Beware of cryptocurrencies, warns debt expert

A rapidly growing number of deeply indebted consumers are getting themselves into financial trouble by “investing” in cryptocurrencies such as Bitcoin and Ripple.

Chief executive of Debt Rescue Neil Roets said he was “amazed” when the first clients started applying for debt counselling who had been driven to the brink of bankruptcy by buying into get-rich-quick schemes involving cryptocurrencies.

“We interviewed our first cryptocurrency victims towards the end of last year who wanted to go under debt review because they were no longer able to adequately service their debt.

“To my amazement, many of them had been the victims of scams involving cryptocurrencies which promised massive returns.

“Some of them had gone as far as pawning their vehicles, taking out second bonds on their homes and borrowing money on credit cards in order to buy cryptocurrencies.

READ: Bitcoin heads to Wall Street whether regulators are ready or not

“When the promises of great fortunes that would be made through these purchases failed to materialise, many of them did the right thing by seeking help by going under debt review,” Roets said.

He said some of the scams involved accounts being hacked by offshore hackers who stole every last penny or by sellers who never actually delivered the digital currency after they had been paid.

 digital currency
Photo by Carlos Muza on Unsplash

In most cases, however, it was simply the vast losses they incurred as a result of extreme volatility of these currencies, Roets said.

They said, just to prove the point, an unknown hacker (or hackers) managed to hijack the BlackWallet server, a platform used for the Stellar Lumen cryptocurrency (XLM) at the weekend.

“They stole $400 000 (nearly R5 million) from users’ accounts and transferred the currency to an untraceable third party site.”

Roets said total consumer debt now stood at close to R1.71 trillion (according to the latest figures released by the reserve bank) which clearly showed that South African consumers had not cut back on spending.

A recent World Bank index has also showed that South Africa was one of the most indebted countries in the world.

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