A lot of people may not know Benard Madoff, but his victims would never forget his name. He ran the largest ponzi scheme in the world; a $65bn scam that affected the life of thousands of supposed investors turned victims.
And in 2022, the death of Mavrodi, a Russian Ponzi Scheme owner called Mavrodi Mundial Moneybox (MMM) was greeted with jubilation. His firm had defrauded thousands if not millions of Nigerians and ruined lives.
This led to stringent policies and requirements around such activities in the region and especially in Nigeria. Regulators and Financial institutions took it upon themselves to protect the general public; an example of this being a situation where Paystack and Flutterwave had to shut down a Ponzi Scheme known as Racksterli, before it became bigger and defrauded more victims.
In May 2022, Flutterwave said it suspended a merchant who was processing 86FB/86Z transactions via Flutterwave, without authorization to perform such transactions. Flutterwave had discovered this merchant and its illegal transactions during its regular audit of merchants and found 86FB/86Z sports betting transactions to be a ponzi scheme.
86FB/86Z as a result released a statement on their announcement center on their now defunct website, accusing Flutterwave of ”maliciously freezing all their funds and repeatedly wanting to take the funds as their own.” They accused Flutterwave of cooperating with local Police to blackmail them. They claimed they’re trying their best to protect the rights and interest of every user.
Flutterwave responded, “we are aware of reports by a platform called 86FB/86Z claiming that Flutterwave has been withholding their funds. Flutterwave is not a bank, we are a payment processor and do not hold customers’ funds including those belonging to customers of 86FB/86Z. All transactions passed through the Flutterwave payment platform are treated and settled in line with regulatory requirements,” said a statement posted on the Flutterwave Twitter handle in May of 2022.
Thousands of Nigerians fell victim to the 86fb platform ponzi scheme, losing an estimated over USD 400 Million (N200 billion). Over 2,000 Nigerian victims of the Ponzi, last year attempted to join the suit by the Kenyan Asset Recovery Agency (ARA) against Flutterwave in a bid to get a share in the various Flutterwave accounts frozen by the ARA, for which the payment company has now been cleared of any wrongdoing and their attempt to join failed.
They have since then taken action to bring a fresh lawsuit against Flutterwave, which Flutterwave said they are defending. Flutterwave have also commenced a Criminal defamation suit against the 86FB/86Z ponzi scheme.
86FB/86Z Ponzi Scheme
The scheme claimed it focused on football bets and worked with William Hill to integrate probability and statistics into football to make it comparable to funds and stocks. In the now-offline-website, it said it ran a hedge fund arbitrage business that combines finance and conceptual science to earn stable returns with extremely low risk in sports gambling.
Watchers of the industry had raised alarm about the platform as early as April of 2022 with a user @/ Iamjonado saying that the platform was a ticking time bomb after his investigation.
Another industry enthusiast reacted, “I said this repeatedly to you guys: Flutterwave ain’t a bank nor provide bank account facility so how come can they freeze 86FB accounts?They are only a payment gateway that enables online payment.”
Flutterwave said its investigations unearthed suspicious transactions that were being executed on its platform by its direct merchants without their knowledge or consent. As a result, it told all the affected merchants to terminate the processing of such payments and suspended them from the platform.
As a licensed payments platform, Flutterwave said it’s required by regulations to carry out stringent and routine reviews of all transaction flows through its platform which also involves doing KYC (Know Your Customer) checks on all those merchants that use its network.
A statement from Flutterwave in May, 2022 said it took the decision to terminate 86FB/86Z after it discovered that the said platform did transactions that were contrary to its registered line of business.
It further advised all customers of 86FB/86Z sports betting firm, to direct all their claims and payment issues to 86FB/86Z for resolution.
While 86FB/86Z claims to be owned by City Football Group (CFG) —an Abu Dhabi-based company which owns Manchester City Football Club in England, it is, however, not listed among CFG’s football business investments. CFG only listed Sapphire Sports, Goal Soccer Centres and Esports in its portfolio, neither is 86FB/86Z listed on the partners’ list.
The Nigeria’s Securities and Exchange Commission (SEC) incharge of regulating investment companies in Nigeria had earlier decried the rising trend of ponzi schemes and have pledged support to financial institutions in the fight against these activities. The regulator has also gone forward to shut down numerous companies found to be ponzi schemes.
Regulators, banks and fintechs in Nigeria have continued to follow through with their regulatory obligations to protect the general public from Ponzi Schemes masked as investment companies, as the challenge remains unabated in Nigeria and other African countries.