Crypto-Based Ponzi Schemes Are Becoming A Major Problem In Africa

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August 9, 2020 by
Crypto-Based Ponzi Schemes Are Becoming A Major Problem In Africa

A recent surge in cryptocurrency awareness in the African region brings back memories of the influx of users during the ICO boom of 2017. In a similar way, many of those who are jumping on board the crypto ship today seem to be making the kind of mistakes of the unfortunate victims of the previous days. While dubious projects presented as ICOs and other kinds of camouflaged money doubling ventures littered the space then, today’s elements are predominantly Ponzi schemes and outright scams.

We can excuse the victims of the past era due to the fact that the industry was totally new, and information was scarce. What is baffling these days is that despite the availability of so much knowledge about Bitcoin and blockchain, a lot of people are still patronizing Ponzi schemes. Even more curious is the fact that many of these people are victims of the past era of crypto scams within the same region.

Why Is Ponzi Selling Today?

Looking at the trend and timing of how things have degenerated recently in the crypto industry, the spike of Ponzi schemes coincides with the events of the Covid-19 pandemic. Available statistics show that since Q2 2020, Nigeria leads in the search for the word Bitcoin on Google Trends. Also, the volume of Bitcoin and crypto transactions within the region is second to none within the same period. Perhaps, this could be influenced by the desperate search for alternative sources of income in the middle of dwindling economic conditions.

The consequences of the Covid-19 pandemic resulted in the shutting down of a lot of businesses. For a region whose economy depends largely on SMEs that hardly get significant support from the government, the hardship that followed the lockdown was not unexpected. Therefore, as businesses were shut down and the majority of the people were not able to receive any form of support from the government, the people turned to their computers and smartphones in search of opportunities.

The Different Categories of Players in Ponzi

Apparently, the way it seems now is that those with better knowledge of the industry but ulterior motives became the creators of different Ponzi platforms. You hear them arriving with some basic blockchain nomenclatures attached to their name, like Smart Contracts, Nodes, or even generic crypto names like Ethereum. These are surely people who know what they are doing and are determined to take full advantage of the semi-ignorant population. Since there are millions of Nigerians and other Africans who are out of work and business, any opportunity with the chance of making a living becomes enticing. Hence, how a lot of people are trooping into these programs without thinking.

A peculiar group of people found within these Ponzi networks are those who have been involved in previous failed schemes like Onecoin, TBC and MMM. You’ll wonder if these ones never learned anything from their past experience. On a closer look, this is the group who are either going in with the hope of making some recovery of what they lost in the past. It is common to hear such people tell you that their plan is to cash out before the system crashes. This is where I think that the problem has become deeper than what a lot of people think.

While we expect that the majority of those investing in Ponzi Schemes are the ignorant and gullible population, it is a totally different scenario. This category of people study the programs, gauge the various factors surrounding them, which includes the promoters and for how long they have been around. With such statistics they can predict the trend and expected lifespan of such schemes. This will determine their entry and exit points and strategies. 

New Recruits Always Suffer The Most

How much lower can a group of people go. Of course, this attitude is not restricted to just Africans, but at the moment, it is a growing trend in this region of the world. Perhaps, this is the same attitude that has made corruption an endemic problem in this same part of the world. Everyone knows it is bad, however, the focus is on how to beat the system and make selfish gains rather than fixing the fundamental problems.

For the truly ignorant, they are entering the baptism of fire in droves. The Ponzi community now runs into millions of people. The size of the community almost makes these systems appear legit. When in a group, it is common to find yourself among the odd minority that is not involved in one investment scheme or the other. If you are known for participating in the crypto industry, you may have received a call or two from family and friends who want to verify the legitimacy of one scheme or the other. That is how rampant these things have become.

A People Without Conscience

Bitcoin and cryptocurrencies are pseudo anonymous in nature. To follow through on a transaction in order to verify the identity of participants requires some effort. Perhaps, this is something that most creators of these schemes are riding upon to fleece the public. The assurance that they can disappear at any time without being held responsible may have encouraged the emergence of these many Ponzi schemes. Also, the fact that the government and regulatory authorities aren’t paying much attention to these groups has allowed everyone to go ahead in having a field day in the arena.

As it stands, the best that anyone can do at this time is to encourage and share proper crypto education around their communities. Also, the inherent risks involved in such schemes needs to be propagated even louder. After all, there are clear examples to show from past programs. The target this time would be the very ignorant ones who may be willing to listen. Yes, they have to be willing to listen because desperation and greed are emotions that most often cloud the reasoning of the people. 

For those who already know and understand the system and yet participate in them, they may not be different from the original architects. These ones have already killed their conscience and are perhaps ready for whatever the consequences may be. 

Like those before them, one day not far from today, the chips will fall down and the schemes will fold up. Usually, when such happens, the victims will be in the majority and their losses painful. Unfortunately, that is not where the problem begins or ends. The main concern is the negative image that these brands are creating for the regional blockchain and cryptocurrency industry. Also, the culturization of such systems in a way that they are becoming a way of life should worry the society. Just like corruption at the government level has become endemic, if we are not careful, Ponzi schemes could become an established industry in this part of the world.

 

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