnormally High Return on Investment – all investment scams offer seemingly too good to be true returns. If the returns seem too good to be true, then it’s likely it is a scam. You should therefore request for more information about how they make their profits, if they want your money, they should be able to provide details about their business – ask for everything, and then run it by someone who has financial knowledge, either an accountant or a commercial lawyer, they will definitely know if it’s a scam or not.
So, the next time you or someone you know is offered an investment opportunity that is too good to be true. Take the two-step due diligence test to confirm if it might be a scam.
If you or anyone you know might be a victim of investment fraud, check out our article here about how to make a complaint to the EFCC.
Have a wonderful week,
Best Regards,
Contact Team,
LawPadi