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Turkey hit by cryptocurrency fraud

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Cevheri Güven

The websites of three large cryptocurrency exchange platforms in Turkey became inaccessible in rapid succession. The owner of one of them, Thodex, went off the grid with $2 billion that was collected from some 391,000 investors spanning 120 countries. Turkey is now debating these 20-something grifters and their alleged ties to politics.

Faruk Fatih Özer, 28, transferred some $2 billion in cryptocurrency to his accounts and abruptly left the country, accomplishing one of the biggest swindles of Turkey’s history. Özer was the founder of the Thodex platform, where about 391,000 people were carrying out cryptocurrency transactions.

In a short span of time, Özer had reached an immense transaction volume by selling Dogecoin at 30 percent below its international market price. On April 17, just a few days prior to his flight, the daily volume was at $500 million. The fact that Thodex was able to sell Dogecoin below the market price without facing any investigation has been ascribed to Özer’s close links to some powerful political figures.

Thodex in its financial records disclosed to the state had estimated its market value to be around $40 million, despite the fact that it had reached a daily turnover of half a billion dollars.

After Özer’s disappearance with $2 billion, İstanbul prosecutors took action and requested an Interpol Red Notice for him. At the same time, photos emerged of Özer with Minister of Interior Süleyman Soylu and with other leading personalities from the ruling Justice and Development Party (AKP).

It is a widely held belief in Turkey that such large-scale frauds often enjoy political support. Özer’s most important partner was Mert Sancaklı, the 24-year-old son of Saffet Sancaklı, a deputy for AKP ally the Nationalist Movement Party (MHP).

Fraud scandals implicating politicians have been on the rise. A few years ago, another cryptocurrency, Turcoin, was at the center of a $1 billion fraud. Mehmet Aydın, a 28-year-old man who owned Çiftlikbank, a company that promised high profits to farmers who invested in it, fled Turkey in 2018 with $1.3 billion. While Aydın was determined to be in Uruguay and officials vowed to bring him back, no substantial progress has been made for the last three years towards that end.

Özer’s first stop outside Turkey was the Albanian capital of Tirana. According to the Interior Ministry, the police visited the hotel where Özer was staying but found he wasn’t there. It is unknown whether Özer has left Albania.

In recent years Balkan countries have become a new hub for Turkey’s mobs. Sedat Peker, a leading mob boss, recently left Turkey to settle in the region.

Opposition claims belated central bank regulation to blame

Özer’s flight came in the wake of a regulation by the Turkish Central Bank on cryptocurrency platforms. Aytun Çıray, deputy chairperson of the opposition Good (İyi) Party, said the regulation was published on April 16, yet it was scheduled to go into effect on April 30, offering swindlers room for maneuver.

Under the regulation, the central bank banned the use of cryptocurrencies in shopping and imposed restrictions on cryptocurrency companies for the first time. Just ahead of the new regulation, Thodex blocked users from transferring their purchased Dogecoin, which was sold 30 percent cheaper, to their personal digital portfolios, citing technical maintenance to ward off complaints. The Dogecoin withheld by Thodex reached $2 billion in a few days.

After Thodex, another Turkish cryptocurrency firm, Vebitcoin, also became inaccessible, leaving users unable to withdraw their assets. Two days later, on April 24, GoldexCo.in followed suit.

In a statement, the İstanbul Chief Public Prosecutor’s Office said the Thodex scandal had victims from not only Turkey but 120 countries.

Ahead of the central bank regulation’s entry into force, three large cryptocurrency platforms shut down, leaving tens of thousands of victims. The amount of money that was lost has yet to be estimated.

Famous models, luxury automobiles

One reason for the criticism is that everything happened publicly. For two years, cryptocurrency firms published advertisements worth tens of millions of dollars on the internet and on TV. These ads, featuring well-known models and luxury automobiles, resembled more casino ads than those of a financial institution. Throughout the process, no regulation was introduced to Turkey’s cryptocurrency market in order to protect investors.

Turkey is ranked fourth in cryptocurrency use worldwide, with 16 percent of Turks claiming to use or own cryptocurrency.

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