Crypto market meltdown rattles 12 million East African investors

Tuesday June 28 2022

Cryptocurrency-based crimes hit a record high in 2021, with illicit transactions rising 79.4 percent to $14 billion, from $7.8 billion in 2020. PHOTO | FILE


A painful financial journey has ensued for at least 12 million East Africans who are now counting, in billions of dollars, losses both from the cryptocurrency market crash and a series of related Ponzi ‘get-rich-quick’ schemes that have unfolded in the wake of the crisis.

As extreme market conditions force legitimate crypto-exchanges to close shop with many laying off employees, reports of some crypto-investment schemes disappearing with investors’ funds have started to surface. This raises questions about the future of unconventional assets.

Bitcoin, the world’s oldest and largest cryptocurrency, worth $67,566 in November last year, has shed at least 70 percent of its value, and is now struggling to stay above the $20,000 benchmark.

Fraudulent schemes

In general, total global market value for all crypto assets has fallen to about $890 billion from $2.8 trillion last November, which has plunged several East Africans holding cryptocurrencies into financial turmoil.

Also, there are growing cases of fraudulent schemes around cryptocurrency investments, which, according to American consumer protection agency Federal Trade Commission, led some 26,000 people to lose over $1 billion since 2021 in the US alone.


Just two weeks ago, some cryptocurrency founders disappeared after defrauding Kenyan would-be investors of at least $8.5 million, barely six months after it surfaced on the internet, and this week, four young men were brutally murdered over alleged crypto-scamming.

Read: Crypto market meltdown linked to sell-offs triggered by inflation

In Uganda, over 5,000 victims of a crypto pyramid scheme recently lodged a petition demanding that the government should refund them about $2.7 million they lost to a firm allegedly licensed by the state.

Kenyan blockchain expert Prof Bitange Ndemo told The EastAfrican that this season marks the beginning of the waning success of Ponzi schemes clothed in crypto assets investment garb as people have started to learn their anatomy and will avoid them.

Read: 4 million Kenyans suffer crypto crash losses

Hope springs eternal

Prof Ndemo, who is a former Principal Secretary at the ICT Ministry and chairperson of the Taskforce on Blockchain and Artificial Intelligence, said many people are gullible to crypto-scamming because of lack of knowledge, coupled with a parlous appetite for fast income.

“By now, many have learnt to be wary of any schemes that promise guaranteed huge returns,” Prof Ndemo said.

“Any scamming, thrives on lack of knowledge. The more people learn about emerging blockchain technology, the less these pyramid schemes will exist,” said George Mwakisha, East Africa’s country representative for Binance, a global crypto exchange.