With the growing popularity of cryptocurrencies such as bitcoin and ethereum, scammers have begun using digital assets for Ponzi schemes, promising investors high profits and minimal risks. Kazakhstan, which has become one of the centres of cryptocurrency activity due to favourable conditions for mining, has also faced similar scams. In this article, we will look at how cryptocurrencies are used in Ponzi schemes and what measures are being taken in Kazakhstan to combat this phenomenon.
1. Ponzi schemes in cryptocurrencies: how they work
A Ponzi scheme is a fraudulent investment operation in which payments to old investors are made at the expense of contributions from new participants, rather than real profits. In cryptocurrency Ponzi schemes, it looks like the following:
- Promise of high returns: Scammers offer to invest in cryptocurrency assets or mining with promises of large returns in a short period of time.
- False returns: To create the appearance of success and attract new victims, scammers may pay “income” to old investors at the expense of new participants’ funds.
- Use of pseudo platforms: Often, schemes use fake platforms that look like real cryptocurrency exchanges or investment companies. These platforms may provide access to “personal accounts” with fake revenue growth charts.
- Funds evaporation: Once the number of new investors dwindles and the scheme can no longer be sustained, the organisers simply disappear, leaving investors with no money.
2. Cases of Ponzi schemes in Kazakhstan
Kazakhstan, which attracts the attention of cryptocurrency miners due to low electricity costs and favourable conditions, has also become a target for fraudulent schemes. The most well-known cases are:
- Finiko: One of the largest Ponzi schemes in Kazakhstan was Finiko, a company that promised incredible returns on cryptocurrency investments. The company lured thousands of investors before its activities were exposed. Many investors ended up losing all their money.
- Questra World: Another Ponzi scheme that promised fast and high returns from cryptocurrency transactions attracted many participants in Kazakhstan before it was shut down by the authorities.
3. measures to combat fraud in Kazakhstan
The Kazakh government and regulators are aware of the problem of cryptocurrency fraud and are taking steps to combat it:
- Tightening regulation of cryptocurrencies: Kazakhstan is actively working to create a legislative framework to regulate cryptocurrency transactions. In 2022, the country introduced strict rules for cryptocurrency exchanges and digital asset companies. These measures are aimed at increasing transparency and preventing fraud.
- Information campaigns: The authorities are conducting campaigns to inform the public about the risks associated with cryptocurrencies and investments in dubious projects. The aim is to increase the financial literacy of the population and reduce the number of fraud victims.
- Cooperation with international organisations: Kazakhstan is actively cooperating with international law enforcement agencies to track and disrupt Ponzi schemes that may cross borders.
- Criminal Investigations: Organisers of major Ponzi schemes such as Finiko have been arrested and prosecuted. Authorities are continuing investigations to find others involved in the fraud and recover funds for victims.
4. Risks to investors and protections
To prevent participation in Ponzi schemes, investors should be aware of the signs of fraud:
- Unrealistic promises of returns: If you are promised excessively high returns over a short period of time without explaining the mechanism for obtaining them, this is a clear sign of fraud.
- Lack of licences and transparency: Legitimate cryptocurrency companies are required to have licences and follow strict regulations. Scammers often avoid transparency and do not provide sufficient information about their projects.
- Communities based on attracting new members: If a platform or project emphasises on attracting new people to the system, it could be an indicator of a Ponzi scheme.
Conclusion
Cryptocurrencies continue to attract the attention of investors and scammers alike. In Kazakhstan, the cryptocurrency Ponzi scheme has become a real problem that requires authorities and investors to be extra vigilant. The introduction of strict regulation, increased financial literacy and active anti-fraud efforts are helping to reduce risks for cryptocurrency market participants.