In Brief

• Crypto Ponzi schemes are now explicitly illegal under ISA 2024, with operators facing up to ten years imprisonment and heavy fines.

• SEC Nigeria gains authority to regulate digital assets, freeze scam-linked accounts, and enforce KYC/AML standards on all VASPs.

• Mandatory registration, enhanced investor protections, and global compliance benchmarks lay the groundwork for a secure, innovative crypto market.

Crypto Ponzi schemes have plagued Africa’s ecosystem for years, and recently, Nigeria took a stand and declared war on fraudsters.

President Bola Tinubu officially signed the Investment and Securities Act 2024(ISA 2024), which highlights two critical goals: it brings cryptocurrency into the regulated financial fold. It delivers a powerful, long-overdue blow against Ponzi scheme laws.

The new law, championed by Senator Osita Izunaso, is a comprehensive legislation ready to bring the full force of justice to any unlicensed crypto platforms.

This seismic shift is primarily a response to Nigeria’s history of losses within this space, with the most recent wound being the CBEX Ponzi scheme.

How Does ISA 2024 Combats Crypto Ponzi Schemes?

Currently, in many African regions, when the term ‘crypto’ is mentioned, many cringe at the name, quickly dismissing it as a scam.

Many might think this stems from a lack of understanding about the subject, but Africa has been plagued by fake crypto platforms that promise high returns from small investments.

Nigeria Senate[Photo:Medium]

Nigeria has had enough, and the ISA 2024 law empowers the Securities and Exchange Commission to pursue offenders and fortify protections for genuine investors.

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Its provisions are laser-focused on dismantling fraudulent operations and fostering a secure environment, given Africa’s current pro-crypto trend.

The new framework highlights:

• Criminalising Fraudulent Schemes: The dominance of crypto Ponzi schemes in Nigeria is over, as the Act formally outlaws pyramid schemes, making their operation or promotion a serious criminal offence. Senator Izuno explicitly stated: “It is now illegal to promote or operate Ponzi schemes,” with offenders facing up to 10 years imprisonment and substantial fines.
• Bringing crypto into the Light: The ISA 2024 also provides comprehensive legal recognition for digital assets, Virtual Asset Service Providers and cryptocurrency exchanges within Nigeria.
• Empowering the Regulator: The SEC Nigeria got a job promotion, having the authority to investigate suspicious activities and the ability to freeze accounts linked to scams and shut down illegal operators swiftly. The SEC can now muscle their way into telecommunication companies, forcing them to release subscriber data for investigating potential suspects.
• Mandatory Registration for Crypto Platforms: All crypto-based firms must register as a VASP with the SEC. This will establish various standards of operation, KYC procedures, AML protocols and consumer protection measures. Any platforms that fail will be deemed unlicensed crypto platforms.
• Strengthening Investor Safeguards: The Act highlight the Investor Protection Fund, enhancing its ability to compensate victims of legitimate investment failures within regulated markets. It has also been updated, recognizing capital market instruments such as derivatives and commodities.

Tackling Crypto Ponzi Schemes Head-On

Crypto Ponzi schemes are typically platforms that promise outsized returns by recycling new investor capital to earlier participants, often at the expense of later investors.

Nigeria, Africa’s leading crypto ecosystem, has suffered numerous encounters with such organizations.

Its loss comes from:

• CBEX: ₦1.5 trillion (~$3.7 billion)
• MBA Forex: ₦213 billion (~$522 million)
• Racksterli: ₦147 billion (~$360 million)
• MMM Nigeria: ₦18 billion (~$44 million)

Let’s be honest, especially for those new to the space; the high rate of scams is alarming to appoint many veteran investors who consider it a right of passage.

With the ISA 2024, which brings digital assets under the SEC Nigeria’s purview, it directly establishes elaborate laws against Ponzi schemes.

It provides the regulatory body with an explicit mandate and tools to identify, investigate and dismantle any fraudulent crypto operations.

Izunso clarified that the timing of the law reflects Nigeria’s growing interest in becoming an active participant in the crypto industry. The Senators’ main goal is to help Nigeria achieve its target of becoming a $1 trillion economy by deepening its capital market and embracing financial innovation.

He stated:

We are planning to unveil the Act to the public because there are so many aspects of the law that people don’t know about.

It is through that law that cryptocurrency has been legalized because the SEC can now regulate crypto. In fact, digital assets have now become an integral part of the financial instruments in our country. It wasn’t there before.

In addition, the Act addresses at least four of President Bola’s eight-point agenda.

The requirement for platforms to register creates a clear distinction between legitimate businesses that adhere to SEC Nigeria’s digital asset guidelines and illegal schemes operating in the shadows.

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Under the ISA 2024, crypto exchange registration entails:

• Submitting comprehensive business plans
• Demonstrating anti‑money laundering (AML) and know‑your‑customer (KYC) protocols
• Maintaining segregated client accounts
• Undergoing periodic audits

Building a Foundation for Growth and Trust

By establishing proper Ponzi Scheme laws, Nigeria intends to criminalize deceptive investment operations and integrate digital currencies into its economy.

The effectiveness of ISA 2024 will ultimately hinge on the SEC’s capacity and resolve to enforce its new powers vigorously.

Swift action against existing fraudulent operators, combined with a visible crackdown on new schemes, will send a powerful deterrent message.

Nigeria is taking decisive steps to protect its citizens, rebuild trust in its financial markets, and harness technological innovation for sustainable economic growth.

The message is clear: The Wild West days for scams are over, and the foundation for a secure, dynamic, and inclusive financial future is being laid.