Ponzi scheme: SEC flags Tofro crypto exchange as fraudulent investment platform

In its mission to eradicate Ponzi schemes, the Securities and Exchange Commission (SEC) has cautioned Nigerians against carrying out investment activities on Tofro.com, tagging the online platform as a potentially fraudulent crypto trading operation. The commission said Tofro does not have regulatory approval to operate in the Nigerian capital market and lacks the license and legal backing to require investment from the public.

According to a public notice issued by the SEC on Thursday, the commission warned Nigerians to avoid the platform, describing its activities as suspicious and indicative of a Ponzi scheme. 

“The commission hereby informs the public that Tofro is not registered by the commission either to solicit investments from the public or operate in any other capacity within the Nigerian capital market,” the notice read.

The commission explained that Tofro’s mode of operation is Ponzi scheme-related, which includes characteristics such as promising unusually high returns, relying heavily on a referral system for payouts, and failing to honour withdrawal requests, which are common red flags associated with Ponzi schemes. It stressed that anyone investing in Tofro does so at their own risk.

“Investigations have revealed that Tofro’s operations exhibit the typical indicators of a fraudulent Ponzi scheme, including the promise of unusually high returns, heavy reliance on a referral system to sustain pay-outs and failure to honour withdrawal requests from subscribers,” it added.

Also Read: Embattled investment platform CBEX resurfaces, launches operation for new investors.

SEC’s Director-General, Emomotimi Agama, reiterated that investors should always verify the registration status of any platform via its official website before investing. He urged Nigerians to exercise caution when approached with high-return investment offers, especially from unlicensed platforms, and that it is crucial to understand the dangers of putting hard-earned money into ventures not registered or regulated by the SEC.

He also warned Nigerians that registration with the Corporate Affairs Commission and the Special Control Unit Against Money Laundering under the Economic and Financial Crimes Commission does not confer legitimacy on any investment scheme operating in the country.

Efforts to eradicate Ponzi schemes 

The SEC and EFCC duo have firmly launched a fight against Ponzi schemes over the past months through blacklisting suspicious Investment platforms and rolling out various awareness campaigns, all to caution Nigerians of being fraud victims.

Ponzi schemes are forms of fraud that lure investors and pay profits to earlier investors with funds from more recent investors. They mislead investors by either falsely suggesting that profits are derived from legitimate business activities (whereas the business activities are non-existent) or by exaggerating the extent and profitability of the legitimate business activities, leveraging new investments to fabricate or supplement these profits. 

A Ponzi scheme can maintain the illusion of a sustainable business as long as investors continue to contribute new funds, and as long as most of the investors do not demand full repayment or lose faith in the non-existent assets they are purported to own.

In addition, Ponzi schemes generally operate by paying returns to earlier investors using funds from new investors, lacking a legitimate revenue source. CBEX and MMM exhibit several of these models, such as unsustainable returns, referral dependency, lack of transparency, withdrawal restrictions at some point, and regulatory flagoff.

In a recent move to mitigate the threats, the EFCC issued a general notice to Nigerians on 58 companies operating illegal Ponzi schemes among which are digital investment platform, Crowdyvest, and agric investment platform, Farmforte. The anti-corruption agency noted that these entities pose as investment companies that orchestrate their fraudulent activities on Nigerians.

In the wake of the newly signed Investment and Securities Act (ISA) 2025 by President Bola Tinubu, SEC warned that the law has empowered the commission to prosecute Ponzi scheme promoters with a sentencing of at least 10 years’ imprisonment or N40 million fine. It reaffirmed its commitment to securing the capital market by ensuring that only fit and proper individuals operate in Nigeria’s capital market, vowing to clamp down on fraudulent activities and protect investors.

The ongoing debate on CBEX fraudulent activity and its re-emergence further reiterates the continued rise of Ponzi schemes. Recall that Nigerian investors on the platform recounted their losses after a sudden block in withdrawal caused various outcries.

Following that, the Economic and Financial Crimes Commission (EFCC) together with the Securities Exchange Commission (SEC), vowed to clamp down on operators and promoters of CBEX, after the collapse led to a loss of about N1.3 trillion in crypto trading that affected over 600,000 Nigerians.