A growing number of deeply indebted consumers are getting themselves into financial trouble by “investing” in cryptocurrencies such as bitcoin and Ripple.
I was amazed when the first clients started applying for debt counseling who had been driven to the brink of bankruptcy by buying into get-rich-quick schemes involving cryptocurrencies.
Some of them had gone as far as pawning their vehicles, taking out second bonds on their homes and borrowing money on credit cards to buy cryptocurrencies.
When the promises of great fortunes that would be made through these purchases failed to materialise, many sought help by going under debt review.
Some of the seams 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.
An unknown hacker (or hack ers) managed to hijack the BlackWallet server, a platform used for the Stellar Lumen cryptocurrency (XLM) on January 13.They stole $400 000 (nearly R5 million) from users’ accounts and transferred the currency to an untraceable third-party site.
In most cases, however, it was simply the vast losses they incurred as a result of these currencies’ extreme volatility.
The fact that two of the world’s most successful investors, Warren Buffett and his long-time partner, Charlie Munger, 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 nosedive early in the new year.
The legally binding system of debt review allows deeply-indebted consumers to repay their debts over a longer period of time in smaller instalments – often at a discount.
> Neil Roets is CEO of Debt Rescue