MTFE scam, billion-dollar fraud and its repercussions in Bangladesh

In a scandal that has reverberated across Bangladesh, the Metaverse Foreign Exchange (MTFE) has been implicated in a massive financial fraud, embezzling nearly US$1 billion, or approximately 11,000 crores Bangladeshi taka. This extensive scam, which primarily targeted Bangladeshi investors, has revealed critical weaknesses in the country’s financial regulatory framework and underscored the dangers associated with unregulated cryptocurrency investments.

MTFE, a Dubai-based company, presented itself as a legitimate investment platform, dealing in cryptocurrencies, forex, commodities, and stocks. The platform claimed to be Shariah-compliant, an assertion that helped it build trust among investors in various countries, including Bangladesh, Nigeria, and Sri Lanka. It promised extraordinarily high returns, which attracted a wide range of investors from different socioeconomic backgrounds.

The company’s operational model was essentially a Ponzi scheme, employing a multilevel marketing (MLM) strategy. Investors were incentivized to recruit others through a referral program, which offered bonuses to those who could bring in new participants. This model rapidly expanded MTFE’s user base, reaching even the most remote areas in Bangladesh and convincing many individuals, including those from rural villages, to invest significant amounts of money.

In August of the previous year, MTFE abruptly disappeared, taking with it the invested funds and freezing the accounts of hundreds of thousands of people. The sudden disappearance of the company caused widespread panic and confusion among the investors who had entrusted it with their savings.

Despite the significant impact, the full extent of the scam, including the total financial losses and the number of affected individuals in Bangladesh, remains unclear. Government agencies have struggled to establish jurisdiction over the case, which has further complicated efforts to address the fallout and assist the victims.

Following the collapse of MTFE, numerous victims filed complaints in various regions of Bangladesh. However, the investigation has encountered numerous obstacles. Law enforcement agencies, including the Police Criminal Investigation Department (CID) and the Counter Terrorism and Transnational Crime (CTTC) unit, have made little headway in tracing the embezzled funds or apprehending the key perpetrators.

Investigators have detained several CEOs associated with MTFE, but these arrests have not provided significant leads. The detained individuals have claimed that they were merely intermediaries, transferring funds to the company’s founder, Masood Al Islam, who remains at large. Efforts to locate or extradite Masood have so far been unsuccessful, adding to the frustration of the victims.

Detailed examinations of bank accounts and mobile banking records linked to the CEOs have not revealed clear evidence of the money trail. Furthermore, investigators have not found any significant information regarding transactions in cryptocurrencies, despite the company’s claims of dealing in such assets. This lack of evidence has led to suspicions that the money was laundered through traditional methods like Hundi, an informal and illegal system for transferring money.

The MTFE scam has highlighted significant regulatory gaps in the oversight of digital financial activities in Bangladesh. Multiple government agencies, including the Commerce Ministry, the Directorate of National Consumers Rights Protection (DNCRP), and the Bangladesh Financial Intelligence Unit (BFIU), have refrained from taking responsibility for investigating or addressing the scam.

Commerce Secretary Tapan Kanti Ghosh remarked that the nature of MTFE’s operations did not fall under the purview of traditional e-commerce oversight, as no tangible goods or services were exchanged. Telecom Minister Mustafa Jabbar pointed out that many investors were aware of the illicit nature of their activities, which has further complicated the legal proceedings.

The DNCRP, tasked with addressing consumer complaints, stated that it does not have the mandate to handle such cases. Consequently, the responsibility has primarily fallen on the BFIU, which is responsible for investigating money laundering and suspicious transactions. However, the lack of clear regulatory guidelines and inter-agency coordination has severely hindered the effectiveness of these investigations.

Victims of the MTFE scam have expressed deep frustration over the slow progress in recovering their investments and bringing the perpetrators to justice. Many have been hesitant to pursue legal action due to the stigma associated with cryptocurrency investments, which are considered illegal under current Bangladeshi laws.

Md. Maruf Rahman Mahim, a resident of Khilgaon in Dhaka, invested about one lakh taka in MTFE through a family acquaintance who served as an ambassador for the company. Despite filing a case with the police, Mahim has received little information on the recovery of his funds or the arrest of the main accused.

In Rajshahi, a joint investigative team comprising the Rajshahi Metropolitan Police (RMP), the Police Bureau of Investigation (PBI), and the CID was formed following a directive from the Cyber Tribunal. This team has arrested five individuals involved in the scam, but they too have claimed to be victims, having invested significant amounts themselves. The local police have sought information from Bangladesh Bank to trace the funds, but have yet to receive a response.

Cybersecurity experts have described the MTFE platform as a well-crafted fraud designed to deceive unsuspecting investors. Abdullah Al Jaber, a noted cybersecurity expert, explained that the MTFE website and app were specifically created for fraudulent purposes. Investors were shown fictitious profits on the platform, which lured many into investing more money.

The absence of tangible investments in cryptocurrencies or other assets has led experts to believe that the MTFE scam was purely a scheme to siphon money from investors under the guise of high returns. The failure to trace the funds through cryptocurrency transactions further supports the theory that traditional money laundering methods were employed.

The MTFE fraud has exposed critical weaknesses in the regulatory oversight of digital financial activities in Bangladesh. The lack of clear jurisdiction among government agencies has impeded the investigation and left victims in a state of uncertainty. This case underscores the urgent need for comprehensive regulatory frameworks to oversee digital financial activities, particularly those involving cryptocurrencies.

To prevent similar incidents in the future, Bangladesh must establish stringent regulatory measures and enhance inter-agency coordination. Educating the public about the risks associated with unregulated investments and the legal implications of cryptocurrency trading is also crucial.

The investigation continues, and there is a hope that the authorities will eventually unravel the complex web of financial transactions and bring the perpetrators to justice. However, the path to resolution appears to be long and fraught with challenges. In the meantime, the victims of the MTFE scam remain in limbo, uncertain if they will ever see their money again or if the perpetrators will be held accountable for their actions.

The MTFE scandal serves as a stark reminder of the potential dangers lurking in the unregulated digital financial space. It is a call to action for regulators, policymakers, and law enforcement agencies to bolster their efforts in protecting investors and maintaining the integrity of the financial system. As the world continues to embrace digital financial technologies, the lessons learned from the MTFE scam will be invaluable in shaping a safer and more transparent financial landscape.

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