Cryptocurrencies

Brazen Nigerian Crypto Scam Inksnation Still Operational Three Months After Regulator Warning

20/09/2020 by Idelto Editor

One of Nigeria’s most brazen crypto scams, Inksnation remains operational and still invites new investors some three months after the country’s Securities and Exchange Commission (SEC) deemed its activities illegal. The SEC has previously warned Nigerians against investing with the scam saying doing so would be at own risk as there is no legal recourse in event of the scam collapsing.

False Blockchain claims

The SEC warning had been prompted by fears that Nigerians are falling victim to yet another giant scam that rides on the growing popularity of cryptocurrencies. Described as the “World’s First Charitable Trust DAO”, the Inksnation masterminds claim they can “end poverty in any country in less than 9 months (by) incentivizing goodness, promoting love and equitable distribution of wealth.” On their website, the scammers offer a convoluted and sometimes confusing explanation of their operations and how the business generates revenues for investors.

Prior to the SEC warning, another organization, the Stakeholders in Blockchain Technology Association of Nigeria (SIBAN), went as far as to label Inksnation’s purported crypto coin, pinkoin a scam.

SIBAN says, “Inksnation is not on any blockchain” while the scam’s purported blockchain, the Inksledger “is not public and may as well be inexistent.”

Still, it appears the warnings have not had the desired effect as desperate Nigerians still flock to the scam. At the same time, the masterminds behind Inksnation seem unfazed by any possible legal consequences, as they are reported to have enlisted the services of a prominent Nigerian law firm, which specializes in blockchain and crypto law.

Besides enlisting the services of the law firm, the creators of the scam have also tapped into the religious beliefs of potential victims. Enterprising scammers now exploit Nigeria’s well-known background as a divided but deeply religious state to fend off scam allegations.

For instance, in a letter addressed to his followers shortly after the SEC and SIBAN issued warnings, the founder and CEO of iBSmartify, the creators of Inksnation, Amos Sewanu Omotade-Sparks wrote:

“This is the result of the SIBAN guys and we have been waiting for it. Fear not members and watch how Elohim JahGah will convert this to all-round blessings. They have helped us to get the attention of the government which we have been waiting for and we are so so so grateful.” Elohim JahGah is the deity revered by Inksnation supporters.

Exploiting Legal Loopholes

Nevertheless, Omotade-Sparks, who also identifies himself as “Universal Daddy Inks (UDI)”, still assures followers that the warning by the SEC is just “a disclaimer.” He says its “the same way they said about bitcoin that whoever trades with bitcoin does so at his own risk. It shall surely end in praise.” Omotade-Sparks even sarcastically thanks SIBAN for “finally doing something that’s meaningful for once.”

So just how do the masterminds of Inksnation continue to sell the scam as well as maintaining the followership interested despite the negative public warnings?

Similar to other large scale scams, Inksnation relies on promising unrealistic returns on any investment whether small or big. Scammers are well aware of the powerful lure of earning a lifetime passive “salary.”

As explained on the Inksnation website, investors become eligible to receive a lifetime salary starting at $342 per month after subscribing for the bronze “living node.” The bronze living node package, which requires a deposit of $3 (1000 Naira), which is cheapest while the “diamond living node” requires an investment of $3,000 for one to be guaranteed a lifetime salary of $857.

Non-existent coin

Interestingly, all benefits are paid out in pinkoin, the scam’s supposed reserve crypto coin that is valued at $17,556. According to Chiagozie Iwu, a CEO with Naijacryptos, a locally established cryptocurrency exchange, pinkoin is not listed on any exchange in Nigeria because “it is neither a crypto coin nor has any ties to the blockchain.” Many in Nigeria’s blockchain space are adamant that ultimately, pinkoin has no value.

Determined to counter and dispel any doubts about their activities, the masterminds have been posting videos on Twitter of real Nigerian recipients of the promised salaries. In one video, a man is seen brandishing wades of the Naira banknotes which he claims to be payment of his salary.

There are a few more videos that follow the same routine but as Iwu explains, this is just typical of most Ponzi schemes. The first few investors “will receive some payouts” and these “will defend the scam.” However, the majority of the so-called “downlines” will not get anything but by then it will be too late.

With the SEC recently designating crypto assets as securities, it would seem the legal loopholes that Inksnation and other scams have been using to defy the regulator are closed. It remains to be seen if Omotade-Sparks and his legal counsel will continue aggressively recruiting new members or the project is about to fade away.

What do you think about the Inksnation scam? Share your thoughts in the comments section below.

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Forex Strapped Nigeria Designates Crypto Assets as Securities

15/09/2020 by Idelto Editor

The Securities and Exchange Commission (SEC) of Nigeria has designated crypto assets as securities as the authorities step up efforts to regulate Africa’s largest cryptocurrency market. The SEC says the classification of crypto assets for regulation is consistent with the country’s investment and securities laws of 2007.

In a statement released Sept. 14, the SEC directs that corporates and individuals “whose activities involve any aspect of blockchain-related and virtual digital asset services, must be registered.”

While the classification is seemingly targeting new crypto assets, the SEC says that “existing digital assets offerings prior to the implementation of the regulatory guidelines will have three (3) months to either submit the initial assessment filing or documents for registration proper, as the case may be.”

Furthermore, foreign issuers of crypto assets are expected to comply with regulations that may require them “to establish a branch office within Nigeria.”

Reacting to the announcement, the General Secretary of the Stakeholders in Blockchain Technology Association of Nigeria (SIBAN), Senator Iyere Ihenyen, commends the regulator for striving to “treat digital assets as alternative investment opportunities.”

Ihenyen says the classification means “investment or security-based digital assets offerings are caught here, whether it is the now dead or dying initial coin offerings (ICOs) that got many fingers burnt in 2017 or the security token offering (STO) that didn’t live up to expectations.”

Still, the SIBAN general secretary feels the SEC “should have clearly defined its test for what constitutes investment or security, rather than vaguely state that virtual crypto assets are securities unless proven otherwise.”

Ihenyen explains why he has reservations about this approach:

“The approach the SEC has taken may be problematic, not only for players and investors in the Nigerian market but also for everyone, including the courts and the regulator itself. More so, the burden of proving otherwise is placed on the issuer, a thing that could be easily abused by regulators and even law enforcement agencies.”

Instead, the SEC should have published a well-defined test for determining what constitutes a security or investment. Ihenyen says doing “this will save us all a lot of time, energy, and resources.”

Meanwhile, Chiagozie Iwu, the CEO of a local cryptocurrency exchange, Naijacrypto, says the SEC’s classification of crypto assets shows some level of recognition for digital assets by the regulator. However, he is quick to point out that the statement does not specifically address the legality or illegality of crypto assets.

The SEC regulations do not say anything about cryptocurrency exchanges and this, according to Iwu, means the SEC has “no classification for crypto exchange businesses yet.” Still, Iwu believes a more comprehensive report will be issued by the regulator shortly.

Meanwhile, Nathaniel Luz, a representative for Dash in Nigeria, says in accordance with the SEC’s classification, cryptocurrencies like “Dash falls under the ‘crypto asset – non-fiat virtual currency’ grouping.” This means this virtual currency cannot be “classified as a commodity or security plus the existence of dash since 2014 pre-dates the ICO days.”

Still, Luz says his organization “is open to working with the regulators should they require any clarifications regarding the classification of dash.”

In the meantime, the SEC’s classification comes at a time when the use of cryptocurrencies for international trade continues to grow in the country. Nigerians also use cryptocurrencies for sending remittances and for online payments. However, Iwu believes the move by the regulator is the culmination of a two-year effort to create a structure for cryptocurrencies. It is unrelated to the current foreign currency crisis.

What do you think of Nigeria’s crypto asset classification? Tell us your thoughts in the comments section below.

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Chilean Cryptocurrency Exchange Denies Fraud Allegations, Tribunal Set Rule on Complaint

05/09/2020 by Idelto Editor

Chilean cryptocurrency exchange, Buda.com has denied allegations that it fraudulently transferred client funds without authorization. The fraud allegations are being reported by Itau bank and both parties are set to appear before the country’s Tribunal for the Defense of Free Competition (TDLC), which must rule on the case.

The Itau Bank, which initially reported the complaint in February, reiterated its position on September 2 that Buda is perpetrating fraud by not adhering regulations.

According to a report in Criptonoticias, the bank is also accusing Buda of forgery and the use of a fake profile to facilitate the fraud.

During the last days of February 2020, using forged bank details, a false email account, and a digital copy identity card, Buda managed to transfer $26,000 (20 million pesos) from a client’s current account to Buda.com. A user profile had been created in the name of this person (victim) and this was used to illegally to acquire cryptocurrencies.

The report adds that on detecting alleged fraud, the client reportedly made a formal complaint with the “Public ministry” while the bank reignited the longstanding feud with the exchange by reporting that Buda.com does not have effective compliance systems.

In response, an official with the exchange regretted the identity theft but expressed surprised at Itau bank’s allegations.

According to the exchange’s spokesperson, Diego Vera, “the reasons why they accuse (Buda) of promoting scams are unknown since the theft of the credentials was from the client’s bank account with Itaú, not from our platform.”

Vera further argues that it was not Buda’s fault that those behind the crime decided to purchase cryptocurrencies on its platform. Emphasizing the baselessness of the allegations, the spokesperson gives a “hypothetical case in which a thief robs a bank and with the money decides to go and buy a television.”

Vera asks rhetorically: “Is it the fault of the person who sells the television or the lack of bank security?”

Concerning allegations that the exchange platform does not fully adhere to regulatory requirements, Vera dismisses this by explaining that clients “use of dynamic keys when accessing the platform.” Furthermore, “know your customer (KYC) processes are undertaken before accounts are created while the use of an email to prohibit logging in from unregistered IP addresses is also enabled.”

Meanwhile, this case marks the second time the TDLC is asked to settle the feud involving Buda and Itau. In April 2018, Buda and another exchange, CryptoMKT complained to TDLC after Itau closed the pair’s checking accounts.

Ten months later, the TDLC ruled in favor of the exchanges.

What do you think of this haggling between the bank and the exchange? Share your thoughts in the comments section below.

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$1 Trillion in Housing Bonds: US Real Estate Crisis Held Back by Fed’s Mortgage Purchases

02/09/2020 by Idelto Editor

The U.S. real estate market is facing a conundrum, as there’s now a tidal wave of renters who can’t pay rent and a massive number of mortgage defaults stacking up like never before. Amid the looming real estate chaos, the Centers for Disease Control and Prevention (CDC) enacted public health emergency powers to stop landlords nationwide from evicting tenants. Moreover, the Federal Reserve has purchased $1 trillion in mortgage bonds since March, capturing 30% of the country’s outstanding mortgage bonds.

US Housing Market Strained, Rents Slide 30%, Foreign Real Estate Investors Left ‘Holding the Bag’

The coming winter may be pretty tough for a great number of Americans, thanks to the government shutting down more than 60% of the nation’s businesses and the lockdown mandates.

The government’s move has strained the U.S. economy indefinitely and the Federal Reserve has attempted to salvage the financial system via stimulus. All across the country homeowners and rental tenants are facing a crisis and the signs are showing in a number of hard-hit states.

For instance, many popular cities like New York and San Francisco are in distress, as rents plunge to lows not seen in years. San Francisco has seen rents drop significantly to levels not seen in roughly six years.

International investors who invested in U.S. real estate, prior to Covid-19, are now left “holding the bag” according to a number of reports. A number of real estate proponents believe the U.S. housing market is rebounding, but most people don’t understand the Federal Reserve is trying to keep the real estate market afloat.

The Fed Spent $1 Trillion on Outstanding Mortgage Bonds Since March, Captures 30% Housing Bonds

On September 1, a Bloomberg report had shown that the U.S. central bank is on a “mortgage-buying spree,” as it has captured around 30% of outstanding agency mortgage bonds to-date.

Since March, the Fed has funneled $1 trillion into the mortgage bond system and analysts say the stimulus has helped some homeowners refinance. However, the Fed’s balance sheet of U.S. properties also gives the central bank an unfair advantage when it comes to setting lending rates.

Analysts from Morgan Stanley say that the Fed is purchasing these outstanding mortgage bonds at 8x the rate it has leveraged in the past. Moreover, Fed board members have disclosed that the pace will remain “at least, at the current pace.”

A mortgage trader at Wells Fargo, Kevin Jackson, thinks the Fed did the right thing capturing one-third of U.S. mortgages. “We had a pandemic arise and you needed a force to come into the market and stabilize things,” Jackson stressed.

‘Distressed US Properties Coming in 2021,’ CDC Enacts Eviction Moratorium Nationwide Until December 31

Additionally, the U.S. is facing troubles with the number of tenants that cannot pay rent nationwide. Alongside this, apartment rent payments in the United States are down 30% across the board. The rental market is failing so badly that there have been a few eviction moratoriums invoked in some states and on the federal level. Now the CDC is stepping in by leveraging emergency powers in order to stave off the rental crisis.

The CDC’s order is called the “Temporary Halt in Residential Evictions to Prevent the Further Spread of Covid-19.” The CDC’s moratorium will extend the eviction ban leverage in the CARES Act and will expire at the end of 2020.

The CDC has leveraged emergency powers to invoke an eviction moratorium which will hold until December 31, 2020.

Reports say the moratorium will cover roughly 12.3 million tenants who live in single-family homes backed by a federal mortgage, or an apartment complex that is financed by the government as well. Even though critics have questioned the CDC’s move, the agency utilized emergency powers granted by the Public Health Service Act.

“The Centers for Disease Control and Prevention (CDC), located within the Department of Health and Human Services (HHS) announces the issuance of an Order under Section 361 of the Public Health Service Act to temporarily halt residential evictions to prevent the further spread of Covid-19,” the CDC’s order notes. Following the CDC’s notice, a writer covering federal economic policy for Propublica, Lydia DePillis, says “we could see a lot of distressed properties come 2021.”

However, Kentucky’s 4th congressional district leader, Thomas Massie, has been very outspoken against the CDC’s latest eviction mandate. “If this rules sticks, the federal government is effectively seizing property without compensation — Theft at gunpoint,” Representative Massie said on Twitter.

Illusionary Markets and Free Markets

Traditional stock markets on Wednesday have spiked 250 points, as economists see a few equities having a strong September start. But many analysts think that the stock market is extremely far removed from the real world’s products and services because of the Fed’s constant stimulus tactics. The amount of money created out of thin air and the mountains of debt continue to grow. For instance, U.S. debt is set to supersede the economy for a whole year for the first time since World War II.

Meanwhile, precious metals like gold and silver, alongside digital assets like bitcoin and ethereum have shined during the economic downturn. Rather than investing in real estate, which was once a fairly predictable safe haven, many are turning to safe-haven assets that are far more liquid.

With the central bank leveraging massive buys of outstanding mortgage bonds and the CDC’s latest emergency powers use, it is hard these days not to envision the U.S. real estate market as a house of cards.

What do you think about the U.S. real estate markets being propped up by the central bank? Let us know what you think about this subject in the comments section below.

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Nigeria Foreign Exchange Crisis: Worsening US Dollar Shortages Point to Further Devaluation

02/09/2020 by Idelto Editor

Pressure on Nigeria’s current exchange rate is likely to get worse in 2021, when the expected recovery of imports is set to force another devaluation of the local currency to N430/$ next year, according to two Bank of America analysts.

Earlier rate adjustments, one in March and another in July, already appear to have failed to ease the pressure.

Before the latest devaluation, the Central Bank of Nigeria (CBN) maintained an exchange rate of N360/$. Since the devaluation, the Naira has officially been trading at N380/$ and higher.

In their predictions published in the local media, the two analysts, Rukayat Yusuf and Andrew MacFarlane are estimating “the Naira (NGN) fair value at 451/$, implying 15% overvaluation from current levels.”

The analysts add, “Our baseline is for a 3.5% recession, 13.2% inflation and current account deficit of 3.9% of GDP this year. CBN to remain on hold with a 6% deficit covered by foreign loans and domestic issuance.”

In the meantime, the CBN had revised its Naira/Dollar forecast to 390/$1 by year-end from 430/$1 with foreign reserves at $28bn from $22bn. The bank’s projections were based “on higher oil prices, lower imports” and an expectation that “the $1.5bn in World Bank loans to Nigeria” would be ready in October.

However, the Naira currency continues to lose ground on the parallel where the rates (at the time of going to press) range between 455 and 465, according to Abokifx, an exchange platform that tracks parallel market exchange rates. At some point in August, the rate went over 480 before receding.

The ongoing shortages of hard currency are now forcing financial institutions to impose severe restrictions on the quantities that clients can withdraw for onward payment. For instance, one Nigeria bank, Ecobank is advising one client of the new limits. The notice reads:

Kindly be informed that the monthly POS/Web transaction for Naira debit card usage abroad has been further review downward to $20 monthly. We sincerely regret all inconveniences this might have caused.

Such restrictions are forcing some Nigerian businesses to look for alternatives that are immune to censorship. This is confirmed by several data sources that show Nigeria as one of the leading cryptocurrency markets in the world. Nigerians use cryptocurrencies to make online payments and for international remittances.

Chiagozie Iwu, the CEO of Naijacrypto, a locally established cryptocurrency exchange platform. He is in agreement that Nigerians are switching to cryptocurrencies in a bid to avoid current restrictions. According to Iwu, “the exchange rate uneasiness has caused banks to restrict foreign currency usage. This, in turn, has made a lot of people switch to crypto for international remittances.”

Iwu adds that fears of another devaluation will eat into savings, and this might have prompted an increased demand for dollar-based stable coins. Nigerian traders also use cryptocurrencies to pay Chinese vendors.

Meanwhile, the CEO shared Naijacrypto’s traded volumes which buttress the notion that exchange rate challenges are driving Nigerians to cryptos.

“In the last two months on naijacrypto.com Naira to stablecoin conversion increased by over 500% in comparison to February when the Naira/USD was stable.”

As Nigeria’s economic situation worsens, many still expect the already large cryptocurrency market to grow even further.

What do you think of Nigeria’s foreign exchange crisis? Tell us your thoughts in the comments section.

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