Dantata Success and Profitable Company – Yes, This Is A Ponzi Scheme In Nigeria

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Whether something’s a good or a bad investment is one thing but whether something’s a ponzi scheme – as we’d suggest Dantata Success and Profitable Company in Nigeria is – is another. There’s really just the one feature we need to be able to declare that it is a Ponzi – the solicitation of investment at excessive returns. The sort of returns that can only be paid out by using later investor’s money to pay off earlier. That being that definition of a Ponzi scheme.

It’s worth recalling that the original one, Charles Ponzi and his adventures in international reply paid coupons, there really was the profit opportunity there. The arbitrage existed even if it was entirely impossible to exploit it in the volume required.

But this, yes, we’ll call this a Ponzi:

Following the closure of a Kano-based Dantata Success and Profitable Company by the Securities and Exchange Commission (SEC) on February 6, 2019, many investors have been plunged into confusion and financial uncertainty. This is as a result of their huge investments in the company, Daily Trust on Sunday gathered. The Dantata Success and Profitable Company is an initiative of Hajiya Basira Dantata. She started the company as a family business where interested members invested their shares for business purposes. The main function of the company is to solicit funds from investors and entice them with good monthly interest for investments, depending on the amount one contributed.

Almost a textbook description of a Ponzi there. It being the solicitation of further investment which is the function of the company.

An insider in the company told Daily Trust on Sunday that it had been into so many businesses, using investors’ money. According to him, the company has ventured into transportation, petroleum, as well as hides and skin businesses. “The company has over 50 trailers that have been transporting goods from Kano to Lagos and some parts of the South. It has over 100 commercial vehicles that have been plying the Kano-Abuja road. It also owns many tricycles in Kano. It is equally operating four filling stations,’’ he said.

All of that could even be true. Even at MMM in Russia there were real businesses underneath the investment scam run by Mavrodi.

The SEC said, “the Company solicits funds from people by enticing them with returns of monthly interest of between 25 per cent to 50 per cent.

And that’s the bit that confirms that it’s a scam. There are two possibilities here. One is that there is no business providing 100% every two months in profit. Sure, running trucks up and down the road might happen but they’re not making that much. Thus the call for investment funds is a scam. Or, alternatively, there is such a business there. The profits are real. In which case, why would you sell that to outside investors at such a low multiple? People are usually pretty happy with a 20% return on their funds a year. This business is offering 600% a year. Why? If you owned the underlying business why would you sell a piece of it at such a low price?

Don’t forget, the capital value of the investment is the inverse of the return on it from the point of view of the seller. Imagine the business really exists. I might be able to sell at that 20% return and gain – just as an example – $100 for a share. If I sell it at a 100% yield then I’m only getting $20 for each share. At at 600% yield then only $3 and a bit per share.

Why would I sell $100 for $3 unless the profits didn’t really exist?

Quite so, we’re happy enough to claim that Dantata Success and Profitable Company in Nigeria is a Ponzi Scheme.