How The Promise of Huge Returns Got Kenyans Conned by Crypto Criminals

In 2022, Kenyans lost billions of shillings to crypto-related frauds. Here are all the details, and insights to keep you safe from fraudsters.
In 2022, Kenyans lost billions of shillings to crypto-related frauds. Here are all the details, and insights to keep you safe from fraudsters.

It is estimated that Kenyans have lost billions of shillings to crypto fraudsters in recent years. The most common scams involve promises of high returns on investments (ROI), or Ponzi schemes

The most recent one lured Kenyans into their traps with a promise of 5-10% via trading Bitcoin based on their signals.

While there are legitimate ways to make money from cryptocurrencies, such as trading or mining, Kenyan investors, especially the youth, are easily wooed by the promise of astronomical returns. But why would individuals be so easily duped? Why has the cryptocurrency market become a magnet for thieves all around the world?

What is Cryptocurrency?

Cryptocurrency is a digital or virtual asset designed to work as a medium of exchange and a store of value that is completely decentralized. This means that the asset uses cryptography to secure transactions and control the creation of new units of the assets. 

Unlike other legal tenders, referred to as traditional currency or fiat, they are not subject to any form of central control, including governments, financial institutions, and individuals.

Cryptocurrency prices are set by buyers and sellers in an open marketplace. The demand for these crypto coins is determined by their perceived value. 

According to Binance Academy, the supply is driven by “miners” who gather, verify and record more coins or tokens into the digital ledger. The supply can be decreased in an event called crypto burning to cause scarcity, and hence increase demand.

The beauty of blockchain technology, in this case, is that it provides openness and transparency. Every transaction is logged on an open distributed digital ledger known as a blockchain. Transactions are recorded in blocks before being connected together on a chain of past transactions.

Crypto trading, since its inception in 2008, has attracted a lot of attention from investors looking to make a quick buck. Bitcoin, the first and most popular cryptocurrency, has surged in value from $0.003 in 2009 to over $60,000 in 2021. This has made it one of the most profitable asset-class in the past decade.

Cryptocurrencies have grown in popularity to the extent that people are investing in them as they would in other assets. It is no surprise that now Kenyans are willing to take the gamble and create hustle-free money as well.

The Ponzi

How do fraudsters dupe Kenyans? What is it about Kenya that makes it a global hotspot?

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According to Kenyan Wallstreet, many of these scams prey on Kenyans’ naivete and avarice, seeking to get rich quickly. But the fact is that these opportunities are not real crypto investment opportunities. One popular Ponzi Scheme that left Kenyans pulling the rug was Bitstream Circle. The scheme was curated by Kenyan and Chinese fraudsters with Kenyans as the majority of its investors.

Ponzi Schemes like Bitstream Circle usually use the current trend to attract the mass. This time, it was the growing adoption of Bitcoin and the unsuspecting and desperate Kenyan youth. The company promised the investors a 5-10% daily ROI.

According to Nation, the company went live on the internet on 7th December 2021 with its YouTube page reading:

“Bitstream Circle Ltd is an active company incorporated on November 25, 2021, with the registered office in South Croydon, Greater London. There is one active director and one active secretary according to the latest confirmation statement submitted on November 25, 2021.”

The company was registered with the responsibilities of regulating and supervising financial markets in the UK company registry. In the registry, Bitstream Circle is managed by one director Qian Yang, a Chinese national, with 10,000 shares worth well over Ksh.1.45 million.

According to the reports, J&C Business (UK) Ltd is Bitstream’s corporate secretary. It also shares the same home address and street name as Bitstream Circle. The reports say J&C Business is also registered as a secretary in companies like Julycasa Ltd., Chogori Industech Ltd., and CH Group, all UK-based with addresses close to Bitstream.

Qian Yang had to start two websites, www.btgroup.win and www.bitstreamcircle.co.ke, which went live on December 7, and a mobile phone application after creating Bitstream Circle. The websites were created to mask the phoniness of the scheme and give it a global appeal.

To further lend the firm greater legitimacy, several Kenyans were enlisted as mentors and customer service representatives. They mostly resided at www.bitstreamcircle.co.ke.

Before the Ponzi scheme disappeared with over Ksh.1.18 million, Bitstream circle had amassed more than 10,000 followers on its Telegram group. The final day saw the admins throwing insults at the gullibility of Africans. Some read:

“You are a bunch of brainless races, see you on our next plan,” an admin had posted.

“Bye, haha. I am living a luxurious life with your dollars. If you have invited friends, wait to be killed by your recommenders. Idiots. There will be a time to meet.” Another had posted after the website had already disappeared from the internet.

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The Greed for High Returns

The investors of Bitstream Circle were compelled to utilize Tether in order to trade. They were then assigned mentors using fake names. After depositing some funds into the website, the mentor would provide them with an investments plan table. The names of mentors that came up were David, Riaz, and Kyle.

The Kenyan recruiters were supposed to create videos and educate others about the company’s new way to make money. The videos guided potential investors on how to deposit, trade, and withdraw from the website.

The mentors would provide signals to investors, such as when and how to place trades. The investors were to only trade Bitcoin signals in at least five trading sessions daily. The investors were sold on the possibility of making 1-2% of their deposit for each session, which amounted to 5-10% at the end of the day.

In simple terms, if you invested at least Sh2,340 and participated in all trading sessions per day, your profit would reach Sh2,457. The more money you put into it, the more money you made.

The platform allowed investors to withdraw their earnings to Binance or leave them on the website. However, only one withdrawal per day was allowed. The withdrawal to Binance also took at least thirty minutes to reach an investor’s Binance account.

The Inevitable

A few days before the company’s disappearance, users began noticing delays in the withdrawal system. On March 13, the investors started questioning the legitimacy of the company. The owners assured investors that the withdrawal system was being upgraded to reduce the withdrawal delays. Then writing messages on the Telegram group was disabled and only users with admin privileges could text.

“In order to bring better trading experience and investment security to members, the withdrawal system is undergoing comprehensive maintenance,” The owners had presented.

Customers who wanted to access their money as soon as possible were informed to recharge 10% of the funds in their account and provide their identification for verification. Desperate users followed the directives, unaware that they were just adding more losses to themselves.

The inevitable happened on March 14 when Bitstream Circle suddenly vanished from the internet, along with its websites and mobile app. Its Telegram group was also no longer accessible. According to Nation, a Crypsense Digital Group investigation revealed that the company had defrauded investors out of $10,048,450 (roughly Ksh.1.18 billion).

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One of the perpetrators did not leave without a parting shot to the users still in the Telegram group: “I still drive my Ferrari every day and some of you can’t afford to eat.”

Red Flags to Watch Out For

When conducting any form of online investment, there are a few things you should always be on the lookout for.

One is if the investment promises abnormally high returns with no risk. Any form of trading, crypto or forex, has huge profits but with significant risks. There are no win-win situations in any form of trading. Always be wary of investments that promise higher than 10% ROI per month. In most cases, these are Ponzi schemes that will only last for a short while before they come crashing down.

Consequently, if the website uses free web hosting services, it is likely a scam. Most legitimate websites use paid hosting services, which usually come with some form of customer support. Free hosting services are more prone to cyberattacks and often have little to no support.

Additionally, if the website has grammatical errors, it is a sign that the website was created in haste and is not legitimate.

Transparency of the company is also very important. Investors should hold onto their money if the company is not transparent about its ownership and contact information, especially if the owners have no presence on social media platforms with credible backgrounds.

If the deal sounds too good to be true, then it is not true. Always do your due diligence to avoid falling victim to any venture designed to lure you into Ponzi schemes.

Were you also a victim of the Bitstream Circle Ponzi scheme? Share with us your story.

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