This article addresses the genesis of Ponzi schemes, their forms and what we can do to curb it.


I remember when I was young; some of my friends told me stories of how powerful their parents were. Some will come to school and tell litany of lies about their parents.

Notable among these stories hovered around their father owning some big factory.

Their mom working as special assistant to the Minister of Agriculture and their uncles’ trekking America like no one’s business.

In the midst of all these stories, we sat on the same table waiting for the food debris from our seniors and neighbors.

There is always a big difference between possibility and reality.

The reality is that, after working for many hours in the sun, I am more likely to call for water than food immediately.

Food is more sustainable after the exertion of energy in the sun.

However, you need water to restore your system (body) before the consumption of what I call proper food.

A possibility can be that tomorrow the moment you get to the office a nicely pressed letter of the promotion will be dropped on your desk when you are not even due for promotion.

A familiar possibility for most believers is money dropping from the skies onto their laps just as in the days of Moses.

However, this possibility will remain as such until such “believers” wake up.

In the field of business and investment, we have these possibilities and realities.

So today I want to touch briefly on some basic errors we make when it comes to investments.

As explained some time ago, the four key indicators that we need to critically assess before any investing decision are safety, return, time horizon and convertibility.

Out of these indicators, the most important to me is the safety of the investment.


All over the world, there has been the rise and fall of many investing schemes that try to beat the natural progression of returns.

This has come to be known as Ponzi, named after the notorious Charles Ponzi who lured investors with outrageous returns in the 1920s.

History even adds that before Charles Ponzi, there was the “Ladies Deposit” by Sarah Howe in Boston, 1880.

Howe offered her solely female clientele an 8% monthly interest and then later stole the money that the women had invested.

This, therefore, means that these tactics of duping investors are as old as the word itself. However, the question remains, are the investors ignorant or greedy?

I am very sure that at the end of this article, we will know whether it’s borne out of ignorance or greediness!

Running your own business such as a school, hospital, construction, and manufacturing to mention few requires capital and the incurring of operational costs.

You, therefore, charge a margin, which becomes your profit (interest) on your investment.

Investing in shares and stocks comes with the quarterly or yearly dividends, which serve as your interest (profit).

Investing in fixed deposits and government bills come with readily calculated interest, which is known from the outset.

In all three segments above, one is clear in his or her mind as to how the investing institution will make money to pay their returns.

When you invest with a financial institution, you have it at the back of your mind that they will also find someone who needs your money at a higher rate.

Your interest will, therefore, come out of the interest that the one who needs it will pay for.

Analysis has therefore been made that, when you call for a higher rate from the financial institutions, it’s the companies that need loans from these institutions that suffer most in the long run.

This again makes meaning, thus, you mostly rest assured that your investment is secured at least as far as that financial institution complies with the regulatory authority.

Now let’s come to the “juicy” investments which go past the above analogy.

I must say some may be financial institutions who in the quest to win the market will also resort to unrealistic returns just to lure investors.

Some of these institutions take the investments at higher rates with the mindset of going into real estate which gives good returns to pay depositors off.

The difficult situation comes when such properties are not sold on time prior to the maturity of the investments hence, making redemption of funds very difficult.

Beyond these financial institutions are the cunning companies that come with funny and eye-catching names. They come with nicely package theories of making good returns.

They lead victims to believe that profits are coming from product sales or other means. Notable among them are the commodity markets such as gold, diamond, bauxite, etc.

They always start operation without the necessary regulatory permit and when they start gaining grounds apply to wrong bodies who have no connection with their real-time business.

The too good to be true schemes will continue to survive on the back of only two factors.

  1. As long as new investors contribute new funds
  2. As long as most of the existing investors do not demand full repayment

When they start operation, they start with a low margin above the prevailing market rate. However, with time they increase the returns to attract investors usually after 1 year of operation.

That is the honeymoon period which always serves as a sounding trumpet of how sustainable the business has been.

Such schemes always explain their source of returns with unclear and vague terms such as hedge futures trading, high-yield investment programs, offshore investment, sustainable international business, gold collectible investments, etc.

How many of these investors even have time to google the full meaning of these words.

The moment they start increasing their rate exponentially, then they try to fortify their business by bringing on board superstars across the entertainment industry as brand ambassadors. Sorry if this story sounds familiar!

These ambassadors come in to add more weight to the scheme.

In some cases, these stars just take their huge signing-on fees and never really engage themselves in the actual work aside from their faces on billboards and intermittent appearances at the opening of their branches.

This brings them to the next step of having a lot of bloggers and media guys on their payroll to suppress any negative news around the business.

These steps can sustain the business for up to ten years in some instances until the two pointers I mentioned above the strike.

The regulatory authorities also step in sometimes to restore sanity in their business after many months of investigation.

The funny aspect of these schemes is that the operators always try to minimize withdrawals by offering new plans to investors where money cannot be withdrawn for a certain period of time for higher returns.

They always start with a legitimate investment vehicle but fabricate false returns along the line.

Let’s are wise and financially educated when it comes to investment.

Any return that is too good to be true is FAKE!

If it collapses on you, it will do on your friend. Let us not encourage it at all when it starts!

Authorities should also be on the lookout for these schemes and issue quick publications.

Anyone who engages after these publications will then be seen as greedy.

Else, we will continue to punish the many who have little or no knowledge when it comes to investment against the few who are greedy.

A word to the wise is always ENOUGH!







Patrick Baah is a chartered banker with over 5 years experience in main stream banking having worked in various capacities. He is currently at the Branch Manager Position of his institution. He has been a qualified member of the Chartered Institute of Bankers, Ghana with a good membership standing since the year 2013. He also holds EMBA and BA from Kwame Nkrumah University of Science, Technology, and the University of Ghana respectively. Patrick is the originator of the daily epistle dubbed “Savings Tip of the Day” which has been running for over a year on WhatsApp and Facebook. Patrick has also been teaching on the Topics Savings, Investment and Financial Independence for over 2 years and a research fellow for ILAPI Ghana. He runs a financial channel on Youtube by name “Patrick TV Gh” and has appeared a couple of times on the business segment of TV3 News 360. Patrick is into youth facilitation and counselling. I can be contacted via and or 0243984492.


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