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23.01.2019 Opinion

MenzGold Might Have Been A Viable Business With A Wrong Funding Model; NAM1 May Not Be A Fraudster

By Samuel Abadoo-Brew
MenzGold Might Have Been A Viable Business With A Wrong Funding Model; NAM1 May Not Be A Fraudster
23.01.2019 LISTEN

Oh, Ghana show mercy, NAM1 may not be a fraudster but an honest man doing a genuine business but with a wrong funding model (wrong only by banking Act law and not criminal Law)

Honest to the extent that even when he wanted to outsmart BOG by disguising his deposit taking against the banking law, he truthfully mentioned in his investors contract that what he was giving them was not real gold but Aurum Utallum (Fake gold) only intended at suggesting to BOG that he was giving out something in return for the deposit; Which criminal on earth will implicate himself like this in a contract?

If he was a criminal why won’t he had sold you his AU (fake gold) and ask you to take it home but instead was collecting it back to give you value?

The objective of his model was clear; “give me your money to go purchase real gold from small scale miners and let share the profit”

I have followed carefully the reported operations of Menzgold and have an instinct conclusion that NAM1 never intended to operate a Ponzi scheme nor defraud the good people of Ghana.

He seems to have been involved in a very genuine and viable gold purchasing business capable of paying even more than the 10% interest per month.

As ones a banker who had worked in a town dominated by small scale miners, I personally know and have seen how viable and highly profitable the small scale gold mining business is.

I recall the mind-blowing huge moneys that were hitting the accounts of unassuming young men who were dealing in this gold purchasing business.

These were money’s they received daily from their ‘big buyer’ partners as a frontier in purchasing gold directly from small scale miners and sent to them for onward export.

They used discounted world market gold price as the basis in determining the purchasing price of the gold from these miners. (Discounted price basically is current world market gold price minus a margin).

What this meant was that at each point in time regardless of the world market gold price, these middle men could make a guaranteed profit; minimum of +5% per deal and 20% per month (for example if the world gold price is GHC 2000/pound, they will buy it from the miners at GHC 1900/pounds, sell this within a week, rebuy and sell again turning over the same funds 4 times a month to make GHC 400/month profit which is 20% on the capital). This was indeed a loss free business model where one was fully guaranteed his profit margin on every quantity of gold purchased.

But here was the obstacle…” How do we get more capital to purchase more gold to make more money”!

I believe it was on this background that NAM1 decided to device a system where he could get more “investors” money to buy more gold, make more profit, comfortably pay 10% monthly interest and still make for himself some cut; What a good and viable way to make money; using people’s money to make money😊

NAM1’s biggest challenge may have been how to publicly mobilize the funds and I believe this is what informed him to start the deposit collection model as a way of mobilizing funds illegally to operate a legally viable licensed gold business. The young Man had found a good business and was ready to share with the public but choose a wrong funding model!

No matter how complex the funding model looked like, the underlying fact remained the same; mobilizing funds illegally to operate a legally viable licensed gold business!!!

This model isn’t derivatives and probably this may have been the reason why NAM1 could not present any documentation to SEC (because indeed their operations did not fall under SEC but BOG)

Now my thoughts………………

  • Was NAM1 gold purchasing business legitimate=YES
  • Is the gold purchasing business viable so as to guarantee 10% monthly profit=YES
  • Was MensGold a Ponzi scheme=No
  • Was the model used in funding their operations legal=No
  • Can NAM1 pay fully all depositors now = it doesn’t seem so currently

What then changed..............

  1. The ban on small scale mining affected the gold business
  2. The huge investment In celebrities was very unwise and unprofitable
  3. The huge investment in not-so-viable businesses was unwise
  4. The needless legal battle cost him much

It may be true that in the last few months the ban on small scale mining took a toll on his business he may have started using new deposits to pay old depositors but that does not in itself suggest a Ponzi scheme!!! This is in fact how the banks operates especially when they lock up their capital in loans; new deposits are used to honor old depositors cash withdrawals.

In order for us to consider a scheme as Ponzi, we need to fisrt consider weather there is a viable real underlying business capable of honoring the mentioned returns. We cannot conclude Mensgold is in a ponzi scheme merely because they currently cannot now pay their depositors (Unless we also want to say that GN bank is a Ponzi scheme because they recently could not honor customers cash withdrawals?)

We can make a very good argument if we could get the menzgold total gold export figures from PMMC and compare with menzgold total deposit base between 2014 to date.

Until we can establish that the amount of money collected from customers within the period (especially before the Ban on small scale mining) far outweighed the value of gold he did export, we will just be making an unfair baseless judgement

In my opinion, NAM1 had a very viable business capable of honoring his promised monthly returns but chose to drive it on a wrong funding model with no crushing helmet.

It will help his case greatly if he could come out to explain his model truthfully to his customers, apologies and ask for time to re strategies

Thank you

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