Can Menzgold ride this storm?

Although Ghanaians have become reticent when it comes to financial schemes which promise far higher than average returns on investment, having experienced the loss of heavy sums in the ‘DKM’, ‘God is Love’ as well as ‘Pyram’ and ‘R5’ schemes, many felt secured dealing with Menzgold Ghana Limited for several reasons.

Aggrieved Menzgold depositors who staged a press conference last week seeking their principal amounts invested, asked critical questions while making some salient points.

They asked that if authorities hold that Menzgold’s operation is a Ponzi scheme, how come an illegal business was allowed to mount huge billboards all over Accra using the images of celebrities like Jackie Appiah and Jocelyn Dumas while opening offices all around the country

They pointed out Menzgold was duly registered at the Registrar General’s Department adding their checks also revealed Menzgold fulfilled its tax obligations.

They contend such cross checks and visibility emboldened them to do business with the company stressing that until the regulators started meddling in the affairs of the company they were receiving their monthly payments be it 7% or 10% on their principal sum and they wondered why the Bank of Ghana and the Securities and Exchange Commission (SEC) allowed Menzgold to cultivate such a huge clientele before stepping in to halt their operation when they as the mandated bodies could have shut down their operations much earlier.

Since the SEC order to halt the taking of deposits, Menzgold has struggled to meet its maturing obligations to clients despite assurances given by the gold trading entity.

Menzgold has issued various statements assuring its clients payments will be made, the latest claiming payment will be effected in 90 days. The company submits that the order by the SEC not to take on new clients has disrupted its operations.

The company has offices across the country. It also recently opened subsidiaries in the UK, Spain and Nigeria although critics point out that those offices in foreign lands have trading license in products other than gold.

Business was so good Menzgold issued supposed gold medallions to award winners at the 2018 BET Awards and of course the Menzgold owner Nana Appiah Mensah alias NAM 1 also opened Zylofon FM, Zylofon TV, Zylofon Music recruiting Stonebwoy, Shatta Wale, Kumi Guitar, Obibini, Joyce Blessing, Becca and others.

But things started falling apart when the Bank of Ghana began warning people not to send their monies to Menzgold as they could incur loses given the firm was operating beyond its remit. It wasn’t long before the Securities and Exchange Commission (SEC) began issuing warnings to Menzgold and urging the general public to keep away.

A deputy governor of the Bank of Ghana, Dr. Johnson Asiamah as at 2017 had warned the Ghanaian citizenry against making deposits with Menzgold stressing that those who failed to heed the warning did so at their own risk since it was not licensed to accept deposits.

The company countered saying it does not take deposits from customers because it is not a financial institution. Stressed Nana Yaw Offei, a senior company executive, “Menzgold Ghana Limited is a gold dealing firm, we buy gold and sell gold. All our operations or whatever we do in our outlets is directly linked to the sale and purchase of gold. For that reason we have acquired the license that gives us the chance to buy gold and sell gold that is by the Minerals Commission of the Republic of Ghana. We are not a microfinance institution, neither are we a financial institution and so we do not take deposits in any way.”

But reeling under pressure from SEC and resultant intense public scrutiny the company eventually capitulated, saying:

“Menzgold Ghana Limited is closing its prestigious gold trading platform called Gold Vault Market until further notice. The product which has spanned over three years and has served numerous customers will by September 15, 2017 cease to be a business line of the Gold Commodity dealers, Menzgold.”

So is Menzgold legally trading?

In 2016, the Minerals Commission stated in a letter that the Minister of Lands and Natural Resources granted Menzgold a “License to Buy and Export Gold.” The license required that Menzgold “purchase gold from any person holding a small scale mining license and to export the gold.”

As things stand Menzgold is operating with a license granted it by the Minerals Commission and the Ministry of Lands and Natural Resources.

The Central Bank views Menzgold as a precious minerals trading company which is carrying out unlawful transactions by taking deposits. It is the deposit taking bit of things which has been the bone of contention with parties involved not ready for an easy compromise.

However those who still believe in Menzgold’s authenticity ought to ask themselves why it is that since the SEC’s order to the gold trading firm to not take new clients and deposits, it has failed to pay its monthly values based on invested sums clients have already paid. Why can’t the entity fall on its already earned investment income to settle clients who want their monies back?

Perhaps explaining how Ponzi schemes work might give an insight. Ponzi schemes by their very nature require new clients to offer their money to the receiving company promising juicy returns so there’s a cycle of money being circulated where earlier investors get paid with sums from new ones. The system however crashes when cash does not flow in from new clients either through regulatory intervention like Menzgold’s or the founder’s lavish lifestyles tilts the balance incensing depositors who demand their money.

It is still uncertain whether Menzgold is a Ponzi scheme given that its founder has opened other businesses here in Ghana including Zylofon FM, Zylofon TV, Zylofon Music, Brew Marketing and other holdings even sponsoring the Ghana Premier League. Should things fall apart, as seems to be happening now, the assets of these establishments will be prime targets for any efforts by regulators or the investors themselves to recover the investments of the public.

Most Ponzi scheme founders remain evasive and shy away from the limelight but Nana Appiah Mensah alias NAM 1 is very much visible at boxing events and entertainment shows suggesting that even if Menzgold is a Ponzi scheme, it is one with a very different style from its predecessors.