The Central Bank of Sri Lanka (CBSL) has announced that it is mulling criminal action against a group that ran a crypto investment scheme dubbed Sports Chain, seven months after an Al Jazeera investigation exposed it as a scam.
In a notice published on March 21, the monetary authority declared that the investment venture had been run as a pyramid scheme, which is prohibited under Sri Lanka’s Banking Act.
“We conducted investigations for several months,” M D S N Gunatilleka, the additional director of the CBSL’s resolution and enforcement department told Al Jazeera. He declined to give further details immediately.
The CBSL said it has sought the advice of the attorney general – the chief legal adviser to the government – on pressing criminal charges against those responsible.
Under Sri Lankan law, running pyramid schemes can result in imprisonment between three to five years. Offenders also have to pay a fine of 2 million Sri Lankan rupees ($6,222) or twice the amount received from the participants in the scheme, whichever is higher.
In August 2022, Al Jazeera revealed that as the economy around them cratered, thousands of Sri Lankans, including professionals like doctors, politicians and security personnel, fell prey to the fake crypto scheme.
Some gave up their jobs in the hope of high returns while many pawned their jewellery, mortgaged their property and sold their vehicles to invest all they could in the cryptocurrency introduced to them as Sports Chain. Despite being promised a five-time higher return, they had barely received what they had invested and many did not even get that.
What they did not know at the time was that the cryptocurrency named Sports Chain never existed in the virtual currency market.
Sri Lanka’s Financial Crimes Investigation Division (FCID) began investigations less than a month after Al Jazeera’s revelations and has since charged nine suspects for money laundering.
If found guilty under the Money Laundering Act, the suspects will be liable to pay the state a fine of up to three times the value of the defrauded property. They can also face between five and 20 years of jail time.
But for the investors to retrieve their money, Sri Lanka’s central bank will have to charge the suspects under the Banking Act for running a pyramid scheme.
Lawyers appearing for the accused maintain their clients cannot be charged for money laundering.
“Our clients were not the creators of this app. They had no control over it,” lawyer Tivanka Ekaratne, appearing for the accused, said.
“This has not been proven as a pyramid scheme yet. It is the investors who have made such claims,” Ekaratne said responding to Al Jazeera on the CBSL’s decision to prohibit Sports Chain.
During hearings at the Colombo Chief Magistrate’s Court late last month, attended by Al Jazeera, the FCID said it was continuing investigations into the suspects.
“They had swindled more than 15 billion Sri Lankan rupees ($46.6m) from more than 8,000 Sri Lankans,” the FCID said in a petition filed with the Colombo Chief Magistrate’s Court.
