Elusive justice as Kenyans continue to lose billions in pyramid schemes

The online forex trading firm VIP Portal owned by Alfred Wangai and his wife Mercy Nkatha started out in Limuru in 2013 and within one year, it had received over Sh1 billion from farmers and Limuru residents looking to improve their fortunes.

The couple was arraigned in court in 2014 and has since been trying to convince judges to drop the charges. Last year, Mr Wangai and Ms Nkatha promised to refund investors but to date, not many have been paid.

Refund demand

Mr Samuel Njoroge is among 122 investors who sued VIP Portal in 2014 demanding to be refunded Sh77 million.

The investors obtained a summary judgment but the court document remains as any other ordinary piece of paper since there was nothing in VIP Portal’s name to attach and recover lost funds.

Today, Mr Wangai and his wife are roaming free and have moved towns, where they are likely to net a fresh set of investors and once again get away with it.

VIP Portal is just one of many pyramid schemes that have evolved with the times and are preying on gullible Kenyans looking to make a quick buck without lifting too much weight.

After 150,000 Kenyans lost over Sh8 billion in pyramid schemes between 2004 and 2007, a government crackdown saw hundreds of bank accounts frozen, new laws proposed to jail architects and some of the fraudsters charged.

But more than a decade later and barely any results from the crackdown, legislators have abandoned plans to enact laws against pyramid schemes. Few convictions have arisen from prosecution of perpetrators and the crooks have got even smarter.

Kenyans are now losing billions of shillings to dubious businesses that operate like New-Age pyramid schemes, with most investors left with little avenues for reprieve.

While the last two weeks have seen focus placed on Simple Homes co-founder Nuzrat Sharif and Goldenscapes Group owner Peter Wangai, the two schemes are just a scratch on the surface of the overall losses, pain and tears that thousands of investors have found themselves in.

One architect

Detectives believe Ms Sharif is one of the architects of a scam that involved tricking investors into thinking they would pay rent, which would double up as purchase instalments. By the time Simple Homes Developers Consortium upped and left, their victims had parted with over Sh500 million.

Mr Wangai could have made as much as Sh1.6 billion by lying to investors that pumping their hard-earned money in land would see him build and maintain greenhouses. Today, police have launched a manhunt for Mr Wangai, who co-owns Goldenscape Group with Irene Muthoni Mwangi.

A two-month investigation by the Nation has revealed how Kenyans are losing billions in pyramid schemes, with little action from authorities and even less reprieve for victims who lay their hopes on the criminal justice system.

Sh10 billion

The investigation has revealed that Kenyans looking for quick investment schemes have lost close to Sh10 billion to fraudsters, who promise huge returns and bonuses for introducing more investors.

Despite complaints by victims to the National Police Service and DCI, individuals behind some of the biggest Ponzi schemes in recent times still roam free even after years of investigations into their companies.

Nairobi Police Commandant Philip Ndolo said pyramid schemes fall under the DCI’s docket.

By the time of going to press, DCI boss George Kinoti was yet to respond to our calls and texts inquiring why little action has been taken on individuals behind the con games.

“Such issues fall under the DCI, which has more investigative capacity. When complaints are lodged with the National Police Service, they are forwarded to the DCI office within that station for action,” Mr Ndolo said.

But there have been a few successful investigations. After Velox 10 Global, a Ponzi scheme disguised as a cryptocurrency dealer, collapsed last year several investors who lost millions of shillings filed complaints at the Central Police Station in Nairobi.

Mr Daniel Karobia, one of Velox 10 Global’s agents, was charged in court. The case is still ongoing but several witnesses have testified.

Companies like Diamond Property Merchants, Property Reality Company, Velox 10 Global, Goldenscapes Group, VIP Portal, Ekeza Sacco and Gakuyo Real Estate have in the last few years taken billions of shillings from investors, who have largely been left high and dry.

Unlike the older generation pyramid schemes, the New-Age fraudster will pump potential investors with a lot of vague, mostly unverifiable information about businesses that look viable before taking money and running for the hills. Today, thousands are losing money in pyramid schemes disguised in the real estate, agribusiness, cryptocurrency dealing and forex trading sectors.

In some cases, victims are aware that they are investing in a Ponzi scheme, but hope to be among the early birds who get paid through investments of Johnny-come-latelies.

Ms Esther Muthoni hoped that she would benefit from being an early investor at Velox 10 Global. But she ended up losing Sh3.2 million.

When 24-year-old Sharon Kimani was still a university student, she heard of Public Likes.

It was a website that offered investors a chance to open an account at a fee then view advertisements in return for money. The website promised quick returns and Sharon from the onset knew it was a pyramid scheme.

A week

After opening an account with Sh5,000, Ms Kimani was able to recoup her investment within a week. In total, she made Sh270,000 from the website.

But by the time Public Likes collapsed, she still had Sh70,000 stuck in her account and could not access it. She was among the lucky ones who made some money before the collapse.

Nearly 14 kilometres off the Nairobi-Namanga highway in the sleepy Oloosuyian area, Kajiado town, there lies 300 acres of land that carry tears of investors who bought into a clever fraud scheme by Diamond Property Merchants.

More than 700 people have collectively lost more than Sh500 million.

Two phases

The two pieces of land collectively measuring more than 200 acres were to host Diamond Property Merchants’ Bethany phases three and four. Both phases are now ghost towns. In phase three, where tomatoes and capsicum were to be grown, only grass and weeds thrive. The gate is permanently locked and nobody is allowed access the land.

Bethany phase four has never taken off over two years after being launched. Of the marketed 150 acres, only 10 acres are in use but not by Diamond Property Merchants.

Interestingly, their investment has now become one of the baits that Diamond Property uses to lure new potential investors by claiming to have had a hand in the success of the greenhouses. In 2017, clashes over land use between Kajiado residents and Diamond Property saw 400 greenhouses burnt down in phase four and several others defaced in phase three.

Diamond Property Merchants had employed several locals who unfortunately did not receive their salaries for months. They staged demos that led to destruction of the greenhouses.

“I worked in phase three for a few months and it looked legitimate at first. Lorries lined up here twice a week to ferry tomatoes and capsicum. We felt shortchanged because we saw produce being sold but we were not being paid. Eventually when the firm dug a borehole in phase three, it realised there was no water underground so the greenhouses were not sustainable. That’s when trouble started with investors,” a former worker who requested anonymity said.

Violent demonstrations

The worker said peaceful demonstrations by workers bore no fruit and in mid-2017, they turned violent.

Investors were told that for a total of Sh740,000 they would own a greenhouse that would be managed for them, and the proceeds deposited to their accounts twice a year.

They were also promised title deeds for each plot — an eighth of an acre. Curiously, most investors did not do proper due diligence, which would have likely revealed to them that in Kajiado County one can only be given title deeds for commercial agriculture if they are purchasing land that is over one acre in size.

The Nation team was unable to reach the four investors who are farming on 10 acres of Bethany phase four as the only phone number it was furnished with was still switched off by the time of going to press.

Impossible return

But on a site visit, the team managed to talk to their employees on the ground, who revealed that an experienced farmer would have also seen through Diamond Property’s ruse as the promise of Sh400,000 in net dividends per year was impossible.

Posing as investors looking to buy land and set up greenhouses, the employees spoke to the Nation but suspiciously, hence refusing to reveal their names.

“Diamond Property lied to investors and the company they hired to manage the greenhouses (Nguzo International) also wasn’t upfront. For instance, they promised investors that there would be two harvest seasons per year, but here one can only manage one season per year,” one of the workers said.

The Nation team was able to trace four court cases in Kajiado and Machakos in which investors are pursuing Diamond Property.