Turkey’s ‘Crypto King’ fiasco is a warning shot for alt-asset investors worldwide

By July 21, 2021Binance
Click here to view original web page at gulfnews.com
200314 trading crypto
Four months ago, Faruk Fatih Ozer, the founder of Thodex, a cryptocurrency exchange, fled Turkey to Albania, after he raised $2 billion from hundreds of investors.
Also in this package

Before talking about the fleeing of the 'Crypto King' with a staggering $2 billion, it would surprise no one if his story were turned into a Hollywood caper flick. Four months ago, Faruk Fatih Ozer, the founder of Thodex, a cryptocurrency exchange, fled Turkey to Albania, after he raised $2 billion from hundreds of investors to invest in cryptocurrencies and promising blockbuster returns.

He managed to do so despite these Turkish investors finding that most forms of investments are closed to them. For example, gold, an all-time safe haven, has disappeared from Turkish markets, while investors in the real estate sector are facing insurmountable difficulties as the lira continues to collapse by the day. (The price of the dollar has exceeded eight liras against two liras 10 years ago.) These conditions have created an environment suitable for fraudsters, particularly by using cryptocurrencies, dangling the promise of high returns, which millions of investors around the world believed and continue to believe. Even though there is no economic data to justify those claims.

So, the emergence of crypto kings is part of this process, especially since cryptocurrency exchanges have begun to spread rapidly. Even the ban on the use of cryptocurrencies has failed to stop its transactions.

A failed intervention

The Central Bank of Turkey has ban the use of cryptocurrencies and encrypted assets for the purchase of goods and services, saying that there are significant risks in these transactions. This means that the actions initiated by Turkish authorities by issuing an international warrant for the arrest and delivery of Faruk may not come to fruition, knowing that even if he is arrested, the $2 billion will not return because this would be deposited in secret accounts and under multiple names that are difficult to trace.

Such a scenario puts those who lost their saving in a real predicament, especially since some of them have put most of their savings in this cryptocurrency exchange. The Washington Post recently noted that the Biden President's administration is currently studying rules governing the cryptocurrency market to determine whether new restrictions are needed to track digital assets and prevent their use in certain activities, such as sponsoring terrorism.

Cracking down on one

The latest move came from Britain announced the ban on the world's largest crypto exchange Binance, declaring that the platform cannot conduct any regulated activity in the UK. The Financial Conduct Authority warned traders not to deal with Binance and advised people to be wary of adverts promising high returns on cryptoassets. The authority also asked Binance to remove all promotional material.

Such strict measures show the extent to which the activities of these exchanges have become dangerous to investors and economies, although there are companies that are officially authorised and registered to trade in cryptocurrencies in many countries, including Britain and the US. The US Treasury Department has asked to impose taxes on cryptocurrency transfers between companies to increase revenues, which means that crypto transactions will be subject to stringent regulations.

But this does do not constitute a guarantee that assets will not be lost for any reason, including losses resulting from speculation or bankruptcy, as well as from fraud. In May, Bloomberg reported that BlockFi, a company specialised in lending cryptocurrencies, mistakenly deposited $10 million worth of bitcoin to some of its users’ accounts. The company said it would recover these funds.

What has been mentioned is a small part of the top of a mountain that can collapse and cost investors heavy...

The writer is a specialist in energy and Gulf economic affairs.

All Today's Crypto News In One Place