Ponzi scammers are compounding the economic misery of Sri Lankans 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 following a default on debt repayment in May. 

Ponzi scheme “highly profitable”

With inflation soaring past 50%, citizens are finding it increasingly difficult to survive financially. Now, several Sri Lankans are alleging that a group of individuals has defrauded millions of rupees through a phony cryptocurrency investment scheme.

According to documents submitted 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 a steadily rising cryptocurrency used in the digital finance of the sports industry,” Al Jazeera said.

One investor, named Ranjan, told Al Jazeera: “We were asked to deposit money to 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 to investors unclear

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

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

The scam is claimed to have primarily impacted people between the ages of 30 and 40, including those from lower-middle-class backgrounds in rural areas, and professionals like 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 up a fixed deposit account and used it to improve the economic status of my family,” 38-year-old Roshan Marasingha, said from South Korea. 

“Unfortunately, we were the bottom-level investors in their pyramid (scheme). So we didn’t receive the return that was promised,” Marasingha added.

Central bank raised fresh crypto concerns

Last year, Sri Lanka’s Department of Government 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.”

However, last month, in the midst of ongoing political unrest in the South Asian country, domestic watchdogs issued a warning to its residents against adopting bitcoin, claiming that it is “largely unregulated”.

In addition, the nation’s central bank, the CBSL, stated that it does not regard cryptocurrencies as legal cash in the country and has refused to grant permission for crypto firms to operate.

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

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