By BUUMBA CHIMBULU
THE international media was last week set ablaze with news about the “Crypto King” turned fraudster, Sam Bankman-Fried, from the United States.
This platform has time and again discussed pros and cons of trading in cryptocurrency which is yet to be legalised in the country through the Bank of Zambia (BoZ).
Cryptocurrency is a type of digital currency that generally exists only electronically.
You can use your phone, computer, or a cryptocurrency Automated Teller Machine (ATM) to buy cryptocurrency.
Today’s article will focus on the downfall of a self-made billionaire, nicknamed the “King of Crypto.”
Bankman-Fried, co-founder of the failed crypto exchange FTX, was last week sentenced to 25 years in prison for defrauding customers and investors of his now-bankrupt firm.
According to the BBC news, FTX was one of the world’s largest crypto exchanges before its demise, turning Bankman-Fried into a business celebrity and attracting millions of customers who used the platform to buy and trade cryptocurrency.
Rumours of financial trouble sparked a run on deposits in 2022, precipitating the firm’s implosion and exposing Bankman-Fried’s crimes.
He was convicted by a New York jury last year on charges including wire fraud and conspiracy to commit money laundering, after a trial that detailed how he had taken more than US$8 billion from customers, and used the money to buy property, make political donations and put toward other investments.
The ruling cements the downfall of the former billionaire, who emerged as a high-profile champion of crypto before his firm’s dramatic collapse in 2022.
Last week, nearly one year after his cryptocurrency empire FTX imploded, the 32-year-old was found guilty of committing one of the largest corporate frauds in the United States history, following a trial in New York.
The court, after sentencing Bankman-Fried to 25 years in prison, ordered him to forfeit US$11.2 billion on March, 28, 2024.
“Sam Bankman-Fried perpetrated one of the biggest financial frauds in American history – a multibillion-dollar scheme designed to make him the king of crypto – but while the cryptocurrency industry might be new and the players like Sam Bankman-Fried might be new, this kind of corruption is as old as time.
“This case has always been about lying, cheating and stealing and we have no patience for it,” the Manhattan United States attorney, Damian Williams, said after the conviction.
The story of Bankman-Fried is an example of cryptocurrency fraud which consumers must be aware of across the world, including in Zambia.
While Zambia is working on introducing cryptocurrencies, the BoZ has, on several occasions, warned that consumers trading using this type of money are on their own.
This means that consumers trading using these currencies are doing so at their own risk until the development on the currency is established.
Bitcoin is a well-known cryptocurrency, but there are many different cryptocurrencies, and new ones keep being created.
Zambia is currently observing developments in cryptocurrency space.
There are many different scam techniques in the crypto space, the following are some of the most common ones.
Exit scams: These happen when developers of new crypto projects defraud investors by promising big returns, but pocket the funds or abandon the projects before investors can profit.
Initial coin offering (or ICO) scams: Also known as “pump and dump” schemes, happen when developers promise their new coin or crypto platform will generate huge returns, then disappear with investors’ funds by selling off all of the tokens at once.
Rug pulls: These get their name from the expression “pulling the rug out,” involve a developer attracting investors to a new cryptocurrency project, usually in DeFi, then pulling out before the project is built, leaving investors with worthless currency.
These scams can sometimes include a version of a Ponzi scheme, where investors profit by recruiting other users with false financial promises.
Scammers are always finding new ways to steal your money using cryptocurrency.
Going forward, only scammers demand payment in cryptocurrency. No legitimate business is going to demand you send cryptocurrency in advance – not to buy something, and not to protect your money.
