SEC warns Nigerians against investment in Loom Ponzi scheme

Many Nigerians are investing money in Loom, but SEC warns that it is a disaster waiting to happen.

The Securities and Exchange Commission (SEC) has warned Nigerians against investing their money in Loom Money Nigeria, a Ponzi scheme that has been causing waves in
 the country.

Two years after the popular MamiDriss World Moneybox (MMM) Ponzi scheme fell with billions of naira lost, Nigerians are beginning to flood Loom, another scheme that
 promises startling returns on investment.

MMM penetrated the Nigerian market in 2015, with more than 2 million people signing up for the scheme by the time it fell in December 2016.

Despite the loss of billions for this scheme and many of its ilk, Loom Money Nigeria is beginning to gain widespread followers among the online community of Nigeria.

However, while speaking at a press conference in Abuja on Thursday, May 16, 2019, SEC's acting Executive Commissioner (Operations) Isyaku Tilde warned the Nigerian public against
investing in the scheme that is not registered in the commission and have no established structures.

He said: "We are aware of the activities of an online investment scheme marked 'Loom Money Nigeria'. The platform embarked on an aggressive online media campaign on 
Facebook and WhatsApp to attract the public investing to participate by joining various groups of WhatsApp to invest N1000 and N13,000 and get up to 8 times the value
 of the investment in 48 hours.

"Unlike the MMM that had a website and the promoter known, the people promoting the Loom are still not known and this pyramid scheme operates through closed groups,
 especially on Facebook and WhatsApp.
"If it were a local Ponzi scheme with well-known offices, it would be very easy for the Commission to seal their offices and freeze their accounts.

"We therefore want to notify the investing public that the operation of this investment scheme does not have a tangible business model, so it is a Ponzi scheme,
 where returns are paid from the sum invested by other people. is not registered by the Commission.

"Please note that anyone who signs up for this illegal activity does so at their own risk."

The SEC disclosed that the Financial Services Regulation Coordination Committee (FSRCC) is struggling to terminate the scheme.

How Loom Works

Loom is a peer-to-peer pyramid scheme that involves people being asked to invest as little as N1000, or N2000, or N13,000 and get up to eight times their worth in
 a short period of time.

The pyramid of the loom is grouped into four color coded levels - purple, blue, orange and red. Whoever is the first to join the group is at the red level, which is
 the central level, and gets paid when the group fills up.

Two people sit at the orange level while four investors fill the blue level. The purple level takes new entrants with eight open points.

Once the eight purple-level dots are filled, the group divides into the upper half and the lower half, while investors at the outer levels move to new levels.

The new groups of seven investors will then have to recruit eight new investors to once again divide the circles into two other groups.

Investors are usually invited to join a WhatsApp group and are advised to get as many investors as possible because the scheme works only if it keeps a steady stream
 of new investors to pay back investors.

The more people are recruited to the group, the faster it breaks down and the faster the payments are to the investors. The initial investment is usually paid to the
 group administrator who is at the red level.

As investors begin to dry, groups take longer to fill, and new recruits lose their investments without any payment. This will only be avoided if there is an endless
 stream of new investors.

Over the years, the Nigerian government has issued several warnings to Nigerians to avoid investing in Ponzi schemes that involve unregistered investments, unlicensed
 sellers, and complex and secret strategies.

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