A poor economy is a prime target for financial scams. Citizens with a low standard of living are quick to latch on to any scheme that promises them financial freedom and a better life. This is the story of the citizens of Uganda. In the last 15 years, Ugandans have fallen victims to diverse Ponzi and pyramid schemes. A 2018 report by the Financial Intelligence Authority puts the number at 18 and includes schemes like World Global Mobile Network, Telex Free, AdfastInc, One Thor and Amazon Traders. In recent times, fraudsters have leveraged the allure of cryptocurrencies to further fleece Ugandans.
Crypto scams have rocked Uganda so much that Patrick Mweheire, the chairman of Uganda Bankers Association, said bitterly that “Ugandans are better off investing their money in cows than plunging into the unknown world of cryptocurrencies.” The scammers prey on citizens’ naiveté and poverty to defraud them of money totaling millions of dollars. The stories of these victims are disheartening. So while many countries are embracing the autonomy, boundlessness and confidentiality of cryptocurrencies as the perfect substitute for fiat currencies, Ugandans see cryptocurrencies as a curse.
In March 2019, Dunamiscoins Resource Limited (DRL) told Ugandans that they are committed to introduce them to the world of online trading and its cutting-edge innovations. They also said they would provide financial and real estate services to the micro, small and medium enterprises of its members. They called for investments and partnerships, promising a 30 percent return within 21 working days. There was even a special offer of 40 percent returns for individuals who invested 2 million shillings (~ $530) and above.
Many Ugandans invested and plowed more money into scheme after receiving their first profits. The scheme spread like a virus: friends told friends who told other friends about it. For instance, one Mr. Mutebi was introduced by his wife who was introduced by a certain OsbertMulungi, a manager at DRL’s Ndeeba branch. They started out with a deposit of 5 million shillings in July and received 7 million shillings after 21 days. A compiled list revealed that over 1,000 people registered with DRL, but random sources said that the number was around 10,000. Aside Kampala, the country’s capital, branches of DRL sprouted in other suburban areas like Namasuba, Mbale, Masaka, Mukono, Arua and Ndeeba. The profits kept rolling in for clients. Business moved smoothly. Everyone was happy. But in December, the bubble burst.
DRL offices were closed. Phone calls didn’t go through. The administrators were nowhere to be found. It was then the scales fell: clients realized it had been a scam all along. The directors of the crypto scam had made away with about 10 billion shillings (~ $2.6 million). The family of Mr. Mutebi lost a collective sum of 63 million shillings (~ $17,000). Apart from the Mutebi’s, DRL’s crypto scam fleeced an Indian of 250 million shillings (~ $66,000), while another client was arrested because of a loan of 4 million shillings (~ $1,000)she invested.
Dunamiscoins not only duped people on the outside, but also its employees. For example, they hired about 50 locals in Masaka to work in the company. The job roles included marketing executives, managers, cashiers and office assistants. Applicants were asked to pay 20,000 shillings to register with the firm. But when applicants resumed work the next day, they found empty offices.
However in December, a director of DRL, Mr. Samson Lwanga, was arrested. Mr. Lwanga said he was willing to refund the money of clients but couldn’t because their accounts were frozen by the Financial Intelligence Authority. The scam operated three accounts in Centenary Bank, GT Bank and Stanbic Bank. The freezing of the accounts was confirmed by Mr. Arthur Mpeirwe, a lawyer, who said that he received information thatDunamiscoins had 10 billion shillings in their Centenary Bank account which had since been frozen.
The amount of money in the other bank accounts weren’t confirmed, but it was reported that the accounts were also frozen. Another director, Mary Nabunya was later arrested and arraigned in court together with Samson Lwanga in January 2020. The duo faced a 65-count charge to which they pleaded not guilty.
Before Dunamiscoins closed shop in December, another fake crypto company called Global Cryptocurrencies had closed in November. It had more than 10,000 clients who had invested a total of $8.2 million. Luckily, its chief executive, Andrew Kagwa was arrested two weeks later. Lion Cryptocurrency, another crypto scam, had closed earlier in October carting away $5.4 million invested by 17,000 people. D9 Cryptocurrency shut down with the investments of 9,000 people totaling $3.2 million. And RujaIgnatova’sOneCoin (known as one of the biggest financial scams in history) duped 12,000 Ugandans of $6.8 million.OneCoin even used a church to penetrate the citizens of Uganda.
It was promoted by one Simon Lee to the members of OneLight Church under the name OneLife. Most of these crypto scams started and ended in 2019. Meanwhile, in early 2018, a couple of fake cryptocurrency companies — Fital-Science, Finetegry, Dutch International and Team — had also shut down leaving thousands of Ugandans stranded.
In some cases, clients did not only lose their financial investments, but also their health or in extreme cases, their lives. For example, a victim of DRL’s scam said that her aunt collapsed when she heard that they had been duped. Ashraf Nusubuga, a 22-year-old radiology student of Makerere University in Kampala committed suicide after losing money (some taken as loans) to a crypto scam. The victims of these scams cut across different walks of life — students, army officers, even government officials. Ozy.com wrote in an article that Robert Bakalikwira, a criminal investigations officer said that in the last two years, 200,000 Ugandans have lost around $1 billion to these scams, which is almost 4 percent of Uganda’s GDP of $28 billion.
The question now is: why do Ugandans keep falling victims to crypto scams? One thing about these scams is that they do not only deceive the masses, but the government too. They register with the government as legitimate companies. For instance, Dunamiscoins was incorporated as a private limited company with the registration number, 8002000148167. It was insured with an insurance company called Jubilee Insurance, and registered as a microfinance institution with the Uganda Microfinance Regulatory Authority.
Apart from this, some people blame the country’s president, President YoweriMuseveni for the scams. The president has been known to be a proponent of digital currencies. Ozy.com reported that in an event that held in Kampala in January 2017, the governor of the Bank of Uganda, Emmanuel Mutebile had expressed his apprehension about the credibility of digital currencies, but was rebuffed by the president who called him “dogmatic”, and advised that people should embrace the technology of digital currencies. As a result, many Ugandans saw this statement as an endorsement of cryptocurrencies, and soon crypto firms flooded the nation — both legitimate and fake.
Furthermore, the country’s legislation and scrutiny on cryptocurrency firms was weak not only because of Museveni; some of the officials of his government were also key promoters of cryptocurrencies. For instance, Kwame Rugunda, the son of Prime Minister RuhakanaRugunda was the CEO of a cryptocurrency advisory firm called CryptoSavannah.
On one hand, we can easily exonerate Museveni and his officials because they were only promoting the legitimacy and benefits of cryptocurrency. However, on the other hand, they cannot be completely exonerated if we consider the fact that the country has a high corruption index — ranking 160 in Transparency International’s index. The country’s corrupt system played a major role in enabling these frauds as some of these bogus cryptocurrency companies were approved and registered even when they didn’t meet the statutory requirements.
The story of Uganda shows that as the acceptance of digital currencies is growing, so also is the skepticism. For a country like Uganda that has fallen prey to these scams for years, it would be difficult for legitimate firms to educate and promote the benefits of cryptocurrencies. Uganda is a poor nation, thus cryptocurrency offers a veritable way for her citizens to gain financial liberation.
Therefore, the government has a duty to inform and protect her citizens. Since Museveni encouragesthe acceptance of cryptocurrency and its technology, he has the primary duty to first understand what it is and the legitimate brains behind it. He could invite renowned crypto teachers, chief executives, developers and investors to his country so that they can appropriately educate citizens. Citizens should be taught how to make their own research — what to look out for before making an investment.
Finally, the government should look into sanitizing its systems. Poor citizens always bear the brunt of corrupt systems. These citizens are only interested in creating a better life for themselves and their families. They shouldn’t be made to lose what they have worked for over the years. If Museveniis really interested in the financial welfare of his people, then he should mop up the bad eggs in the system.
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