Members of Parliament (MPs) have unanimously condemned fraudulent investment firms commonly known as Ponzi or Pyramid schemes, which promise high returns with little or no investment.
A motion moved by MP Mwine Mpaka, (NRM, Youth, Western) urged government to ban all Ponzi and Pyramid schemes.
“Unsuspecting investors recruit new people who invest in the scheme. Whereas money comes in, this money is used to benefit the owners of the schemes and those who entered earlier. They usually appear genuine and profitable investments,” he said.
Mwine Mpaka, added that the schemes have robbed Ugandans of their money and that bank accounts of the individuals operating the fraudulent schemes should be frozen.
Hon. Lydia Chekwel (Indep., Kween) said that she too was duped into the schemes and that she even failed to take her children to school.
“I was recruited into this scheme; I got excited and recruited my husband as well. We were defrauded to the extent that we failed to pay children’s school fees. I still have receipts to prove this,” she said.
The Minister of State for Ethics and Integrity, Simon Lokodo, said he condemns the spirit of dishonesty where Ugandans dupe the poor with no shame.
“These people take even the little you have while pretending to help. They exploit unknowing Ugandans who sometimes have become partners of this vice. It’s really a pity,” he said.
The House sitting, which was chaired by the Deputy Speaker, Jacob Oulanyah, noted that a big number of MPs had been victims of fraudulent Ponzi and Pyramid schemes.
The motion follows the recent arrest of the Development Channel Director, Nigerian Charles Nwabuikwu Lambert, who has conned Ugandans of millions of money.
The Nigerian was first arrested on 23rd August 2018 by Kira Road Police as a result of angry employees from various transport companies trying to set ablaze one of the premises owned by Development Channel and also trying to lynch the Company Director Charles Nwabuikwu faulting him over their unpaid arrears.
Richard Kimuli Ssenoga, the head of transporters, told police that, Development Channel had since February 2018 hired a total of 63 PRADO SUVs to ferry various dignitaries around different parts of Uganda promising the owners daily income of Shs150, 000
Upon his first arrest, Lambert paid a sum of 17 million and agreed to pay the remaining balance in a period of 2 months which he failed to adhere to hence accumulating to 213 million Uganda shillings as of today 20th November 2018.
His arrest on was sparked off as a result of a number of unfruitful excuses fed to the angry creditors by the company director hence a consequent response by Jinja Road Police to solve the concern.
What is the difference between a Ponzi and a pyramid scheme?
Pyramid schemes and Ponzi schemes share many similar characteristics in which unsuspecting individuals are fooled by unscrupulous investors who promise extraordinary returns. However, in contrast to a regular investment, these types of schemes can offer consistent “profits” only as long as the number of investors continues to increase. Ponzi and pyramid schemes are self-sustaining as long as cash outflows can be matched by monetary inflows. The basic difference arises in the type of products that schemers offer their clients and the structure of the two ploys.
Ponzi schemes are based on fraudulent investment management services – basically investors contribute money to the “portfolio manager” who promises them a high return, and then when those investors want their money back they are paid out with the incoming funds contributed by later investors. The person organizing this type of fraud is in charge of controlling the entire operation; they merely transfer funds from one client to another and forgo any real investment activities.
On the other hand, a pyramid scheme is structured so that the initial schemer must recruit other investors who will continue to recruit other investors and those investors will then continue to recruit additional investors and so on. Sometimes there will be an incentive that is presented as an investment opportunity, such as the right to sell a particular product. Each investor pays the person who recruited them for the chance to sell this item. The recipient must share the proceeds with those at the higher levels of the pyramid structure.
There are two additional important factors to consider: the only guilty party in the Ponzi and pyramid scheme is the originator of the corrupt business practice, not the participants (as long as they are unaware of the illegal business practices). Secondly, a pyramid scheme differs from a multi-level marketing campaign which offers legitimate products.