Why Not Prosecute NAM1? The Menzgold Money Has Gone Already Anyway

We have a warning that a criminal prosecution of NAM1 in the Menzgold case isn’t the way to go – this being an error for the money’s all gone already. There’s nothing left to do except prosecute the person who set the system up. This is just a feature of how Ponzi schemes work. There never is any pot of money left at the end because the entire point of the plan is that incoming investments get handed out as dividends to the earlier investors. That’s the very definition of a Ponzi scheme after all.

So, assuming that Nana Appiah Mensah can actually be found, that he’s not in fact in Dubai beyond an extradition agreement perhaps, then yes, criminal prosecution would be a reasonable option. Do note that I’m saying prosecution, not conviction, that would depend upon the evidence of course.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Member of Parliament for the Effutu Constituency in the Central Region Alexander Afenyo-Markin has cautioned all and sundry that the Menzgold saga must be handled with care in order to get something for the aggrieved clients. He has specifically cautioned against criminal prosecution of Nana Appiah Mensah, the embattled Chief Executive Officer of gold trading company Menzgold Ghana Limited and its directors. According to him, it will not be in the interest of customers to pursue the matter as a criminal matter because they may lose their monies eventually. [/perfectpullquote]

No, for here’s the thing about a Ponzi. The investors have already lost their money. It is gone, dusted, disappeared. This is why it isn’t being paid out to those investors as their dividends and profits, because it’s not there.

A Ponzi is, by definition, an investment scam were excess profits are promised. Far higher than can be achieved by whatever the plan described says will be done with investors’ cash. So, how are those profits actually paid out?

What happens is that the first set of investors are paid their profits out of the revenue coming in from the second set. The second wave get paid out by the investments of the third set and so on. The scheme falls over when there’re no more waves of people to join and put their money in.

Think it through for a moment, NAM1 was promising that Menzgold would pay 10% a month interest/profits/dividends upon gold. A realistic return on gold is perhaps 1% a year. Even that’s not easy but it can be achieved. So, where’s the other 119% of the original investment coming from in that first year? What defines a scheme as a Ponzi is that the second investors’ money doesn’t go into the investment, into the gold. Instead, it’s used to pay out that interest to the first investor. The third investor pays the second and so on. This all works just fine because anyone sceptical can be pointed to the first and second investors who can truthfully insist that they have been paid their 10% a month interest.

This all comes to a shuddering halt when there is no nth investor to pay the profits promised to the n-1 investor, n-2 and so on. Ponzi schemes die when they run out of gullible people to be the new investors.

But why do they die? Because there is no money anywhere. It has all been paid out to the early investors as their profits. Which is why not pursuing a criminal conviction in such cases in order to preserve funds is a bad idea. There aren’t any funds, they’ve already gone, that’s why the Ponzi scheme is failing.

Yes, it’s obvious enough that Menzgold was a Ponzi and the very fact that it was is why there isn’t any money left.