Cryptocurrency is such a unique digital asset, which has grown too big with some major injuries before its formal birth. This digital currency has commenced its journey without any regulatory approval. So, this financial asset has taken its own shape in the virtual market, gaining popularity among all segments of investors, including political elites. The market size has reached close to four trillion dollars in the world. Yet, crypto has not been recognised as officially acceptable financial asset and banks do not accept crypto for settling the transaction. Although official recognition has not come yet, the crypt industry has gone through a major debacle with large-scale crypto scams involving FTX and Binance. A new addition to the crypto scam is HyperVerse.   

As reported in the local media, the US authorities have penalised one crypto scammer, Sam Lee, for continuing security and wire frauds through the company HyperVerse founded by Lee and some of his associates. This company was engaged in scams involving USD two billion where innumerable investors, including Asians, have lost their money. This company offered a sort of guaranteed daily 1% earning on the investment, which allured many innocent investors.

The US authorities, including the SEC (Securities & Exchange Commission), have identified this investment activity as an old-style Ponzi scheme. As per the media reports, Lee has denied the charge, claiming that any wrongdoing in his company’s name has been done by some other people through hacking. Subsequently, HyperVerse, has closed its operation, but Lee has founded other platforms to carry out similar transactions.

Beware of Rising Crypto ScamsIt is further learnt that Lee and a group of people have selected the Middle East, especially Dubai, for their scam activity, because there is a huge potentiality of the rapidly growing crypto business in the region due to their weak regulatory measures. Over the last few years, Dubai has become the centre of the growing crypto scam, which remained unnoticed amidst the hue and cry created over the largest crypto FTX scandal. Experts opined that there is a difference between HyperVerse scams and other crypto scams, including FTX and Binance, because the former has defrauded the investors and become difunctional while the latter are still operating.  

Crypto firms established with the ill motive of deceiving innocent investors use some special features promising lucrative returns that easily attract more investors. In addition, these firms apply some techniques of exponentially increasing their investors by offering extra returns to those who bring new investors. Because of their cunning technique and networks, these firms grew enormously in the Middle East, particularly in Dubai. It is learnt that about five crypto firms, including HyperVerse, have defrauded victims of USD 3.4 billion. Many crypto firms even after being accused of wrongdoings have continued to operate their business without serious legal consequences. Although pyramid and Ponzi businesses are considered illegal and termed as scams in the UAE, some firms are found to have operated their business and most of them are involved in defrauding investors. 

Because of many crypto scams in Dubai, the UAE was exposed internationally and downgraded to “Grey List” of jurisdictions by FATF (Financial Action Task Force), which alleged that this country did little to prevent illicit transactions and fraud. Subsequently, the UAE adopted some actions, including stringent measures against illicit financial activities and, as such, convinced FATF to remove its name from the list. Thereafter, the country improved its global image and started receiving positive responses. However, for some reason, it did little to tighten crypto and instead kept the crypto rule loose presumably with the intent to become the industry’s global capital.

Dubai is believed to have turned into a global financial centre where there is an open visa policy and minimum regulatory interference which eventually provides an opportunity for the people who prefer to operate in the legal grey areas. Dubai has been pursuing crypto-favoured policy since 2022 and taking this advantage, many suspected crypto people have started establishing investment networks in Dubai. As reported in the media, during the period from 2015 to 2017, one Bulgarian engineer has set up an operation base in Dubai while running OneCoin Ltd, which is identified as one of the largest frauds ever perpetrated. According to the said report, this crypto firm has siphoned off USD 3.8 billion from innocent investors by promising to offer digital tokens that the company has never created.

HyperVerse is not alone; there are more crypto companies active in defrauding investors. Onpassive is one of them, located in the world’s tallest building, Burj Khalifa. US SEC has already identified this company as Pyramid Scheme, which has allegedly defrauded eight lac people, from whom a total of USD 108 million has been siphoned off. Meta Force is another Pyramid and Ponzi company that defrauded USD 340 million. There are many such crypto and financial companies in the Middle East.

The crypto world has been experiencing massive growth worldwide with a dominant presence in the Middle East. Many individuals or groups of people have established small or medium crypto companies. Their main target is small investors, for which the Middle East is the most lucrative place because innumerable foreign workers work here. Besides, Dubai lodges many moneyed men, who are also targets of crypto scammers. Many Bangladeshi people have been earning foreign currency in Dubai and its adjoining areas. Even many rich Bangladeshis live in Dubai. So, they can easily be targeted by the crypto scammers.

It is expected that crypto is going to be the most popular digital financial asset after US President-elect Donald Trump assumes power because most Senate members are known as crypto lovers. Formal recognition of crypto and bringing this digital asset under proper regulation is now a matter of time. Once recognised and regulated, this financial asset will start massively global trading. At the same time, crypto scams will also rise because the scammers will try to take advantage of its quick popularity. Although this trend will continue to occur across the world, the Middle East may take the worst shape. So, investors who intend to invest in crypto assets must be extra cautious. 

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The writer is a certified anti-money laundering specialist and banker based in Toronto, Canada. Email: [email protected]