STAFF REPORTER A RAPIDLY growing number of South Africans are getting into financial trouble by “investing” in cryptocurrencies such as Bitcoin and Ripple.
Neil Roets, the chief executive of debt counselling company Debt Rescue, says he was amazed when people driven to the brink of bankruptcy because they had bought into get-rich-quick schemes involving cryptocurrencies began applying for debt counselling.
“Our first cryptocurrency victims came to us towards the end of last year. They 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.
“When the promises of great fortunes failed to materialise, many of them did the right thing by seeking help by going under debt review,” Roets says.
He says some of the scams involved accounts being hacked by offshore hackers who stole every last cent or sellers who did not deliver the digital currency after they had been paid.
It is patently obvious that cryptocurrencies are probably one of the most volatile commodities on Earth, or quite possibly an outright scam.
Last Saturday, hackers hijacked the Black Wallet server, a platform used for the Stellar Lumen cryptocurrency. They stole $400000(R4.8 million) from users’ accounts and transferred the currency to an untraceable third-party site.
In most cases, however, the vast losses were a result of the extreme volatility in the prices of cryptocurrencies, Roets says.
“If anything ever proved the saying by the great American circus owner PT Barnum that ‘there’s a sucker born every minute’, this experience did just that. To most of us with even a semblance of knowledge of how wealth is accumulated, it is patently obvious that cryptocurrencies are probably one of the most volatile commodities on Earth, or quite possibly an outright scam.
“The fact that two of the world’s most successful investors, Warren Buffett and his long-time partner Charlie Munger, both agreed that they would never invest in cryptocurrencies says it all. They predicted that the two best-known cryptos – Bitcoin and Ethereum – would both take a massive nosediv e early in the new year,” Roets says.
“I can say almost with certainty that cryptocurrencies will come to a bad end,” Buffett told CNBC in an interview recently
Roets says consumer debt in South Africa is now at almost R1.71 trillion (according to the latest figures released by the South African Reserve Bank), which shows that consumers have not cut back on spending.
He says almost 50% of consumers are three months or more behind in their debt repayments. The major culprits are credit and store cards, followed closely by unsecur ed debt.
The only relief for consumers who are in over their heads is the legally binding system of debt review, which allows consumers to repay their debts over a longer period in smaller instalments – often at a discount.