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Be Wary of these Scams (2) - The Crypto Investment

Crypto currencies have become very popular. Although their acceptability as a means of exchange is still widely debated, it has come to be one of the greatest sources of investments in the world today. Since the advent of Bitcoin in 2009, there now exists over 20,000 crypto currencies in the world. As of August 15, 2022, the number of cryptocurrencies tracked by CoinMarketCap stood at 20,575. According to Finbold, this figure represents a growth of 709 new digital assets or a 3.5% increase from the 19,866 recorded on June 15.

Nigerians are not left out in the craze to invest in cryptos. This is particularly true for teens and youths. And that’s why there is a need to watch out for crypto scams, because fraudsters have also gotten on the game. The United States’ Securities and Exchange Commission in a recent article posted on its website stated:

We are concerned that the rising use of virtual currencies in the global marketplace may entice fraudsters to lure investors into Ponzi and other schemes in which these currencies are used to facilitate fraudulent, or simply fabricated, investments or transactions...

Fraudsters may also be attracted to using virtual currencies to perpetrate their frauds because transactions in virtual currencies supposedly have greater privacy benefits and less regulatory oversight than transactions in conventional currencies. 

Now, what is a ponzi scheme:

A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. But in many Ponzi schemes, the fraudsters do not invest the money. Instead, they use it to pay those who invested earlier and may keep some for themselves. 

Crypto Investments? or Crypto Scams?

Well that is not what this discussion is about. It is about those who tell you that they can help you to invest your money in forex or cryptocurrency and pay you a very high interest on your investment monthly with your principal still intact. 

The problem with these sorts of promises is that they will likely fail, and 99% of the times often do, because, nobody, and absolutely nobody, can predict the future to a certainty, especially the world of money, forex or cryptos. The dollar that’s up today may crash tomorrow, causing you to lose your money, likewise the crypto.

As with every market, there are highs and lows. In a month when the market is down, you don’t expect to get, for goodness sake, a high return or yield on your investment. In fact, in some months you can’t get a return on your investment. Real investments grow over time, not weekly or monthly. 

Just google the word crypto scam and you will find several news on how thousands and millions of people have been duped by people claiming that they can make them more money by helping them invest in cryptocurrencies. Here are two recent news on frauds committed in the guise of crypto investment. 

The first is from a crypto news site:

“The U.S. Commodities Futures and Trading Commission (CFTC) has taken legal action against an Ohio resident it says ran a $12 million Ponzi scheme involving bitcoin, a complaint filed at a district court in the state on Thursday shows.

The complaint, filed at the Southern District of Ohio, is a cease-and-desist order against one Rathnakishore Giri and his two companies: SR Private Equity LLC and NBD Eidetic Capital LLC. The CFTC also wants the court to make Giri pay back his wronged investors.

"Under the guise that he operated a private equity investment fund with a focus on investing in digital assets, Giri seized upon the contemporary fervor for digital asset investment opportunities and lured unwitting investors to contribute over $12 million in cash and bitcoins to his funds with the promise of exceptional returns without the risk of financial loss," 

The other is from Al-jazeera’s website:

Pathirana is one of the many Sri Lankans both locally and overseas who claim to have been deceived by a group of men that ran a fake cryptocurrency investment scheme and swindled millions of rupees. While it is not clear how many people in total claim to have been duped, one person that Al Jazeera spoke to said easily a thousand people had joined in his district alone, and that since the model worked on bringing on new investors, the scheme had a cascading effect.

In official papers filed with Sri Lankan authorities, the investors say that in early 2020 Shamal Bandara, a Sri Lankan, and Zhang Kai, introduced to the investors as Chinese, had set up “Sports Chain”, which they said was a cryptocurrency investment platform. On its website, Sports Chain calls itself a “highly profitable” and “anonymous” venture, which aims to “become a steadily rising cryptocurrency used in the digital finance of the sports industry”.

So beware of anyone who assures you that he can help you invest your money in cryptocurrency for high returns monthly. Such relationships do not usually end well, and the biggest loser is usually the investor whose money is lost while trading, or so he was told. 
But it is worth noting that, while some people use the forex/crypto avenue to defraud others, there are some others who, in their greed to get rich quick, burn their fingers by using other people’s money to trade.

A case in point
Recently, a young couple reported a young man of 22 years to the police for allegedly defrauding them of N10 million. He told them that he could help them invest their money forex and cryptocurrencies for 6 months at a yield of 15 percent per month including their investment. That is, at the end of 6 months they would collect a total sum of 19million! How attractive. The young man paid returns for the first two months, then the story began. He said the market had crashed. Whether that is true or not, that was not the deal. A Promise is a promise. There was no agreement as to what would happen if the market crashed.

Also, the young man was not a financial institution. Legally speaking, he didn’t have the right to carry out investment banking. The best thing the couple could do was to use the police to arrest him for fraud, even when there was an agreement between them.
Although the young man proposed paying back in bits with a down payment of N2 million, the couple turned down the offer. They proposed N6 million upfront and N1 million monthly. The young man said he couldn’t agree to something he couldn’t fulfil. That case is in court as we speak. Whether the case will succeed or not depends on evidence presented at trial and the discretion of the court. 

It is highly probable that the young man was truthful, and only wanted to trade with other people’s money just to make more gains for himself. In fact, this couple were not the only ones suing him in court. There were others.
 
I can mention two or three more instances where these investments have gone sour. In some cases, the traders in forex are honest people, but are greedy for gain. He who makes haste to be rich will never go unpunished. We can never bypass nature’s laws. Better a little ate in quietness than much with anxiety and no peace. Some of these traders now have to pay huge debts to the people whom they traded with their money, because they couldn’t fulfil on their promise. 

But the bigger losers are always the investors, who ended up losing a greatly in the long run, because eventually, the trade-off was not worth it. It would have been better if they had their moneys in a savings or fixed account than now have to wait for over a year to get the repayment from the trader.

When we make haste to be rich, we will burn our fingers. This is true for both the investors and the traders.

Articles on this site are meant for general knowledge only, not as professional advice. If you need personal advice on matters contained herein, you are advised to contact a professional.

We are a firm of legal practitioners and CAC certified agents. We help business owners, entrepreneurs and associations register their businesses, companies and associations with ease. If you need our help with any of the matters contained in the article, feel free to send us a mail at niyiama@yahoo.com or reach us on WhatsApp @ +234-08126194751.

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