BEHAVIORAL AND DEMOGRAPHIC DETERMINANTS OF FINANCIAL RISK-TAKING IN NIGERIAN PONZI SCHEMES

Ponzi schemes are fraudulent investment operations where returns to earlier investors are paid from the capital of new investors rather than from profits earned through legitimate business activities. Named after Charles Ponzi, whose 1920s scheme in the United States defrauded investors of over 20 million dollars, these schemes promise unusually high or consistent short-term returns to attract participants. While Ponzi schemes may initially appear as legitimate businesses, they become unsustainable over time because maintaining promised returns requires an ever-increasing influx of funds from subsequent investors. The operators often divert these funds to pay earlier investors and themselves, leaving later participants with significant financial losses. This study examines the behavioral and demographic factors influencing financial risk-taking in Nigeria’s Ponzi schemes, highlighting patterns of investor participation and susceptibility. Understanding these dynamics is critical for developing regulatory measures, enhancing investor awareness, and mitigating the risks associated with fraudulent investment schemes. The findings provide insights into the mechanisms that drive Ponzi schemes and the socio-behavioral factors that perpetuate them, contributing to more effective policy and financial risk management strategies.