An MLM-based investment scheme that used bitcoin as its transactional currency has gone bust, in Vietnam.
A Vietnamese investment scheme that used multi-level-marketing (MLM) and bitcoin as its currency to promise investors returns of 144% a month has come to an end.
MLM trading is illegal by law in Vietnam, as deemed by the Vietnam Competition Authority (VCA), but that didn’t stop unsuspecting users from pouring money into the scheme.
The Ponzi scheme first surfaced in January this year. It used the domain “fxmt4.us”, seeking participants to register with an account before demanding a minimum deposit of 1 bitcoin, as the buy-in, according to local publication Thanh Hien .
Early investors saw early returns, fueling the interest among residents like farmers at a countryside district in Vietnam. Initially, investors saw 1% in returns a day, for the first month. After the first month, that rate increased exponentially, with returns of 24% for every five days. Over a month, that works up to 144%.
By May, the scheme was no longer paying out dividends and soon enough, the platform and the domain went offline.
A preliminary investigation by local police revealed 1,900 registered accounts on the platform which saw a total of 1,900 bitcoins deposited, valued at 22 billion Vietnamese Dong (approx. $1.1 million). Hundreds of people, several who registered multiple accounts, lost their investments.
A forensic investigation of the website was unable to determine the location of its server.
In light of an increasing number of bitcoin schemes in eastern Asia, a Vietnamese regulator issued a public statement to its citizens, warning against using bitcoin as an investment. The statement also pointed to the stance taken by the State Bank of Vietnam, which, in 2014, pointedly stated that bitcoin and other virtual currencies are not a legal form of payment or settlement in Vietnam.
While the cryptocurrency isn’t prohibited in the country, a lack of regulation also means that users’ bitcoin payments and deposits aren’t protected by law either.
Despite the unfortunate scheme, Vietnam’s $14 billion remittance industry, a tech-friendly population with an exploding pace of smartphone adoption and its position as one of the fastest-growing economies in the world bears the foundation for a country with ripe potential for adopting digital currencies.
Images from iStock/mattjeacock and Shutterstock.