If anyone has ever been in doubt that the Menzgold Aurum Utalium deal is a Ponzi scheme, events so far regarding its operation, conduct of its promoter, Nana Appiah Mensah also known as NAM1 and subsequent rigmarole have reflected all the characteristics of a Ponzi scheme. And like all such schemes when all is done and dusted only about 5 to 30 per cent of victims are likely to recover their money.
Sadly, four days to Christmas, there is no evidence that Menzgold depositors have received any or all of their funds.
Kathy Bazoiam Phelps, a bankruptcy lawyer based in Los Angeles, in an interview with Bloomberg said recoveries in Ponzi schemes range from 5 per cent to 30 per cent, and many victims don’t get anything.
While Ghana banking officials familiar with the Menzgold debacle would not speak to journalists about the details of how much the company is holding, conservative estimates by some financial analysts have put the estimated amount of deposits received by Menzgold around GH¢5 billion!
Why Menzgold is a Ponzi scheme
The first sign that Menzgold is a Ponzi scheme is the claim to receive ‘gold’ deposits which it trades on behalf of its clients. The name Aurum Utalium used for the piece of metal that clients bought and was purportedly being traded for them is the name that fake gold dealers use to defraud their victims. Aurum Utalium is actually referred to as fool’s gold.
Secondly, the claim by the company that it is unable to make interest payments to its clients because it has been ordered to stop receiving new clients is exactly another reason it is a Ponzi scheme.
According to Investopedia, a Ponzi scheme is a fraudulent investing scam that promises high rates of return with low risk to investors. It generates returns for older investors by acquiring new investors – similar to pyramid schemes that use new investors’ funds to pay earlier ones.
Thirdly, the dodgy nature of NAM1 and his collaborators is a clear sign that Menzgold is a Ponzi. At the height of the crisis, he made so many false claims to reassure his victims. There was the claim of hiring a ‘top London lawyer’ to contest the case with the Ghana authorities. Then Menzgold made claims of opening branches in New York, London and Nigeria among others to create the impression that the company was being accepted in other parts of the world. However, there are no records to show that any of these ‘international branches’ are in operation. The London branch changed its address soon after it was registered and there is no evidence of any actual business.
The company also made several promises to make payments through victims’ bank accounts, then there was the move it initiated claiming to shift the ‘trading’ online and so on. But none of those ever happened.
Historically in Ghana, victims of Ponzi schemes like Pyram, R5 and some obscure ones when asked how they thought the schemes made so much money to pay them the high interest rates that they paid out, would allude to some story that these businesses traded in high volumes of commodities like rice and made lots of profits, but none was able to show proof of such trading.
In the case of Menzgold, its victims claimed it traded the fool’s gold, Aurum Utalium on the international market on their behalf to make profits from which it pays the very high interest rates – no one was ever able to show proof of that.
A source once said Menzgold also invested in other high interest schemes similar to what it ran, and earned some 40 per cent interest from which it then pays its victims the 10 per cent monthly interest – also without evidence.
The recent letter issued by some employees of Menzgold is another indicator. The employees say the management, led by NAM1 have been keeping everything a secret. Employees of a company shouldn’t be kept in the dark regarding a company’s operations – only a questionable organization would do a thing like that.
The GH¢5 billion estimate
The estimated GH¢5 billion reportedly collected by Menzgold could be plausible because, while the total number of depositors are not known, and the total amount in its possession hasn’t been officially published, some depositors have made claims of having deposited as much as GH¢1.5 million. Indeed, not long before the crisis, a Facebook friend shared the story of a London-based Ghanaian who has issued a cheque of GH¢300,000 to someone to be deposited with Menzgold.
A number of people have been identified who have taken several thousand cedis in loans and others who have deposited their pension – all running into several tens of thousands of cedis.
There are reports in some quarters that a politician has deposited as much as $150,000 in the scheme.
Putting the figures being mentioned in bits and pieces together, makes the GH¢5 billion estimate very likely.
Why hasn’t anyone been arrested?
In all known major Ponzi scheme incidents around the world, the main actors have been arrested and prosecuted, because of the element of fraud in the pattern of business. But why no one has been arrested in Ghana regarding the Menzgold farce remains a mystery.
Some theories could be postulated for that. One theory is that, possibly the security services have the full details of the scheme and therefore, fear that if the perpetrators are arrested, there is likely to be fallouts, including riots.
Another theory is that, they possibly are trying to avoid creating ‘fear and panic’ among victims, as they exercise a certain amount of hope that the crunch would resolve itself.
And there is the theory which suggests that there could be powerful people behind who might have benefitted from the scheme and are possibly protecting NAM1.
Four months ago in September, since the Securities and Exchange Commission ordered Menzgold to halt trading, the company has used different tactics to delay refunding depositors’ funds to them. Everything the company has said and done appear to enable it to buy time. The recent act – when it asked all its employees to proceed on leave appears to be another strategy to buy more time.
The employees, who not long ago stood by NAM1 when times were good for them, have now flipped and are making claims that management is secretly selling off assets, paying off some ‘close friends’ and planning to flee the country.
As Christmas draws closer, for most Menzgold victims, who very likely won’t get back their funds, December 25, 2018, would be the most bitterest Christmas of their lives.
By Emmanuel K. Dogbevi
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