While 2021 served as a year of recovery for many individuals and organizations who drowned in the loss caused by the Covid pandemic, the reverse was the case for some investors who lost a fortune in companies of investment
Like many investment platforms that went under last year, Addy Finance and Investment Ltd, formally known as AddyFx, was one of them. Billions of naira of investors’ money were trapped as the company could no longer fulfill the payment promise.
AddyFx was founded by Adoms Uju Francis in November 2018 and operated as a forex trader providing double digit monthly returns on investments – monthly every 6 months or every 12 months with options to terminate at the end of a pre-agreed cycle . or turn to mark the beginning of a new cycle.
In 2021, the company was able to obtain an SEC license from the Security and Exchange Commission, and everyone thought it was the beginning of a new chapter and opportunity. However, this was not the case; instead, the company began failing investors soon after. This caused the company to collapse with investors’ funds.
From the story of Tayo, who convinced his mother to sell her only property in Lagos to invest in AddyFx, to those who had staked their school fees, house rent and more, Nairametrics collects the stories of how AdyFx investors entrusted the company with their planned funds, but met with disappointment when the company could no longer fulfill its promise in May of last year.
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The manner in which the company went down has remained shocking to investors who had perceived the company as one with the potential to stick around for the long term, given that it was one of the few companies that was able to obtain the license SEC last year.
To answer the questions raised by many, Nairametrics spoke to a company insider working as a marketer.
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In this article, we summarize the account of the AddyFx crash in 5 reasons.
To maintain anonymity, the narrator will be identified as ‘Charles’.
1. Excessive and unsustainable interest rate
Before getting the SEC license, Addy Finance promised investors a monthly return on investment (ROI) of 13-25%, to which many people were attracted by it.
Meanwhile, the lack of an SEC license continued to be a setback to the company’s goal, as many investors quickly rejected the offer, albeit an attractive one, when they checked the company and found that it did not was SEC licensed. As a result, there was a need to approach SEC and do the needful.
Charles told Nairametrics: “When Addy wanted to register with the SEC, the SEC gave them conditions they had to meet, and one of them was the name they had to change. In other words, they had to delete the ‘Fx’nomenclature because the government does not recognize any Fx trading company in Nigeria; and they must diversify their portfolio.“
“Another condition given by the SEC was the need to abandon the percentage offer if the company is to continue. We were given a benchmark of 3-5%but we were able to talk to them, and we agreed on 5%, 7% and 10%“.
Diversifying the portfolio was not much of a problem because the company was already doing real estate, logistics and some other things; however, reducing the rate was not an easy thing to do as many people were attracted to the scheme due to the attractive rate of return.
Despite this, Charles explained that the new deal with the SEC became the company’s main selling point, as investors were encouraged to invest before the license came to enjoy a high interest rate before the window was closed.
“We told people that if you don’t invest now, when we get the SEC license, they won’t be able to get that percentage again. At the end of that week, we gave as a window for people to pay; the company invested more than one billion dollars in investment“.
When the license arrived, instead of serving as an impetus for more customers, Charles explained that it became the main factor driving investors away.
“It was after we got the SEC license that the problem started, because first of all, we had to lower our percentage. The money was not coming like before. We had believed that if we had SEC, the money would come in, but we came to understand that Nigerians don’t really care about the safety of funds. What they wanted was profit. And they felt our percentage was too small.
“Management started pressuring us to go out and get money, and that’s when we started getting the bottom line.“
2. Panic investors
Charles explained that prior to the SEC’s recognition, many investors had left their banks to invest in the company because of the relatively low returns those banks were offering. So when Addy could no longer keep up with the high rate, investors naturally started pulling their funds out to put them in the bank where it was safer.
“Some people went to tell our high net worth investors that the way it’s going, Addy could crash soon, which made them start to panic. A certain high net worth individual removed about 5 billion N/A, and others who also withdrew a huge amount.
“As a result of the shock, Addy began paying late. Refunds that used to arrive in the early hours of the day began arriving at 1:00 p.m. and increased to 4:00 p.m., 5:00 p.m., and before you know it, people had to make calls before they got their money, and that also added to the panic. People got scared and started withdrawing their funds. The money wasn’t coming and people were withdrawing .
3. Close the company’s social media account
When the company began to default, Charles admitted that one of the company’s biggest mistakes was shutting down its social media handle to prevent people from calling the platform.
He said, “One of the mistakes we made was when the payment started we closed our IG account and that’s when people started calling us scams. As a result of that, when we told them that we would give them all their money back, some people had already gone to the EFCC, and you know when an investigation starts, they have to freeze the accounts.
“They started freezing many of our accounts. But then we kept paying just to ease the number of people on our neck. People found out that some were being charged and went back to the EFCC to lodge a complaint. His plan was to meet with EFCC to help them collect their money, not knowing it would affect everyone. EFCC froze our account; the banks froze our account and some of them were already suing us in court.“
4. Bad management of funds by the management team
Since many people believe that AddyFx may have mismanaged the funds, Charles believes that the rumor may be true, judging by the kind of extravagant lifestyle that Addy’s management threw up and the level of unprofessionalism.
“When Addy was doing well, there were some mistakes the finance department made because staff were hired based on familiarity, not professionalism. It was when they were trying to restructure that they started hiring people with degrees. So most of the people were friends and relatives of the MD. In fact, it was the MD Bolt driver who later became the CEO.
“Actually I think there was a mismanagement of funds because the money was sent to our factory. Most of the boys in Management led a very extravagant life – they booked 4-star hotels when they traveled to Abuja.
“Another Addy error done was its opening too many branches In less than a year we opened about three offices. We opened in Port Harcourt, Makurdi and Imo State. These branches were very unnecessary. I understand that we wanted to create employment, but as a company that is not even 4 years old, Addy should have been very reassured.“.
5. Inadequate checks by regulators
While Charles blames lapses in the company’s system and structure for its failure, he also blames the SEC for not spotting red flags in time.
He said, “If the SEC had actually audited our account, they would have known something was wrong because the money we were using to diversify wasn’t coming from our profits. We were using investors’ funds to diversify into projects like real estate, and you know, real estate in Nigeria takes time to be profitable.
“Imagine you use one billion naira to build an estate somewhere like Imo state, and you expect it to be profitable in 6 to 12 months, you have to pay investors 20% in one month. It makes no sense .So if the SEC did their job really well, they could have checked and found that the business was not sustainable and shut it down before it was too late.“.
What you should know
- In October last year, the Interpol section of the Nigerian police declared Adoms Uju, wanted for defrauding investors of N52 million and $28,000 respectively, part of the multi-billion Naira fraud victims accused of he
- The arrest warrant, which was issued by the Lagos Division of the Federal High Court, stated that he defrauded the victims through his company, Addy Finance & Investment Limited, registered with the Association of Managers of Fund of Nigeria (FMAN).
- The petition was started by Chive GPS, a Lagos-based intelligence research analysis company, on behalf of the victims.
- Speaking on the development of the case, Nnamdi Chife, the managing partner of Chive GPS, said: “We have no further information on the status of the case at the EFCC. But we are still leaning on EFCC and FCID to continue with the search for him to pay“.