By:Staff WriterColombo (LNW):The Central Bank of Sri Lanka (CBSL) has announced that it is considering criminal action against a group that ran a crypto investment scheme dubbed Sports Chain.
The Criminal Investigation Department’s Commercial Crime and Financial Crime Investigation Unit has now launched a probe into complaints regarding Sports Chain, a senior police officer confirmed.
In a notice published on March 21, the monetary authority declared that the investment venture had been run as a pyramid scheme, which is prohibited under Sri Lanka’s Banking Act.
Sports Chain had been established in Sri Lanka in February, 2020. It was in villages in areas such as Polonnaruwa, Anuradhapura, Trincomalee and Kurunegala that the scheme was first popularised.
It subsequently moved to urban areas, including Colombo. Seminars were held in five-star hotels and conference venues to “educate” investors on the platform.
While investors were told they could earn a passive income with their money alone, they were also allegedly encouraged to bring in others to the scheme as the more investors they brought in, the bigger their returns would be.
Victims who have fallen prey to the scam include professionals such as doctors, lawyers, teachers and armed forces personnel. Exactly how many have fallen victim to the alleged scam is still unclear.
The Central Bank (CBSL) issued notices to the public in 2018, 2021 and again in July this year warning them to be wary of trading in Virtual Currencies.
“The CBSL has not given any licence or authorisation to any entity or company to operate schemes involving VCs, including cryptocurrencies, and has not authorised any Initial Coin Offerings (ICO), mining operations or Virtual Currency Exchanges,” a CBSL statement said in July.
The statement also noted that VCs were considered unregulated financial instruments and had no regulatory oversight or safeguards relating to their usage in Sri Lanka.
The CBSL said it has sought the advice of the attorney general – the chief legal adviser to the government – on pressing criminal charges against those responsible.
Under Sri Lankan law, running pyramid schemes can result in imprisonment between three to five years. Offenders also have to pay a fine of 2 million Sri Lankan rupees ($6,222) or twice the amount received from the participants in the scheme, whichever is higher.
In August 2022, Al Jazeera revealed that as the economy around them cratered, thousands of Sri Lankans, including professionals like doctors, politicians and security personnel, fell prey to the fake crypto scheme.
Some gave up their jobs in the hope of high returns while many pawned their jewellery, mortgaged their property and sold their vehicles to invest all they could in the cryptocurrency introduced to them as Sports Chain.
Despite being promised a five-time higher return, they had barely received what they had invested and many did not even get that.
What they did not know at the time was that the cryptocurrency named Sports Chain never existed in the virtual currency market.
Sri Lanka’s Financial Crimes Investigation Division (FCID) began investigations to find out perpetrators and file legal action.
If found guilty under the Money Laundering Act, the suspects will be liable to pay the state a fine of up to three times the value of the defrauded property. They can also face between five and 20 years of jail time.
But for the investors to retrieve their money, Sri Lanka’s central bank will have to charge the suspects under the Banking Act for running a pyramid scheme.