IT all started on Friday, April 11, as a suspicion when a digital asset trading platform, Crypto Bridge Exchange Smart-Treasures (CBEX), postponed its investors withdrawals.

By Monday, April 14, the funds on each investor’s dashboard have been wiped out. This elicited worries that the platform had crashed. Nigerians who invested their fortune on the platform lost it.

The saga, however, has raised concerns about public enlightenment on things to know or watch against while making investment decisions.

What is a Ponzi scheme?

A Ponzi scheme is a fraudulent investment scam where early investors are paid with money from new investors, rather than from actual profits generated by the business.

It is a pyramid structure where the scheme’s longevity depends on attracting more and more new investors to keep earlier investors’ profits flowing.

Like other similar Ponzi schemes, CBEX operated on the notion of giving its investors a 100 per cent Return on Investment (ROI) in 30 days.

Within the last 10 years, many Nigerians have fallen victim to a series of Ponzi schemes, including the MMM Nigeria, Get Help Worldwide, Crowd Rising, Donation Hub, Lion’s Share and 6Dollars.

So, before deciding to invest as a potential investor, below are critical things to note or watch out for to make the best-calculated risk.

How to identify a Ponzi scheme and protect your investment

Every potential investor must take some steps to ensure that he or she does not fall into the hands of scammers who veil as genuine operators in the financial service sector.

According to financial analysts, the first step is to check whether a company is duly registered and licensed to operate in Nigeria.

While a company may be registered with the Corporate Affairs Commission (CAC) to do business in Nigeria, the company may not have been licensed by the Securities and Exchange Commission (SEC) to carry out an investment scheme or operate as a fund manager.

When any of these is void, analysts say the company may be operating illegally.

Speaking on CBEX, a financial analyst, Patrick Ajudua, noted that the company is an unlicensed investment platform which is neither registered in Nigeria nor Canada.

He pointed out that Ponzi schemes usually come with the promise of a very high return but low risk.

He said the operator offers a tempting 100 per cent return rate on investment within one month and structures the investment in such a way that encourages unsuspecting investors to bring in more participants with a reward system attached to it.

He explained that the Ponzi scheme also tires investors’ claim at maturity to the investment of another person.

How to verify companies on the SEC website

SEC is the apex regulator in the Nigerian capital market and is saddled with the responsibilities, operators, and sanctity of the market.

It provided a platform where all the companies carrying out one investment function or the other can be verified.

Called the Capital Market Operator Search (CMOS), the website provides the names and functions companies operating in the market are licensed to carry out.

The SEC regularly updates its list of registered companies through a multi-step process that includes registration, renewal, and monitoring. This process ensures that only compliant companies are allowed to operate in the market.

To verify the company or scheme, simply type the name of the company on the search bar, and if legally authorised to operate in the market, the name and function of the company will be displayed.

What to know about Ponzi scheme regulation

The recently signed Investment & Securities Act 2025 (ISA 2025) have given more power to the SEC to regulate all virtual and digital assets investment platforms, commodity exchanges and other platforms.

Among others, the Act provides that anyone found operating an unlicensed or Ponzi scheme will be made to pay a minimum penalty of N20 and face a 10-year jail term.

Meanwhile, the Economic and Financial Crimes Commission (EFCC) has launched an investigation into the CBEX crash. With no guarantees, the agency is working towards recovering funds for affected investors.

Experts in the financial sector believe that the SEC should also not fold its hands and allow this massive fraud and loss of investment by Nigeria to go unchallenged, The ICIR has reported.