Sri Lankans Make Crypto Ponzi Scam Claims | Business and Economy News

Colombia, Sri Lanka-When 37-year-old Harshana Pathirana quit his job in the hospitality industry, sold his car and invested in what he believed to be cryptocurrency, he dreamed of making a fortune, especially as the economy around him was collapsing.

More than a year later, with the tourism sector struggling in the face of Sri Lanka’s worst economic crisis, Pathirana is unemployed and has lost all of her investment.

“I invested 2.2 million Sri Lankan rupees ($6,162) and was promised a return five times higher. But I only received about 200,000 Sri Lankan rupees ($560, $20),” Pathirana told Al Jazeera. “I lost everything.”

Pathirana’s name has been changed to protect his identity as his family is unaware he has lost his money. “My family thinks I sold the car and deposited the money in my bank account,” he said. He is now trying to migrate to find a job and earn money.

Pathirana is one of many Sri Lankans, both locally and abroad, who claim to have been deceived by a group of men who ran a fake cryptocurrency investment scheme and defrauded millions rupees. While it’s unclear how many people in total claim to have been duped, one person Al Jazeera spoke to readily stated that a thousand people had joined in his district alone, and that since the model worked to attract new investors, the scheme had a cascading effect.

These investors are feeling the effects of the economic crisis in Sri Lanka, which saw inflation hit 60.8% in July, causing severe shortages of basic necessities and making basic meals almost unaffordable.

The scam is said to have affected professionals like doctors, security personnel and people from lower middle income backgrounds in rural districts, mostly between the ages of 30 and 40.

Some of those who spoke to Al Jazeera were Sri Lankans who had made investments while working in countries including South Korea, Italy and Japan.

Most of them had given up their jobs, pawned their jewellery, mortgaged their property and sold their vehicles to invest whatever they could, hoping that they would receive large gains.

“If I had my money today, I could have opened a fixed deposit account and used it to improve my family’s economic situation,” said Roshan Marasingha, 38, who spoke to Al Jazeera from South Korea.

He said he invested 3.1 million Sri Lankan rupees ($8,683) and only received 550,000 Sri Lankan rupees ($1,540) in return.

“Unfortunately, we were the low level investors in their pyramid (scheme). So we did not receive the promised return,” Marasingha lamented.

Some Sri Lankans made investments while living in other countries [File: Hassaan Shazuli/Al Jazeera]

The system of government

In official documents filed with Sri Lankan authorities, the investors claim that in early 2020, Shamal Bandara, a Sri Lankan, and Zhang Kai, presented to investors as Chinese, had established “Sports Chain”, which, according to them, was a cryptocurrency investment platform. .

They reportedly ran their operations like a Ponzi scheme, a fraudulent business in which existing investors were paid with funds raised from new investors.

On its website, Sports Chain calls itself a “highly profitable” and “anonymous” company, which aims to “become an ever-growing cryptocurrency used in the digital finance of the sports industry”.

Sports Chain’s website is riddled with grammatical errors and bills itself as the “world’s first competitive public channel platform”.

However, on CoinMarketCap, a crypto asset tracking website, there is no “Sports Chain” cryptocurrency registered or traded in the market.

The Sports Chain mobile app is not available on Google Play or the App Store and must be downloaded using a web link.

To use the app, investors had to enter the referral key of the partner who introduced them to the concept. Sports Chain called it a “partner network building” system – which is one way of defining a Ponzi scheme.

To promote this, the men behind the program have organized multiple events and meetings for investors, sometimes in five-star hotels in the capital Colombo.

A video of one such meeting, seen by Al Jazeera, showed one of the men explaining how money deposited by new investors would be divided among existing ones.

Using the mobile app, investors were asked to empty their virtual wallets by transferring “Sports Channel Coins” to an option called “Power Pool” where the coins were multiplied by five.

Every day, a few cryptocurrency coins were returned to the wallet from the Power Pool.

sports channel app screenshot
Investors had to enter the referral key into the app (pictured) of the partner who introduced them to the concept [Hassaan Shazuli/Al Jazeera]

“We were asked to deposit money in a bank account, download a mobile app and start trading,” Ranjan, an investor, told Al Jazeera.

He preferred to be identified only by his first name because he works for the Sri Lankan Navy.

“I joined because I was convinced that I could get a good return on investment,” he said.

To receive more coins in their wallet, investors needed to bring more partners into the network.

Investors allege that in mid-2021, the people behind Sports Chain ran out of money to pay investors, as the number of new investors began to drop drastically after it was rumored that it was a scam.

“Initially, we could make withdrawals after receiving around 150 coins in the wallet. Then they kept increasing the limit to around 500,” fellow investor Priyanga Kasturiarachchi, 40, told Al Jazeera. deposited 1.8 million rupees and had managed to withdraw 1.3 million rupees, he said.

Kasturiarachchi claims that after he and his daughter exposed their situation on social media, they received threatening phone calls.

Al Jazeera saw bank deposit slips, many of which were in the local accounts of at least three foreigners – Wu Chungsheng, Yu Shuhui and Wang Yixiao – while several others were in the names of Sri Lankans. It is unclear what, if any, connection these people have with Bandara and Zhang. None of the payments had been made directly to the bank accounts of Shamal Bandara or Zhang Kai who allegedly ran the scam. Bandara did not respond to a WhatsApp message sent to his cellphone. Al Jazeera could not reach any of the others.

No license for cryptocurrencies

Sri Lanka’s central bank says it “has not granted any license or authorization to any entity or company to operate any systems…including cryptocurrencies.”

complaints from investors in the application of the sports channel
Several Sri Lankans have complained to the police [Hassaan Shazuli/Al Jazeera]

Under Sri Lankan law, running pyramid schemes or Ponzi schemes can result in a prison sentence of three to five years. According to the country’s banking law, violators must also pay a fine of 2 million Sri Lankan rupees, which is double the amount received from participants in the scheme.

The investors have now filed complaints with the Financial Crimes Investigation Division of the Police (FCID) and the Central Bank of Sri Lanka.

They accused the alleged scammers of deceiving them through the fake cryptocurrency system and then threatened them for revealing details on social media.

“We are carrying out an investigation to determine whether we should take civil or criminal action,” a senior officer from the FCID office in Mirihana – a suburb of Western Province – told Al Jazeera. He declined to be named as he is not authorized to speak to the media.

“In most cases, investors get paid for the first few months and then they get nothing at all,” he added. “It’s important to raise awareness so people don’t fall for these diets.”

In response to questions from Al Jazeera about whether the central bank was investigating the matter, she said complaints about fraudulent schemes should usually be referred to the police for legal action. The central bank did not respond to specific questions about the Sports Chain program.

Chathuranga Perera, 31, said he deposited 3.2 million Sri Lankan rupees ($8,963) in January 2021, money he earned working in the tourism industry. In a series of withdrawals in April, he managed to recover 400,000 Sri Lankan rupees ($1,120), but no more.

“That’s what I saved for years. Now I have no job. I lost almost everything,” he told Al Jazeera.

“This money would have been very useful because we are facing an economic crisis. It hurts to be in this position,” he said.

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