Since the introduction of cryptocurrencies, crypto crimes have been a concern. Over the years, criminals have perfected the art, leading to the loss of millions, if not billions, of investor money in Africa.
Authorities have managed to arrest a few crypto scammers and close down many firms in the process. Many gullible investors have fallen victim to these scams. The scams vary from pyramid schemes, multi-level marketing schemes, and even fake initial coin offerings (ICOs). While this is a known issue and most developed countries have enacted legislation to shield investors from unscrupulous business men, most countries in Africa are not well versed with this issue.
A notable crypto scam happened earlier this year in Ghana. The Economic and Organization Crime Office (EOCO), an anti-graft body, took action against directors and shareholders of Global Coin Community Help.
Authorities took Kwaku Damate Kumi and David Opatey, who were the directors of the company, before an Accra High Court in the country. In the filing, three other shareholders of the firm were charged with 51 charges include defrauding by pretense.
Interestingly, the five had received licensing for the company to operate under “the objects of real estate development, transportation services, e-commerce, e-trading, mobile money services, among others.” However, they decided to go into deposit-taking services for investment purposes.
Upon investigation, authorities discovered the company was operating under a false name and did not have the necessary licensing from local authorities.
Another incident happened in Kenya. It saw one investor swindled for $30,000. The scam, which was known as Velox 10, conducted an exit scheme after making millions in Kenyan shillings. The fraud allegedly involved players from Brazil. Many became victims as they were promised up to $4,000 in daily profits.
The most recent scam happened in South Africa when a crypto wallet company, Ladysmith, was suspected of being a pyramid scheme. The company promised 100% returns on any investment made by investors. People could invest as little as $7.12. A few days after the accusations came to light, the firm admitted that it was a Ponzi scheme. It also claimed that it could not make the payments as promised.
A specific red flag could quickly help one to differentiate an authentic investment company from a scam: promises of high returns. When the deal is too good, there is a high possibility it is a scam.
Another thing to note would be how long the firm has been operational. Most of the reported cases are of companies with less than four years of experience. It doesn’t guarantee that a company is running a scam; but it doesn’t lend a lot of confidence. Looking into the company’s details before investing will help potential investors avoid being victims of scammers.
Though this is not a typical case, Africa investors should also watch out for crypto projects purporting to have endorsements from prominent people. Many fraudsters have gone so far as to lift profile information from key players in the industry to lure investors.
The best way to avoid falling victim to these scams would be getting a strong education on blockchain and cryptocurrency. It is essential to get as much information as possible on the matter before making investments. Africa, as a continent, has enough educational facilities to help communities understand more about technology. There are various blockchain schools, including in South Africa and Kenya that are spearheading educational efforts n this field.
Just recently, Kenya held its first blockchain class for university students. The course was titled “DLBRT Blockchain for Business Course”. The students learnt about general information on the blockchain ecosystem, and recent trends in the crypto industry. The class was held at Strathmore Business School for about 30 days.
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