RACKSTERLI: HOW NOT TO BE SCAMMED

Kevin Onuegbu

The week that followed the crash of Racksterli was very traumatic for many Nigerians who had invested a chunk of their savings into the Ponzi scheme. It was a period of great depression. A certain young man committed suicide after he verified the rumoured crash to be true. Scores of students, workers, investors went online to wail their woes. All hell was let loose.

As unbelievable and unrealistic Racksterli seemed to me, it shocks me to later find out that over three hundred and sixty-two thousand brains fell for that sham in Nigeria. And this makes me begin to imagine how incredibly smart and gullible Nigerians can be at the same time. Given that the same gullibility made thousands of ‘smart’ Nigerians fall for MMM and a host of other Ponzi schemes that all ended in tears. Lessons not well learned after all.

While a few Nigerians put the blame on themselves ( I like to call them the bold ones), the others lamented that it was the endorsement of Davido that made them entertain the idea of Racksterli without submitting it to reason. And this further shakes the hitherto quiet table of the Nigerian culture of hero-worship and deification of celebrities as it is incredibly ludicrous to think that most Nigerians fail to make a clear-cut distinction between fame and wisdom, prompting them to swallow whatever their deified celebrities say or recommend hook, line and sinker. Unmindful that celebrities are not necessarily more knowledgeable than their fans, they just happen to have more money and fame and are equally flawed. Indeed, our psyche has been dealt with by so much mediocrity in our society. Such that it is a norm for most Nigerians take things without questioning.

In this article, I will be highlighting some tips that you might have to keep avoid falling when another sham surfaces.

Do not invest in a business not regulated by the SEC (Security Exchange Commission).

The SEC is the main regulatory institution of the Nigerian capital markets. So any standard public company, which is not a Ponzi scheme, must be recognized by the SEC. However, this does not mean that all businesses or companies not regulated by the SEC are shams. Some are genuine but it does pay to always have this in the back of one’s mind that a public business or venture that is regulated by the SEC has aced the final bar exams of authenticity. Therefore it is advisable to always verify whether a public company is registered with the SEC or not. And visiting the SEC website (www.sec.gov) is the best way to go about it.

No business is too big to fail

This is where most people get it wrong as some Nigerians commented that they were moved to invest because of the large membership Racksterli pulled. They had this misconception that because a business has thousands of people investing in it or has been around for a while, therefore has indirectly taken on an infallible status. To give an example; for decades, General Motors, Chrysler and Ford were known as “the big three”. They were the top leading competitors among American car companies. However in 2009, General Motors and Chrysler both filed for bankruptcy and only survived due to the government bailout. Only Ford managed to stay afloat on their own. These are two companies that everyone thought would outlive them, yet they filed for bankruptcy. This proves that there is no such thing as “too big to fail” especially in the volcanic and tumultuous world of business.

Never invest in a business that is too good to be true

Racksterli gave a mouth-watering offer–over 50% of one’s investment in a month. The offer was too good to be true given that an investment in the stock market (like an ETF company) averages between 15 – 20% of one’s investment annually. Even the safer government bonds are much lower (less than 5% per annum). This makes it extremely hard for a seasoned investor to give Racksterli a second thought. And this brings us to the next vital point.

There is no get-rich-quick way in wealth accumulation.

As Epictetus rightly cautioned: “Nothing great is ever created suddenly…great things take time”. This is same for wealth accumulation. Do not think you can hit the jackpot in a shortest possible time. It is pertinent for one to always think of the long-term in investment because that is the only way to leverage on compounding.

Try to understand a business before investing in it

Part of understanding the nature of the business you want to invest in is by knowing how cash flows in and out of the business. Also checking if the means of cash flow is sustainable and bound to last. And most importantly, understanding if the business is risk-averse and checking if it is insured. This is a protection against the advent of a collapse as the insurance company would ensure that all affected investors get well compensated.

Lastly, don’t go all-in in any investment

It is important to always diversify in investment as nothing is certain in the slippery world of business. And as an English proverb cautioned: “Don’t put your eggs in one basket”

In conclusion, it is always best to play it safe. And now that you have known these nuggets of wisdom, I hope they know you too. Sho ra fun Ponzi scheme o, Olorun awa pelu e!