Africa might currently be the smallest cryptocurrency economy in the world but it is the fastest-growing region in that regard. Because cryptocurrencies have brought with them comfortable and fast-paced means of cross border payment.
This has made the region a fruitful arena for scams. For the past few years, more than a few swindlers have been reported in various African countries translating to the loss of millions of dollars of investors funds. Just last year the amount of money lost to scams was a total of $10 billion according to the report provided by chainalysis.
How Do These Scams Work?
The hidden nature of cryptocurrency and also the fact that it is unregulated is the attraction for swindlers in this space. The specific is the same with all Ponzi schemes. A lot of those scammers portray themselves as genuine cryptocurrency networks with the ability to provide high yields, in turn, investors give out their money to be invested only for the said companies.
A very good example of these scams involves Velox 10 Global, a Pyramid scheme that squeezed Kenyans of millions of shillings in 2018 and 2019. While they claim to trade bitcoin, they collect a membership fee of almost $100 and convince the members to add $200 if they want to earn up to $1000 daily. The participants of this scam never received a dividend and a few took the company to court.
In the same vein in 2019 Dunamiscoin Resources suddenly closed with $2.7million of investor’s money. More than 4000 people were promised a return of 30% in 21 days.
Since cryptocurrencies are not regulated in African countries, it will be difficult to track the scammers. But South Africa is taking some steps towards regulating. But still, a purposeful regulation is implemented and the Modus Operandi will continue.
Michael Kimani, a Nairobi-based blockchain analyst says “these multilevel schemes play in a grey area that exists because the regulation has not stepped in and defined some rules”.
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