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  • Background to the study

In many places, unregulated investment schemes exist and have caused more harm than good. Deb (2014) observed that ethical values and moral standards are at their lowest ebb in India due to the spread of chit or Ponzi funds in corporate and non-corporate organizations. In ailing economy with high unemployment rate and struggle to make ends meet, undergraduates are prime targets of the operators (Adebumiti, 2016). Several Caribbean states witnessed a spike in similar investment schemes, particularly during 2006–2008 (Carvajal, Monroe, Pattillo & Wynter, 2009).

Such fraudulent venture has been categorized as a white-collar crime. The term white-collar crime was first coined by Edwin Sutherland as a crime committed by a person of respectability and high social status in the course of his occupation (Sutherland, 1940 cited in Sher, 2015; Cliff & Desilets, 2014). The Federal Bureau of Investigation (FBI) describes it as illegal acts which are characterized by deceit, concealment or violation of trust and which are not dependent upon the application or threat of physical force (Desilets, 2014).

In other words, Ponzi scheme is a form of non-violent crime which is usually initiated and coordinated by influential individuals, popular and initially well respected in their respective line of work. It could be any unregistered business platform that proposes abnormal or high returns on investment.

The overall psychology of a Ponzi scheme is corrupt. He relies on lack of awareness to defraud unsuspecting individuals. The Ponzi scheme operators engender support from an ever growing group of investors usually with the promise of consistent high returns on investment (Drew & Drew, 2010). They gain the trust of their victims based on a false message that income is being earned as a result of investment in legitimate assets. This false belief is sustained through a combination of large and/or stable returns to investors and information manipulation by the schemer (Asogwa, Etim, Etukafia, Akpanuko & Ntiedo, 2017; Deason, Rajgopal, Waymire & White, 2015).

Investors who wish to liquidate their investment or seek to draw an income stream are actually paid by the contribution of new entrants. Therefore, the survival of a Ponzi scheme depends on the schemer’s ability to attract new investors who make sufficiently large contributions to sustain high payouts to existing ones. However, a Ponzi scheme inevitably comes to light when the operator flees with the proceeds or liquidity demand of investors exceed his ability to source for new investors that would sustain continued payment of dividends (Benson, 2009; Surendranath & Mark, 2015). The system would thereby crash and investors’ funds disappear. Ponzi schemes have been around in different forms since it was popularized in 1919 by Charles Ponzi. Mr Ponzi’s method has continuously been used worldwide by other ponzi lovers. A popular scheme in the United State was Bernand Madoff in 2008. Nigeria has not been left out and has had her own share of the ponzi experience.

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