Sri Lankans scammed out of millions by fake crypto schemes

Ponzi scammers are compounding Sri Lanka’s financial woes by swindling them out of their savings with bogus crypto schemes.

Crypto investor Harshana Pathirana told Al Jazeera: “I invested 2.2 million Sri Lankan rupees [around $6,162] and was promised a five times higher return. But I only received about 200,000 Sri Lankan Rupees [around $560]. I lost everything.”

The scam comes as the country is experiencing one of its worst economic crises ever after a debt default in May.

Ponzi scheme “highly profitable”

With inflation rising to over 50%, residents are finding it increasingly difficult to survive financially. Now, several Sri Lankans are claiming that a group of individuals have defrauded millions of rupees through a fake cryptocurrency investment scheme.

According to documents sent to Sri Lankan authorities, the investors claim that in early 2020, Zhang Kai and Sri Lankan Shamal Bandara founded Sports Chain, which they said was a platform for investing in cryptocurrencies.

On its website, Sports Chain billed itself as a “highly profitable” and “anonymous” venture with the goal of “becoming an ever-growing cryptocurrency used in the digital finance of the sports industry.” Al Jazeera so.

An investor, named Ranjan, told Al Jazeera: “We were told to deposit money in a bank account, download a mobile application and start trading.”

“My family thinks I sold the car and deposited the money in my bank account,” said another investor.

Real loss for investors unclear

Over 1,000 people are said to have joined the scheme in one district alone, according to a person spoken to Al Jazeera. However, it is unknown how many people have been defrauded in total.

According to this person, the scheme had a domino effect because the model attracted fresh investors.

The scam is said to have primarily targeted people between the ages of 30 and 40, including those from lower-middle-class rural backgrounds, and professionals such as doctors and security officers, the report noted.

People from Sri Lanka who have worked in places like South Korea, Italy and Japan were among the victims.

“If I had my money today, I could have opened a fixed deposit account and used it to improve the financial status of my family,” said 38-year-old Roshan Marasingha from South Korea.

“Unfortunately, we were the investors at the bottom level of their pyramid (scheme). So we did not receive the return that was promised,” Marasingha added.

The central bank raised new crypto concerns

Last year, Sri Lanka’s Department of State Information issued a press release outlining a new initiative that will see a government-led effort to create a nationalized, “integrated system of digital banking, blockchain and cryptocurrency mining technology.”

But last month, amid ongoing political turmoil in the South Asian country, domestic watchdogs issued a warning to residents against using bitcoin, claiming it is “largely unregulated”.

In addition, the nation’s central bank, CBSL, stated that it does not view cryptocurrencies as legal tender in the country and has refused to allow crypto firms to operate.

That said, investors remain divided on the utility of digital assets amid the turmoil.

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