Money Market Reporting Training Day 5: Pyramid scheme is fraud -Says Echebiri .Warns on dangers of digital currencies .Illustrates pyramid scheme with story of monkey merchant

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Money Market Reporting Training Day 5:

Pyramid scheme is fraud –Says Echebiri

 .Warns on dangers of digital currencies

.Illustrates pyramid scheme with story of monkey merchant

By Udeme Clement (reporting from Abuja)

From Left: Kanie Ceesay, with Central Bank of the Gambia, Mr. Alex Ekemenah with Next-Money, Uduak-Obong Inam, with University of Uyo and a female participant from Liberia, at the workshop, in Abuja:

Nigerians and entrepreneurs operating within the West African sub-region have been warned on the dangers of digital currencies and investing in pyramid scheme, as such monetary transactions are not recognised or regulated by central banks within the region.

The Chief Executive Officer, CEO, Centre for Financial Journalism, CFJ, Mr. Ray Echebiri, gave this warning while presenting a lecture on, Incidence of fraud in the money market, at the ‘Strategic workshop on money market reporting for financial analysts’, organised by West African Institute for Financial and Economic Management, WAIFEM, in collaboration with CFJ and sponsored by African Capacity Building Foundation, ACBF, in Abuja.

According to him, “People should be aware that digital currencies are not created, issued or guaranteed by any central bank, even as such currencies are not backed by any commodity, such as gold”.

He warned, “The risks associated with these currencies include the fact that consumers are not protected when using digital currencies for payments. Digital currencies (units or accounts) are not recognised by many central banks. These currencies are not insured by deposit insurance corporations unlike bank accounts. There is no protection, refund rights or redress for users of digital currencies. Customers can lose all their money due to loss or theft”.

A cross section of participants at the workshop:

He went on, “Digital currencies are virtual money, stored in electronic medium called e-wallets and are vulnerable to losses due to loss of password, hacking and virus/malware attack. Loss of the wallet could result in permanent loss of digital currencies held in them”.

He stressed, “The risk is real. In 2013, MT Gox, a Japanese exchange handled 70 percent of all bitcoin transactions but lost 750,000 bitcoins in 2014. It had to file for bankruptcy”.

He explained further, “Due to the negative risks involved, the monetary authorities are saying no to digital currencies. For example, Bangladesh, Nepal, Ecuador, Bolivia, Iceland and Morocco have all banned Bitcoin in their territories. South Korea, a global centre for crypto-currency trading, said it would ban anonymous trading of virtual currencies. China’s Central Bank has barred financial institutions from taking part in digital currency as well as exchange trading of Bitcoin”.

“The European banking authority has banned financial institutions from buying, selling or holding digital currencies. The central banks of India and Mexico have issued a warning on the use of digital currencies. The Central Bank of Nigeria says there should be no buying or selling of digital currencies in Nigeria.”

He informed, “Following the risk associated with these currencies, the monetary authorities have warned that digital currencies are not regulated, not issued by any central authority and are thus exempted from government support”.

Giving more explanation on pyramid scheme, the instructor said, “Nigerians should also be warned about the dangers of Pyramid scheme (also known as Ponzi). Pyramid scheme is fraudulent investment that involves payment of purported returns to existing investors from funds contributed by new investors”.

Using the story of ‘Monkey Merchant’, the lecturer illustrated the fraud associated with pyramid scheme. He emphasized, “If it sounds too good to be true, it cannot be true!  Where is MMM? It has disappeared into thin air! Just the way the money merchant disappeared! At the end, the Monkey Merchant disappeared and all the people who invested in his scheme lost their money”.

More participants on another section of the class at the workshop:

Segment-5 report:

Here is the segment-5 report of this workshop.

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