No funds currently due to the merchants are with Flutterwave

Over the years, numerous money-doubling platforms, called Ponzi schemes, have defrauded thousands of Nigerians of their hard-earned money. Nigerians continue to fall victim to these phoney schemes for reasons ranging from economic, financial and even social pressure.

Michael Oladele, the director of the Bank Examination Department at the Nigeria Deposit Insurance Company (NDIC), revealed in December 2022 that during the previous 23 years, different Ponzi schemes and associated crimes cost the nation a minimum of N911.45 billion.

Ponzi schemes, or pyramid sales frauds, are a money-doubling system that operates slightly cyclically by paying existing investors with deposits from new ones. This cycle typically breaks down when there is a backlog of older investors due payments

This was the case with a scheme called Mavrodi Moneybox Mundial (MMM) which entered Africa promising a return of “30 per cent per month” in addition to further, reachable bonuses. The scam reached Nigeria in 2016 and quickly gained popularity before it crashed.

According to Nigeria’s Securities and Exchange Commission, three million Nigerians lost N18 billion in 2016 when MMM failed. These were the fates of Nigerians who decided to ‘invest’ in this misleading money-doubling scheme.

With several suicide attempts due to the failure of MMM, the Lagos State Emergency Management Agency tasked Lagosians to call their emergency numbers if they saw someone attempting to end their life.

However, Nigerians have continued to be susceptible to Ponzi schemes as a way of making money, one of which is the 86Fb scheme.

In 2022, 86FB, a football-focused investment platform that claims to collaborate with William Hill, a major international online gambling enterprise based in London, England, gained popularity in Nigeria. Some of its agents at that time asserted that 86FB operates a reverse betting site where investors can make three per cent of their capital every day (90 percent monthly ROI) if they follow 86FB’s suggested game plan.

All the guarantees of generous returns on investments proved to be too good to be true, as the platform promised ROIs, which quickly enticed many Nigerians.

To gain more customers, they needed a faster way of making and receiving payments among their customers and downliners. Since their business model went against the rules of most licensed and regulated payments platforms operational in the country, the ponzi scheme used a legitimate Flutterwave merchant to process the transactions illegally.

During Flutterwave’s routine Know Your Customer (KYC) check, the company discovered transactions irregular with the merchant’s pattern. Upon further investigation, Flutterwave noticed that the merchant was processing unauthorised transactions for 86FB/86Z. As is consistent with their rules, the payment company treated and settled the transactions in line with regulatory requirements and terminated the account of the merchant.

As a result, the sports betting platform issued a statement accusing Flutterwave of conspiring with the authorities to freeze its account, making it unable to pay investors.

In the wake of the controversies, Flutterwave explained in a statement that it conducted a routine review of transactions and KYC of its registered customers, which exposed the shady activities of the unregistered 86FB/86Z scheme, hence its decision to suspend the platform’s account.

It revealed that some of Flutterwave’s direct merchants were illegally processing transactions for 86FB/86Z without approval from the fintech company.

“During our investigation, we identified direct merchants of Flutterwave who were processing transactions for 86FB/86Z without our approval or authorization to do so on the Flutterwave platform. As a result, we notified the merchants to cease processing and suspended their use of the Flutterwave platform. We also settled all funds due to these merchants. No funds currently due to the merchants are with Flutterwave,” – said the statement.

Flutterwave further explained that:

“Where transactions are done contrary to the registration of a business, we are required to take appropriate actions up to and including termination. For example, if a merchant is registered to sell tomatoes and without approval starts selling cars, the merchant is in breach of our terms of service and regulatory requirements.”

While Flutterwave settled all outstanding funds due to the merchants before termination of account, it would appear that some Nigerians that invested in 86FB/86Z did not get their funds back. Keshinro Seyifunmi, who invested N100,000 in the platform in 2022, told Peoples Gazette on Thursday that he had yet to be paid back since the platform blocked withdrawals in 2022.

A group of over 2000 Nigerians through their lawyer had approached a Kenyan Court, seeking a share of Flutterwave’s funds erroneously frozen by the Asset Recovery Agency (ARA) in the East African country but failing to do so, following the ruling of the Court. While the ARA has withdrawn the case against Flutterwave and the court has cleared Flutterwave of any wrongdoing, the victims of the 86FB Ponzi Scheme have instituted a fresh separate action for the recovery of their funds which they believe are with Flutterwave. Flutterwave has also since sued 86FB/86Z in Nigeria for criminal defamation. The cases remain in court till date.

Source: gazettengr.com

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