Perhaps the most popular financial fraud is the one baptized since the beginning of the last century as “Ponzi scheme”. The idea is to attract investors by promising short-term returns much higher than those of the market. The first investors who enter the scheme are paid with the funds that new savers enter. It is called pyramidal in cases where each investor who joins receives prizes for attracting additional clients. The house of cards (or the pyramid) collapses when it becomes clear that the promises of extraordinary financial gains are not sustainable indefinitely, leaving savers who did not withdraw their savings trapped in the web.
The Ponzi scheme applied to cryptocurrencies -or supposed cryptocurrencies- has occurred and continues to occur in much of the planet. A few examples on different continents help to measure the global scope of this phenomenon.
In the United States on February 25, a San Diego court accused the founder of a cryptocurrency investment platform called BitConnect of orchestrating a fraud of more than 2,000 million dollars against thousands of investors located in different countries.
On the other side of the Atlantic Ocean, in mid-April, directors of Finiko were arrested in Russia, a platform that operated a pyramid scheme from January 2018 to July 2021, defrauding nearly 800,000 investors in Russia, Kazakhstan, Hungary, Austria, Germany and USA, reaching the scam a figure close to 1,500 million dollars.
Going into Asia, Plus Token, promising returns of between 10% and 30% per month, attracted more than 3 million savers living in China, South Korea and Japan with a figure equivalent to 5,700 million dollars.
One of the most significant cases worldwide was that of Onecoin, a Bulgarian company with a “subsidiary” in Argentina, called Onelife, which fraudulently offered the supposed cryptocurrency in different provinces. In mid-April, the members of the Chamber of Accusation of the city of Córdoba confirmed the preventive detention of 10 defendants for this scam.
Argentina suffers, like the rest of the world, a growing wave of crimes associated with cryptocurrencies throughout the country.
Unlike the fraud that occurs within the financial system, one advantage that crypto criminals have is that in many countries on the planet their platforms do not have a defined supervisor. This legal vacuum allows them to operate long enough to carry out the scam before being discovered.
While it is extremely easy to invest in these crypto schemes, once the fraud is exposed it is very difficult for savers to recover the funds invested. For one thing, fraudsters are often quick to stash that ill-gotten money in accounts beyond the reach of regulators and judges. On the other hand, some of these crypto platforms usually locate their legal domicile in tax havens and include dispute resolution mechanisms in the fine print of their adhesion contracts that are settled in different jurisdictions far from where the investor resides.
But not only the State is responsible for preventing or quickly disrupting these scams. Those private actors who emphatically reject state intervention are functional to these frauds that discredit and delegitimize an entire industry, where not all are equal.
On the other hand, to attract savers, these fraudulent schemes require a convincing communication display. To do this, they use social networks promoting platforms, sometimes dedicated to providing free financial advice as a gateway to induce their customers to buy these products.
They have enough money to allow their charismatic managers to attend prime time shows where they are treated as if they were gurus of a new era, sometimes resorting to famous personalities who irresponsibly promote these “fabulous” investments. Celebrities like boxer Floyd Mayweather or actor Steven Seagal promoted crypto products that ended up scamming savers who invested in those funds. In this sense, already in 2017, the United States Securities and Exchange Commission (SEC) issued a statement indicating that any celebrity who offered to promote the purchase of digital assets should publicly report in detail the payment received in compensation for said celebrity. promotion.
Fraudsters also have a very powerful ally; human nature where greed, the desire to emulate famous figures or the wonderful dream of obtaining extraordinary profits at a stroke of the pen, limit the rationality of investors.
In response to this digital phenomenon, most of the most powerful countries (with the exception of China, which has prohibited the use of cryptocurrencies by issuing its own digital currency from its Central Bank) are determined to find a regulation that balances two objectives.
On the one hand, letting financial innovation flow, which, when used well, is a central tool for improving people’s lives, interconnecting them, reducing costs, improving security in transactions, providing greater services and including the most neglected sectors.
On the other hand, and without losing sight of the objectives of preserving the stability of the financial and monetary system and the environment, the states seek to develop mechanisms to protect retail investors.
In this sense, it is key that all the public bodies involved -which cover various areas -financial, legal, tax, productive, labor and environmental- work in coordination to fully understand the operation and implications of the extremely complex world of cryptocurrencies. In financial terms, there are technical and legal issues that must be resolved related to the transfer of money, the legal nature of the platforms (called “exchanges”) and the assets that are traded, and their registration and custody. Coordination and exchange of information with regulators from the rest of the world is essential to be able to cover this universe.
With this intelligence, the State is in a position to clearly define which organism(s) will be in charge of regulating and supervising the functioning of these actors and which requirements must be fulfilled in order to function.
Finally, and returning to the issue of fraud, it is essential to launch a massive financial education campaign that provides the population with tools to prevent scams of all kinds.
Former president of the National Securities Commission.
Source: Ambito
David William is a talented author who has made a name for himself in the world of writing. He is a professional author who writes on a wide range of topics, from general interest to opinion news. David is currently working as a writer at 24 hours worlds where he brings his unique perspective and in-depth research to his articles, making them both informative and engaging.
