The Standard Blog

Pyramid scheme fraudsters must be punished

Published on 06/06/2009

By Roseleen Nzioka

The sentencing of the world’s largest investor fraudster Bernard Lawrence Madoff is scheduled for June 29, 2009. Madoff faces a maximum sentence of 150 years in prison and $170 billion in restitution.

He is currently an inmate at the Metropolitan Correctional Center, New York City, NY.

Bernard Lawrence Madoff is an American former businessman and former non-executive chairman of the NASDAQ stock exchange who was convicted of operating a Ponzi scheme (what we Kenyans call pyramid scheme) that has been called the largest investor fraud ever committed by a single person.

It took just four short months for him to be arrested, charged and convicted of the crimes. On March 12, 2009, Madoff pleaded guilty to an 11-count criminal complaint, admitting to defrauding thousands of investors. Federal prosecutors estimated client losses, which included fabricated gains, of almost $65 billion. Madoff surprised everyone by refusing to name his accomplices, instead choosing to take all the blame.

In Kenya a task force, headed by former minister Francis Nyenze, has finally compiled its report, after almost one and a half years, which lists the masterminds of pyramid schemes that cost Kenyans a whooping Sh34 billion. Majority of the schemes collapsed in 2007 leaving many investors destitute. At least 20 Kenyans, victims of the schemes, committed suicide and many families were separated because of losing their money through the pyramid schemes.

Cooperative Development minister Joseph Nyaga told Parliament on Thursday that he would reveal the full list of the masterminds in two weeks. The task force to investigate the fraud was formed in February 2008, and toured the country, collecting views and registering victims who lost money in the schemes.

Although some investors took initiative and instituted court cases against some directors of the pyramid schemes no one has been punished for the fraud to date.

Nyagah said the taskforce had identified 169 pyramid schemes, adding that 16 were later registered as co-operative societies.

Meanwhile some MPs took advantage of the parliamentary privilege and named names of those implicated with defrauding Kenyans in the ponzi schemes. The list of suspects reads like the who’s who in Kenyan politics, business and religious circles. But for now they remain innocent until proven guilty.

How did the ponzi schemes work in Kenya? Simple. Depositors were encouraged to deposit their money with the schemers, with the promise of earning high interest on their deposits.

The investors were actually paid monthly or bimonthly interest rates of between 10 and 16 per cent on their deposits.

The more one invested the more interest one earned. Naturally greed got the better of Kenyans and people started depositing millions of shillings with all manner of pyramid schemes that sprouted all over the country. And then it went bust!

Kenyans are now demanding justice. The fact that the law is vague on ponzi schemes is no excuse for the fraudsters to go scot-free. The fraudsters used pretentious means to acquire people’s money and made off with it. They are thieves. And no doubt the law is very clear on how to deal with thieves.




1. On Thursday July 9, 2009, 22:27 PM , George, United States wrote:

  What you do not know Rose, is that Madoff used to pay the SEC a lot of money to look the other way. Madoff was just a fall guy because the government could not afford to take top dogs to task.


2. On Thursday July 9, 2009, 14:28 PM , Fred Kamunde, United Kingdom wrote:

  There has been loads of ‘confusion’ between the so called pyramid schemes and network/multilevel marketing. Some network marketers have met stiff resistance because of members of the public, and would-be investors, failing to distinguish between the two. Would one care to expound, with local examples, the features of each!!


3. On Monday July 6, 2009, 10:36 AM , Yusuf Gideon, United Kingdom wrote:

  If what I am reading (comments) is true, then the children of Kenya have no hope left if there own parents and leaders can squander their future without even batting an eyelid. This should never be accepted as a way of life.


4. On Monday July 6, 2009, 6:34 AM , Njau Gitu, Australia wrote:

  We must be extremely that a scam of this magnitude careful that this does not happen in Kenya. Remember this fraud occurred under the wathchful eye of the US Securities and Exchange Commission a well wheeled regulator. We question whether the Kenyan Capital markets Authority is able to forestall such a calamity given the past experience where stock brokers have gone bust with investor funds.


5. On Saturday June 27, 2009, 9:59 AM , enter full names mark ochieng odipo, Kenya wrote:

  these are lessons learnt, when the deal is too good think twice. the justice system is such a way that these case might take ones working life ie the GOLDENBERG CASE. Most of the investors in these schemes were people who want easy money both the conmen & the coned.


6. On Tuesday June 23, 2009, 0:29 AM , bruno, Kenya wrote:

  Bruno, Ponzi and pyramid schemes are one and the same thing, get your facts right.


7. On Monday June 15, 2009, 7:18 AM , James Maina, United States wrote:

  I was thinking about the laws on thieves, any thief. Then I recalled something we used to call mob justice. If a little bit of mob medicine could be administered to the high profile ponzi schemers (preachers, politicians, bankers, etc) in the public arena, theft would decrease tremendously. Well, just a suggestion for the thought! Mobbing worked in the old days! Why not now? People, take charge!!!


8. On Monday June 15, 2009, 6:55 AM , James Maina, United States wrote:

  We have witnessed well connected investors loose everything they have worked for through Madoff pyramid schemes. Hard working Kenyans are quite vulnerable to ponzi shemes not because they are ignorant, but because a group of well connected individuals have consciously plotted to defraud them. Throughout the world, people work hard to have a financially sound and secure future. Educate our people.


9. On Friday June 12, 2009, 9:08 AM , bruno, Kenya wrote:

  First a Ponzi scheme named after Charles Ponzi (USA) is different from a pyramid scheme. if well coordinated and well managed can be a big success. We’ve demonized this scheme more than the founders and owners real dreamt of it. Banning them was a good idea because we dont have the intellectual capacity and integrity needed to run such schemes in kenya. But on the side of the coin if well managed they can do well for low income Kenyans who needs to put their income together to access bigger and more profitable ventures.


10. On Thursday June 11, 2009, 7:46 AM , Nancy J Naburuki, Kenya wrote:

  Not only should the people be given justice but the masterminds behind this serial fraud case should be severely punished,whether government officials or the common mwananchi.It should be justice for all!


11. On Thursday June 11, 2009, 7:44 AM , Nancy J Naburuki, Kenya wrote:

  Not only should the people be given justice but the masterminds behind this serial fraud case should be severely punished, whether government officials or the common mwananchi. It should be justice for all!!


12. On Wednesday June 10, 2009, 6:48 AM , enter full names Tipaku Philip,, Kenya wrote:

  These are the scheme that govt created to defraud kenyans during elections, raising money for campaign and they knew about it,the MP of that district knew about what was going on.


13. On Monday June 8, 2009, 8:46 AM , limo alfred, Kenya wrote:

  the government was behind the scheme, how did they get the registration to be cooperative societies? it was a scheme aimed at defrauding kenyans with an aim of raising campaign money


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