Financial Misconduct in Financial Intermediation: A Case Study of Ponzi Schemes in Sierra Leone
Abstract:
This study examines the improprieties within the financial system, specifically focusing on Ponzi schemes. It ex plores the impact of these schemes and the conditions that facilitate their growth, such as regulatory deficiencies, a lack of investor education, the allure of high returns, and other related factors. The devastating effects of Ponzi schemes are also investigated, highlighting issues like financial losses, a decline in trust in financial institutions, and potential threats to economic stability. A mixed-methods approach was employed, utilizing both primary and secondary data sources. A well-designed questionnaire was administered to 100 respondents, who were surveyed using convenience and snowball sampling techniques. The gathered data were analyzed with simple statistical software, such as Excel, and the results were presented using various statistical tools. The study's findings reveal that Ponzi schemes in Sierra Leone have caused significant financial and psychological harm over the past decade. It identifies three of the most recent schemes: My-Coin, Wealth Builders, and Super providing crucial insights for future prevention and regulation. Advertise. Due to the order of occurrence, Super Advertise has the highest victim rate at 77%, as the impacts on victims are still fresh. These findings illuminate the pervasive nature of Ponzi schemes and their devastating effects, Notably, the research indicates that both financially illiterate individuals and those with high financial litera cy—including 81% of tertiary-educated individuals—fell victim to these Ponzi schemes. The schemes preyed on ignorance, greed, and impatience, undermining the stability of financial markets and eroding trust in the financial system. The paper recommends enhancing regulatory oversight, improving investor education, ensuring transparency and disclosure, protecting whistleblowers, and promoting international cooperation. It also suggests implementing and enforcing strategies that focus on developing early warning systems, understanding the behavioral traits of vic tims, and analyzing the broader economic impact of Ponzi schemes, emphasizing the empowering effect of investor education.
