- Alleged middleman says platform is not a pyramid scheme, holds out new promises
- Depositors get no returns, but only excuses; CID financial crime unit launches probe
By Sandun Jayawardana
Mathematics tutor Kavish* (35) was hoping to go abroad to study for a Master’s Degree. But the COVID-19 pandemic in 2020 brought about border closures, scuttling those plans. Then early last year, the mother of one of his students persuaded him to invest Rs. 3.5 million he had set aside for higher studies on a new cryptocurrency scheme that was gaining rapid popularity. The decision would prove disastrous, as Kavish became one of many to fall victim to an alleged Ponzi (Pyramid) scam dealing with Virtual Currencies (VCs).
Kavish was given the contact number of one of the key men behind “Sports Chain,” which claims to be a cryptocurrency investment platform. It appeared to be an attractive scheme. The pandemic had battered the economy and yearly interest rates for even Fixed Deposit (FD) accounts in local banks had been slashed to less than 10 percent. Sports Chain was offering monthly interest rates of between 10 and 15 percent.
VCs, also known as cryptocurrencies, are only available in electronic form and are stored in a digital wallet, which can be online, on a computer, or on an external hard drive. VCs are digital representations of value whose transactions occur on online networks or on the internet. VCs, however, are issued by private organisations or groups of developers and are not regulated by central banks.
Those who invested with Sports Chain needed to download an app from the platform’s website and were told that the money they invest would be converted into a cryptocurrency known as USDT. Interest would be received via a token and once an investor had collected a minimum of 100 tokens, he or she would be able to convert those tokens to USDT, and withdraw the corresponding amount in rupees, they were told.
The man whom Kavish met had told him he needed to invest Rs. 1.2 million to get started. He eventually invested Rs. 3.5 million in the scheme in three instalments in May, July and August last year. Two of these instalments were deposited in the personal bank account of the man he met. One instalment of Rs. 1.2 million, however, was handed over in cash at a restaurant on the man’s instructions.
Kavish said he invested more because he had initially received some returns. “I received about Rs. 400,000 but then the returns stopped and I could not withdraw my money. This has been the situation for close to a year now.”
Those who spoke to the Sunday Times claimed that Sports Chain was first introduced to the country in 2020 by a Sri Lankan national named Shamal Bandara and a Chinese national identified as Zhang Kai. There were also six or seven locals who formed a “core team” of the operation. They were assisted by another group of persons operating at the district level.
Those behind the scheme gave different excuses regarding why the payments had slowed. “They first said it was because the country was locked down at the time and that with so many people using the internet, the speed had slowed. But this held no water because there were Sri Lankans living overseas who had invested in the platform and they were having the same issue, even in developed countries where internet speeds were far better than ours. They then claimed that withdrawals were being delayed due to a system upgrade. All we got were excuses, but no word on what happened to our money,” Kavish said.
Piyal* (35) was introduced to the platform through a friend of his wife. He was working in tourism and had seen his income drastically reduce owing to the pandemic. He eventually emptied an FD account, took out a loan and even pawned some jewellery to invest Rs. 2.5 million in Sports Chain. Like Kavish, he, too, had been told to hand over Rs. 1.2 million of the money in cash. He was not given a receipt.
He said he received about Rs. 400,000 over the course of four months before payments stopped around October last year. After multiple attempts to get those behind the platform to return his money failed, Piyal went to the police in January this year.
Those who claimed to have lost money said they had become aware that they were bottom-tier investors in a pyramid scheme and this was why they were not getting their returns.
|Court imposes travel ban on five people connected to Sports Chain
On Monday (12), Colombo Additional Magistrate Manjula Rathnayake issued a travel ban on five persons who are allegedly connected to Sports Chain. They were also issued notice to appear in court on December 9.
Accordingly, a travel ban was imposed on Amith Wickramage, Shamal Keerthi Bandara, Shanaka Madushan Wijesinghe, Rovinda Manjula Medawatta and Pradeep Kumara Hanthana.
The order was issued in response to a case filed by Attorney-at-Law Nalin Pathirana on behalf of Sudath Ranjan Silva, who claims he had been defrauded of Rs. 2.4 million through the scheme.
Sports Chain had been established in Sri Lanka in February, 2020. It was in villages in areas such as Polonnaruwa, Anuradhapura, Trincomalee and Kurunegala that the scheme was first popularised. It subsequently moved to urban areas, including Colombo. Seminars were held in five-star hotels and conference venues to “educate” investors on the platform. While investors were told they could earn a passive income with their money alone, they were also allegedly encouraged to bring in others to the scheme as the more investors they brought in, the bigger their returns would be.
Victims who have fallen prey to the scam include professionals such as doctors, lawyers, teachers and armed forces personnel. Exactly how many have fallen victim to the alleged scam is still unclear.
A colleague who worked with Asitha* (50) in a popular restaurant in Colombo introduced him to the scheme last year. By March, he made his first deposit of Rs. 1.2 million to the bank account of one of the core team members. He handed over a further Rs. 1.2 million in cash to the same individual in August. He was only able to get back about Rs. 600,000 before the payments stopped.
“My greatest regret, however, is that I also introduced two of my younger relatives to the scheme and they put in a combined Rs. 2.4 million into it. They didn’t receive a cent,” Asitha claimed.
The Central Bank (CBSL) issued notices to the public in 2018, 2021 and again in July this year warning them to be wary of trading in Virtual Currencies. “The CBSL has not given any licence or authorisation to any entity or company to operate schemes involving VCs, including cryptocurrencies, and has not authorised any Initial Coin Offerings (ICO), mining operations or Virtual Currency Exchanges,” a CBSL statement said in July. The statement also noted that VCs were considered unregulated financial instruments and had no regulatory oversight or safeguards relating to their usage in Sri Lanka.
The Criminal Investigation Department’s Commercial Crime and Financial Crime Investigation Unit has now launched a probe into complaints regarding Sports Chain, a senior police officer confirmed.
The Sunday Times also contacted Shamal Bandara for comment. Mr Bandara said Sports Chain was a global operation and denied he had any leadership role in popularising the scheme in the country. “I too am an investor with Sports Chain. I have assisted many fellow investors who wanted help in obtaining USDT for their accounts. That is probably why some people single me out, but it is definitely not my operation.”
He added that Sports Chain had informed users some months ago via the app that it would “go mainstream” from January next year, which means that its token would be listed in a digital currency exchange, allowing for greater trading. What Sports Chain has been doing for the past two years is building its “eco system” with enough users for this to happen, Mr Bandara said. Trading could still be done within this group of users and people have made money from it, he added. “I have never taken any money personally from people for them to invest in this app. If someone has done so, then it is an offence and has to be dealt with by law.”
Mr Bandara also refuted claims that Sports Chain was a pyramid scheme.
*Names have been changed
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