“Personal reasons” were given as the cause for the suicide. According to police, the 22-year-old committed himself after losing money they had put in a fictitious cryptocurrency company. As reported by Luke Oweyesigire, deputy spokesman for the Kampala Metropolitan Police Department, the man had invested all of his savings and some of his own borrowed funds in what turned out to be a Ponzi scam, drawn in by the promise of huge profits.
Unprecedented cryptocurrency scams are wreaking havoc on Uganda, transforming it into an unexpected center for fraudulent companies purporting to provide digital currencies while preying on the country’s poor governance and lack of financial knowledge. Other big cryptocurrency scams in 2019 targeted developed economies — the BITPoint exchange in Japan suffered a $28 million loss, while con artists in the United Kingdom and the Netherlands took $27 million from Bitcoin customers in the two countries. According to the FBI, cybercriminals stole $4.3 billion from users and exchanges across the world last year. Uganda, on the other hand, has been struck the worst – by far.
In the last six months, at least five cryptocurrency companies have gone out of business and walked away with a combined total of more than $26 million in client funds from their customers. The victims represent a cross-section of Ugandan society, ranging from students and churchgoers to army commanders and government officials. 200,000 Ugandans have lost about $1 billion, or almost 4 percent of the country’s gross domestic product (GDP), according to Robert Bakalikwira, a criminal investigations officer who has been investigating these instances.
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These frauds are distinct from those carried out in the Western world when hackers have stolen from stock markets or robbed individuals. In Uganda, bogus companies purporting to sell cryptocurrency are enticing customers with promises of high returns before disappearing with their money. The country’s escalating problem may serve as a model for other impoverished countries with lax laws that cannot keep up with the often deceptive promises of technological advancement. “We have received a large number of reports of cryptocurrency frauds,” says Fred Enanga, a spokesman for the Ugandan national police. “We strongly warn Ugandans to avoid being duped out of their money in such transactions.”
The involvement of President Yoweri Museveni’s administration, on the other hand, is being called into question. It has established a 10-member committee of investigation and is making public announcements to inform Ugandans that the government and central bank do not recognize any cryptocurrency as legitimate money. Nonetheless, even though the nation has no laws for the industry, the government has not declared it unlawful to run a cryptocurrency company in the country.
During an occasion in Kampala in January 2017, during which Bank of Uganda Governor Emmanuel Mutebile said that he was not confident in the legitimacy of cryptocurrencies, the president of Uganda rejected him and declared that he would not accept his statement. In the following years, a torrent of businesses flooded the nation. Some were genuine, but many were fake. “Museveni is partially responsible for our misery,” says Ken Wamala, a 50-year-old resident of Masaka, a hamlet in southern Uganda, who claims frauds have cost him about $41,000 in total. Among the fraudsters are Dumanis Coins, whose management vanished on December 3, 2019, after receiving $2.7 million in Ugandan shillings from unsuspecting victims. There were more than 10,000 individuals who had made investments in the business.
