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How Kenyans are losing billions in these “Life-time business opportunities”.

-A multimillion company is urgently Looking for aggressive, self-motivated and industrious individuals to help in digital advertising of the services and products.

-Am Willing to Share With You How you can Earn Ksh. 10,000 Weekly. ASK ME HOW

-Am looking for people to employ. I have a project in Nairobi Kenya and I need 20people to assist me in the project. Anyone interested SMS or whatsapp +254…………

Does that look familiar? I know your answer is an absolute YES.

I totally understand that everyone needs more cash, more income, more time and a much better lifestyle. That's why we all look for money making opportunities.

Unfortunately, those so called “Life Time Opportunities” where some promises you to make, say Sh. 5,000 daily are usually scams.  If you want to invest in those kind of things, be ready to lose all your money in that whole operation.

Kenyans have not forgotten the famous Pyramids Schemes in which some gullible investors — who ostensibly wanted to double their money — lost Sh. 8 billion to various fly-by-night companies. By taking advantage of an unregulated market, they promise very good returns and in a day and end up raking billions through word of mouth and aggressive campaigns.

All these schemes can be classified into Ponzi Schemes or a Pyramid Scheme.

Ponzi scheme.

Ponzi scheme (popularly known as pyramid schemes in Kenya) is a fraudulent investment operation where the operator provides fabricated reports and generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profit of financial trading.

Operators of these schemes can be either individuals or corporations and grab the attention of new investors by offering short-term returns that are either abnormally high or unusually consistent.

Companies that engage in Ponzi schemes focus all of their energy into attracting new clients to make investments. Ponzi schemes rely on a constant flow of new investments to continue to provide returns to older investors. When this flow runs out (i.e. when they are no longer able to recruit new members), the scheme falls apart.

The basic premise of a Ponzi scheme is ‘To rob Peter to pay Paul’.

Typically, Ponzi schemes require an initial investment and promise well-above-average returns. They use vague verbal guises such as “hedge futures trading”, “high-yield investment programmes”, or “offshore investment” to describe their income strategy.

Initially, the operator will pay high returns to attract investors and entice current investors to invest more money. When other investors begin to participate, a cascade effect begins. The “return” to the initial investors is paid by the investments of new participants (money paid by new members), rather than from profits of the product.

Often, high returns encourage investors to leave their money within the scheme, so the operator does not actually have to pay very much to investors. The operator will simply send statements showing how much they have earned, which maintains the deception that the scheme is an investment with high returns.

NOTE: Investors within these schemes often face difficulties when trying to get their money out of the investment.

These schemers try as much as possible to minimise withdrawals by offering new plans to investors where money cannot be withdrawn for a certain period of time in exchange for higher returns. The operator sees new cash flows as investors cannot transfer money. If a few investors do wish to withdraw their money in accordance with the terms allowed, their requests are usually promptly processed, which gives the illusion to all other investors that the fund is solvent, or financially sound.

A wide variety of investment strategies that are typically legitimate have become the basis of Ponzi schemes. Ponzi schemes rely on some esoteric investment approach and often attracts well-to-do investors.

Pyramid schemes.

In a pyramid scheme, those who recruit additional participants benefit directly. In fact, failure to recruit typically means no investment return. They explicitly claim that new money will be the source of payout for the initial investments.

A pyramid scheme typically collapses much faster than a Ponzi scheme because it requires exponential increases in participants to sustain it. 

Economic bubbles.

Economic bubbles are also similar to a Ponzi scheme in that one participant gets paid by contributions from a subsequent participant (until inevitable collapse). A bubble involves ever-rising prices in an open market (for example stock, housing, cryptocurrency or tulip bulbs) where prices rise because buyers bid more, and buyers bid more because prices are rising. Bubbles are often said to be based on the "greater fool" theory.

As with the Ponzi scheme, the price exceeds the intrinsic value of the item.


Cryptocurrencies have been employed by scammers attempting a new generation of Ponzi schemes. For example, misuse of initial coin offerings, or "ICOs," on the Ethereum blockchain platform have been one such method. 

The novelty of ICOs means that there is currently a lack of regulatory clarity on the classification of these financial devices, allowing scammers wide leeway to develop Ponzi schemes using these assets.

Here in Kenya, the Central Bank of Kenya governor, Dr. Patrick Njoroge, has warned those trading in cryptocurrencies that the bubble might soon bust on them.


If a Ponzi scheme is not stopped by authorities, it usually falls apart quickly for one of the following reasons:-

-The operator vanishes, taking all the remaining investment money.

- Since the scheme requires a continual stream of investments to fund higher returns, once investment slows down, the scheme collapses as the operator starts having problems paying the promised returns (the higher the returns, the greater the risk of the Ponzi scheme collapsing). Such liquidity crises often trigger panics, as more people start asking for their money, similar to a bank run.

-External market forces, such as a sharp decline in the economy cause many investors to withdraw part or all of their funds.

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