The Central Bank of Sri Lanka is considering filing criminal charges against those behind the crypto scam called Sports Chain, after its victims lost an estimated US$47 million. The Sri Lankan Financial Crimes Investigation Division (FCID) has already charged nine suspects with money laundering, and if found guilty, they'll be ordered to pay three times the stolen funds’ value and could face between five to twenty years of jail time. Banks accounts associated with the suspects were frozen and they're having their assets seized.

The scheme lures victims in with a 500% return investment as a way to cope with the runaway inflation that affected Sri Lanka since August 2022. People invested via pawning jewellery, refinancing property or even selling vehicles. While the legal counsel of the suspects argued that the accused never created the app used in the fraud, the Sri Lankan central bank must still charge them for breaking the Banking Act for victims to get compensation. The Colombo Magistrate’s Court will hear the FCID’s case in August 2023.

Cases of crypto scams are not exclusive to Sri Lanka. In Argentina, Brazil, South Africa and other developing countries, Ponzi and pyramid schemes take advantage of the immature regulatory frameworks and less robust anti-money laundering controls, according to a Chainalysis Account Executive. The mix of a lack of good regulatory rules and currency devaluation make investors more vulnerable to falling in these scams, as evidenced by the US$11.8 million and US$7.3 million lost in Argentina and Brazil respectively in 2022.

Seeing the potential of the growing crypto markets in Latin America, Binance, the global cryptocurrency exchange, has announced its expansion into Argentina where people can buy cryptocurrencies directly with the Argentine peso. At the same time, the National Securities Commission of Argentine (CNV) has looked into implementing a proof-of-solvency requirement for crypto companies, in order to prevent further losses to the public.

In conclusion, the Central Bank of Sri Lanka is looking to impose criminal actions to those behind the crypto scam, Sports Chain, as a penalty for their misdeeds, while cryptocurrency companies are looking to increase the safety regulations in these markets to prevent further losses to innocent investors.



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