The Securities and Exchange Commission (SEC) on Thursday raised alarm over the activities of a group it described as "online fraudsters, who are currently running an online investment scheme tagged 'Loom Money Nigeria."
The Acting Director-General of the SEC, Mary Uduk, told journalists in Abuja that "Loom Money Nigeria" has since taken over social media by targeting young people to participate in an illegal Ponzi pyramid scheme.
Ms Uduk spoke through the Acting Executive Commissioner (Operations) of the SEC, Isyaku Tilde. She said the fraudsters use social media platforms like Facebook and WhatsApp to lure unsuspecting victims.
According to the SEC DG, the group lures young Nigerians into investing as low as N1,000 and N13,000, with a promise of getting as much as eight times return for value of investment within 48 hours.
Ms Uduk, who described 'Loom Money Nigeria' as a Ponzi scheme and 'a looming danger' to Nigerians, said the venture has no tangible business model, as returns are expected to be paid from other people's invested funds.
"We are aware of the activities of an online investment scheme tagged 'Loom Money Nigeria'. The platform has embarked on an aggressive online media campaign on Facebook and WhatsApp to lure the investing public to participate by joining various Loom WhatsApp groups to invest as much as N1000 and N13,000 and get as much as eight times the value of the investment in 48 hours.
"Unlike MMM that had a website and the promoter known, promoters of 'Loom Money Nigeria' are not yet known.
"This pyramid scheme operates through closed groups, mainly on Facebook and WhatsApp. If it were a local Ponzi scheme with known offices, it would be very easy for the Commission to seal their offices and freeze their accounts.
"We, therefore, wish to notify the investing public that the operation of this investment scheme has no tangible business model, hence it's a Ponzi scheme, where returns are paid from other peoples' invested sums. Also, its operation is not registered by the Commission," she said.
The official advised the general public to distance themselves from the scheme, warning that anyone who subscribes to this illegal scheme does so at his/her own risk.
She also assured that an inter-agency committee, Financial Services Regulation Coordinating Committee (FSRCC) is collaborating with security agencies to track the group and shut it down.
A Ponzi scheme is an investment fraud involving the promise of payment of attractive returns to existing investors from funds contributed by new investors.
The Loom Pyramid Scheme is not new to the world. Last month, Daily Mail UK reported that the scheme 'resurfaced' online all over the world.
The scheme comes in the guise of different names such as 'Loom Circle', 'Fractal Mandala' and 'Blessing loom'.
In Nigeria, its central name is 'Loom Money Nigeria', with individuals creating their own WhatsApp groups such as 'Jack Loom', 'Catherine Loom', among others.
The collapse of MMM, another Ponzi scheme in Nigeria a few years ago led to a national outcry by some Nigerians who lost their investments.