Ponzi plans cost Kenyans Sh1 billion, CMA reveals


Capital Markets Authority (CMA) CEO Wyckliffe Shamiah at a past event. FILE PHOTO | LUCY WANJIRU | NMG

Kenyans have lost Sh1 billion buying into unregulated investment products marketed by entities promising high returns.

The Capital Markets Authority (CMA) Thursday told Parliament that about 500 investors have complained of loss of funds through online forex frauds, illegally pooled funds, cryptocurrency, real estate and ponzi schemes, ordered refunds and instituted criminal charges.

They lure unsuspecting investors across the country promising huge returns of up to 20 percent, the CMA says.

The capital markets regulator takes action against entities that sell products that require regulation, but lack a licence or approval from the watchdog.

“The total number of individual investors that have lodged complaints with the Authority in the different unregulated products that have been investigated is approximately 500 with a sum total of over Sh1 billion,” CMA chief executive Wyckliffe Shamiah told the National Assembly Finance Committee yesterday.

Most unregulated products are operated in obscurity and deal in products that resemble securities or capital market instruments.

The regulator said it had acted on cases from public reports and those it identified through its market intelligence.

The CMA hosts a whistle blower portal available on its website that enables members of the public to anonymously report any suspicious activity within the market

Mr Shamia said yesterday the most common fraud were online forex schemes where unregulated firms pose as brokers and collect money from the public for buying currencies online.

Foreign-based firms also lure Kenyan investors, asking them to send their money to offshore accounts for buying and selling currencies, shares, commodities and metals like gold online, but fail to wire back the proceeds when they want to cash out.

The markets regulator yesterday named Iforex time, Trends Forex Traders, AutoTrade Markets, Everjoy Forex Institute, Interweb Global Fortune and Thika Forex Trading Lounge among 40 online forex traders under probe for operating without a licence.

“The Authority established that Mr Charles Kibue Mwaura operates from Nakuru where he collects funds of between Sh5,000 and Sh20,000 from clients and promises them a daily return of 10 percent from the day the money is invested,” the CMA boss said.

He said others like County Capital were operating fund management services without a licence and was reported by a client who could not get her Sh4 million back.

Last year, financial sector regulators, including the Central Bank of Kenya, the CMA and the Retirement Benefits Authority, warned of a rise of fraudulent and unregulated schemes.

Some firms, including Women Investing in Entrepreneurship, Winnas Sacco and Choice Micro finance, were raising capital from the public by issuing shares without the regulators’ nod while Wiseman Talent Ventures was selling cryptocurrency Kenicoin through a public offer promising 10 percent return.