A Brazilian pyramid scheme operating in Kenya has gone down, taking with it hundreds of millions of shillings belonging to Kenyan Bitcoin investors. Local news outlet, Standard Digital, said the company, Velox 10, headed by one Ricardo Rocha, began their operations in Kenya in September 2017 with a considerable launch party at the Hotel Intercontinental in Nairobi . Velox promised to help Kenyan investors earn millions of shillings in profits.
Lured with the promise of earning up to $4000 per day, investors were charged a $100 membership fee, with an “upgrade” for an additional $200.
For the likes of businesswoman, Ms Esther Muthoni, the deal was too good to pass. Falling for the promise that the company’s biggest investors would win a free five day trip to the United Arab Emirates, where they would meet “top global business gurus” she parted with $320 000. She also introduced her friend, Lucy Kamatu, who invested $5500into the scheme. Now they have nothing.
The Central Bank of Kenya (CBK) has been warning against investing in cryptocurrency for some time, in fact, in 2015 they released a statement: “Virtual currencies such as bitcoin are not legal tender and therefore no protection exists in the event that the platform that exchanges or holds the virtual currency fails or goes out of business”.
And in November, two months after the pyramid scheme launched, the CBK once more reiterated their stance during a press briefing announcing new currency notes. Governor Dr Patrick Njoroge said that cryptocurrencies are “risky investments”.
Investigations Into The Scheme Continue
There are reviews about the company online, dating back as far as October 2017, and they give very clear warnings to all potential investors. Besides the fact that their website was amateur and information was flawed, it appears people saw dollar signs and did not perform due diligence.
The scam artists offered new investors commissions if they recruited new members, this should have been a flashing warning sign for potential investors as it is a classic Ponzi-scheme tactic. Named after the Italian con-man Charles Ponzi, the scheme works as long as new investors continue to contribute new funds, and if most of the investors do not demand full repayment and still believe in the non-existent assets they are purported to own, the scam will make money.
Seven people filed a case at the High Court in January last year, in an attempt to stop Velox from operating in Kenya. “CBK and the Capital Markets Authority have failed in their licensing and regulatory duties by allowing Velox to continue its illegal activities within Kenya. They ought to be compelled to take legal action against the company,” they said.
Flying Squad deputy head, Jackson Owino, said that investigations into the scheme are ongoing.