April 29, 2010 / 4:36 PM / 10 years ago

Hundreds protest over "Ponzi scheme" in Sudan's Darfur

KHARTOUM (Reuters) - Police used tear gas to break up a protest by hundreds of investors who lost money in a Ponzi scheme that stretched across Sudan’s strife-ridden Darfur region and beyond, U.N. officials and locals said on Thursday.

Around 2,000 people gathered in El Fasher, capital of North Darfur, on Tuesday, after discovering that the scheme had collapsed, said a U.N. official who asked not to be named.

“It was a Ponzi scheme,” said another U.N. official in Darfur, referring to a pyramid model where money is illegally paid from one investor to the other and presented as profit.

“This has been going on for months. It came to a head,” added the official, speaking on condition of anonymity. “It went beyond El Fasher. It went to the diaspora. People have been venting their frustration, gathering in places.”

North Darfur’s regional government said a number of men had been arrested after investors complained about losing big sums.

“Everything is under control of the legal authorities. ... All the people who are dealing with this, they are arrested,” the secretary general of North Darfur’s government, Ali Mohammed Ibrahim, told Reuters.

He said investors had been asked to register losses with authorities who would try to track down the missing assets.

TOO GOOD TO BE TRUE

Ibrahim declined to go into the details of the financial operation under investigation. Descriptions from El Fasher residents were consistent with a Ponzi scheme.

Ponzi schemes, named after the Italian fraudster Charles Ponzi, pay early investors money received from later investors, and they regularly collapse.

Abdul-Jabbar Abdullah Fadul, a professor at El Fasher University, said he had been warning people for months not to touch the scheme.

“But people want to get money very easily. There was no investment. They were taking things ... taking people’s money and paying them back with other people’s money.”

Khalid, a teacher in El Fasher, said he had lost 12,000 Sudanese pounds ($5,400) to two businessmen who started taking investments around 10 months ago.

“They said if you have $10, they will give you some shares or papers. And then after 30 days they will give you $15.”

At first the men did pay up, said Khalid, who only wanted to be identified by his first name. Then the business closed down just before Sudan’s national election earlier this month and did not open up afterwards, he added.

“They said they were taking the money, going to Khartoum and other places outside Sudan to buy goods to sell in the markets. That is how they said they made their money.

“The whole thing failed. We went to the bank and their account had been closed ... Now all the people are worried. There is no money and all the people are sad. There is unemployment and many things. It is very bad.”

Editing by Maria Golovnina

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