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This was how Nigerians fought with Bitcoin frauds

Jan 23, 2018 Posted /  10427 Views

This was how Nigerians fought with Bitcoin frauds

Nigeria was one of those countries that had feelings for Bitcoin but its love story began with a scam. Sergei Mavrodi, a popular scam artist about which Applancer had earlier reported found a scheme to con the common people of Nigeria. This was called Mavrodi Mondial Moneybox (MMM), a 30-year-long global Ponzi that initially started in Russia. However, this Ponzi was not limited to Russia alone and roped in millions of other people from around the world and Nigeria from late 2015 to the end of 2016 with assurances of 30 percent returns in just 30 days.

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There were hideous ways employed to loot the common people when the government began to crack on the bank accounts connected to the scheme, MMM’s operators cut the banks out and started necessitating victims to utilize Bitcoin. The time when MMM administrators started paying out brusquely before the Christmas of 2016, it had hijacked the funds of an estimated 3 million people in Nigeria.

If we talk about the per capita annual income of the people in the country, it is less than $3,000 of $50 million. However, these scams had convinced many experts in the country that if they are able to find a way to coup the frauds, Bitcoin could potentially become the future of the country’s economy. Lucky Uwakwe, co-founder of Blockchain Solutions Ltd., a cryptocurrency consulting firm in Lagos mentions

“It was MMM that made Nigerians understand how Bitcoin worked.”

Uwakwe adds that at present, Nigerians are trading about $4.7 million in Bitcoin a week from about $300,000 per week a year ago. Now, it ranks at No. 23 internationally, according to a researcher in CryptoCompare. There are two ways to look at the data, it can be far below the more than $1 billion being traded daily in U.S. dollars or Japanese yen, or you can call it equivalent to the volume of activity in Chinese yuan or Indian rupees. David Ajala, who runs NairaEx, one of about a dozen digital currency exchanges in Nigeria says

“The growth has been crazy.”

He further adds

“It took us two years to get 10,000 customers. Within the last year, we’ve added 90,000.”

There were scams after every few intervals and phoney traders were overwhelming the country’s cryptocurrency exchanges, messaging apps, and even the streets of Lagos and other cities, guaranteeing people swift money. They used to disappear once they’ve gathered the money they wanted. “A lot of people have had their fingers burned,” says Adeolu Fadele, founder of the Cryptographic Development Initiative of Nigeria, a group that aims to enlighten regulators and the public about digital currency.

The scams were following a pattern similar to the e-mails belonging to the prince of Nigeria and asking for your bank accounts. The pattern started ousting and the scammer started using the name and photo of a real dealer and started creating a trading profile on a local exchange that was good enough to pass a cursory background check. This technique is known as cloning and is quite famous among scammers. Others started making an offer not of Bitcoin, but of “billion coins” or some other nonexistent cryptocurrency. Bashir Aminu, a digital-security expert and Bitcoin enthusiast in Lagos tells

“Everybody I know has been scammed in one way or another.”

What Nigeria did?

An investigation from Bloomberg media reveals that Nigeria began to develop informal groups of traders, which would take an old-school approach to validate the transactions. After several friends of Aminu’s lost thousands of dollars to scammers between them, they set up an informal exchange on the messaging app Telegram, trading among themselves. When other friends sought to join the group, Aminu would review their identification and banking documents—comparing passports and papers with the faces in front of him. Sometimes he’d even act as a trusted broker, holding a buyer’s money in escrow until the seller came through with the Bitcoin transfer. Over the past year, he says, his group has grown to almost 800 members. There are dozens of similar networks, Aminu says, with varying degrees of security procedures. Some arrange face-to-face meetings in homes, the backs of small shops, and other private places, where a buyer hands over hard cash and watches the seller make the Bitcoin transfer on a smartphone.

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