Scammers on fake sites prey on crypto traders

For years, Kenyans have fallen victim to the well-choreographed and enticing online investment schemes, as they often turn out to be just that—scams.

Since the advent of the Covid-19 pandemic, trade in crypto currency and emergence of many Ponzi schemes have massively thrived and ripped off thousands of inexperienced investors.

ICT cabinet secretary Joe Mucheru recently stated that Kenyans lost US$120 million (Sh12 billion) in 2021 to crypto currency scams.

Nigel Junior, a tech expert at Techspace Africa, says in his two years of research on these sham platforms, he has discovered that the schemes are evolving from regular pyramid schemes to crypto-based schemes that target young people who are keen on getting into the crypto scene.

Getting trapped

“People who do not know what and how crypto works will not know any better when making an investment in them. If there is an offer of high returns with minimum to no risk, heavy reliance on commissions on the ‘investor chain’, and pressure to reinvest, then it is a Ponzi scheme.

"The most common way to identify such a scheme is by its interest rates. They include a false assurance of  “guaranteed” high or consistent returns while offering vague or no business activities.

"As a rule of thumb, any investment that promises over 12 per cent annual returns has a high probability of being fraudulent,” he says.

A few weeks ago, Nigel adds, Techspace warned Kenyans about Bitstream Circle, a new Ponzi scheme in town, terming it as yet another elaborate project targeting young people looking to get into crypto currency investment.

He says, “As expected we received major backlash from ‘investors’ who called it ‘legit’. However, they woke up to a collapsed Ponzi scheme today.

"Flooding my inboxes and social media pages were Kenyans who were unable to withdraw money from their Bitstream Circle accounts asking how to get their money back.

Nigel intimates that the first red flag about the platform was the promise to make for their client a stable income through a daily-earning crypto currency trading. The second red flag was that the scheme promised the investors ‘zero risk’ on their investment money.

“Crypto is not a get-rich-quick scheme; you cannot make those percentages daily with no risk. When you hear crypto currency, think long term, do a lot of research, evaluate the fundamentals of crypto assets you plan to buy, and invest what you can afford to lose. Factor in your risk appetite, and always, avoid unknown platforms, acting on random tips and the fear of missing out,” he advises.

In most parts of the world including Kenya, these schemes are still not regulated. IT consultant Evan Miriti says most of these bad actors ride on the ignorance of most Kenyans on what such schemes are all about. He says not many people will take the time to learn and do due diligence about new platforms, but use their friends’ referrals as an adequate metric of trust.

“Platforms or channels offering high returns on investment and overnight multiplication of wealth are likely to be scams. Due diligence is key to any investment. Crypto currency could be a way to add risk to increase the return on your portfolio.

You should always remember that diversification, or as is commonly stated, not putting all your eggs in the same basket, should be the way to think about investment. You should not put all your money in crypto currency because they are high-risk assets.

Their prices could fall or rise rapidly leaving you with significant losses or profits. If you decide to invest in crypto currency, do due diligence to avoid being a victim of fraud,” he says.

Get rich quick

Tech and entrepreneurship expert Chris Kahuria says for every good investment idea, there is an infinite number of scams designed and targeted at unsuspecting investors, particularly those who easily buy the narrative of quick wealth. 

“It seems a sizable number of Kenyans want quick wealth and the scammers have a field day in here. Ranging from real estate projects, pyramid schemes, forex trading, and now the new child in the market known as crypto currency, the Kenyan gullible and naive investor is under siege,” he intimates.

Chris adds, “The fact is, it’s hard for the government to nib this at the bud because the architects are smart schemers and by the time you hear a public outcry, they have already preyed on a good number of Kenyans.

"This begs the question: What can be done to stop unsuspecting Kenyans from losing their hard-earned money in such crypto and other investment schemes? Could the announcement by the Central Bank of Kenya (CBK) about the introduction of a digital currency be the remedy to such scams?

"The answer is no. It is said regulation follows innovation and not the other way round and there would never be crypto adoption and regulation in our economy unless there was crypto innovation.”

He adds that the move by the central banks is inevitable in a fast-changing world and if governments will remain in control of money, they must adopt money innovations such as digital currency and regulate it.

“Scammers have, however, always thrived in the absence of regulation because they take advantage of investors who are ignorant and who have an affinity for quick wealth. In my view, it is up to the investor to bring themselves up to speed and save themselves from the agony of being conned because con artists will always be there and smart,” he says.

Know the genuine

An interested investor or a crypto user needs to find a genuine platform to invest in. William Musyoka, Bizin Africa operations manager, advises on how one can assess a platform to know that it is a legit site before starting their crypto journey.

“Always avoid fake websites and apps. Scammers are being more than creative as they copy the physical outlook of the original websites and make their fake ones. If there isn’t a small lock icon indicating security near the URL bar and no “https” in the site address, then don’t proceed.

"One way of getting the right app is getting redirection from the website’s link. All legit crypto platforms are free to register and there aren’t mandatory trading terms. Before downloading or signing up, read reviews and maybe check the platform online to see if they have an app,” he says.

Tech and risk expert Eunice Wanja says with the rising adoption of digital currencies across the world, it will reach a point when they will not be inevitable.

“Rapid technological innovation is ushering in a new era of public and private digital money. The world is currently changing on the way we do currency transactions and the way we save. This shift will be inevitable in the future and this shows that we should find ways that we will be dealing with these scams online. It will be worse if we are not careful,” she says.

 She shares that crypto currency might be the future of legal tenders. “Crypto currencies are not regulated in Kenya. They are not a legal tender here, but in countries such as El Salvador, Bitcoin has been in use as a legal tender since 2021.

This is a green light showing that this is where we might be heading in the near future. The question is how prepared are we?” she poses.