Investors Lose Shs 3.6bn to Ponzi Schemes, Says Capital Markets Authority

Capital Markets Authority (CMA), the regulator of capital markets, has advised members of the public to seek investment advice from licensed investment advisors in light of the mushrooming Ponzi and pyramid schemes.

According to Denis Kizito, CMA Director of Market Supervision, Ugandan investors have so far lost about Shsh3.6bn in Ponzi schemes.

He made this revelation on Wednesday, December 6, 2023, during a Journalist’s Capacity Building Seminar held at CMA offices in Kampala.

During the seminar, CMA equipped journalists with comprehensive knowledge and insights on the capital markets industry and shared an overview of capital markets, regulatory framework, investment options and market trends.

Investment fraud

During the seminar, journalists tasked CMA to expound on the issue of investment fraud in light of Ponzi and pyramid schemes that are plaguing the Ugandan economy.

Currently, the Directorate of CID is investigating circumstances under which several victims were defrauded to the tune of Shs5bn by Capital Chicken Limited.

The victims were offered profits as returns through an online investment contract at an attractive interest rate of 40 – 60%.

According to SCP Fred Enanga, Uganda Police Spokesperson, the company is being investigated for operating a business of fund management without a licence, operating without an investment advisor’s licence and obtaining money by False Pretence.

“It is against the above background that we would like to caution the public about other Ponzi Companies in the market, some of which are under investigation by CID in coordination with the Capital Markets Authority,” said Enanga.

These include; Veta Plan, Mall Fund, Great Wealth Youth Platform Africa, Cashmulla, Pio Crypto, Premium Clusters, Contract Kapital and Pacs Capital Limited, among others.

For instance, under Cashmulla, a user deposits Shs17,000, and is encouraged to invite other users and earn a commission from users under them, which is a classic pyramid scheme tactic. The user cannot recover or withdraw their money.

“We wish to caution the public that this is another get-rich-quick pyramid scheme, with the potential of defrauding Ugandans. Year after, different pyramid schemes, change their company names during entry, then offer attractive packages or rewards after gaining numbers, they freeze the accounts and defraud the unsuspecting members of the public,” added Enanga.

He urged the public to always carry out sufficient due diligence and only enrol in investment opportunities regulated by the Capital Markets Authority, or any other relevant regulator.

“In addition, they should seek investment advice from licensed investment advisors, before making an investment decision and avoid being victims of investment fraud.”

CMA intensifies regulatory activities

On September 18, CMA issued a warning to the public on potential losses from investing in Capital Chicken Ltd, The Mall Fund Limited, and Veta Plan Chicken which had not been approved to offer investment contracts to the public.

According to Kizito, the mushrooming Ponzi schemes are one of the major challenges the authority is facing because as more Ugandans seek investment opportunities, they continue to fall victim to investment fraud.

He said they are currently in the process of amending the laws to empower agencies and sensitise the public on safe investment. CMA is also investigating cases of fraud by these Ponzi schemes.

On his part, Joseph Magala, a CMA legal officer who doubles as a Member of the National Task Force on the Ponzi and Pyramid schemes, said the current CMA law empowers them to freeze assets without first securing a court order but the clause is only limited to the offences of fraudulent dealings in securities and insider trading.

Magala, says, unfortunately, they would require a court order first to freeze assets accumulated from Ponzi schemes which delays the process of recovering victims’ money.