• Wednesday, May 29, 2024
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BusinessDay

Nigerians still flock to InksNation 3 months after scam warning from SEC

Increasing scam alert points to need for safe, smart banking

Nearly 200,000 Nigerians – with over 5,000 people active daily – still claim membership of a Telegram group created by InksNation, a platform flagged in June by the Securities and Exchange Commission (SEC) of Nigeria.

iBSmartify Nigeria, the promoter of InksNation, claims it invented a philanthropic blockchain platform that can end poverty in any country in less than 9 months. Other claims include inventing the world’s first reserve cryptocurrency called PinKoin and Africa’s first QR debit card called Pinkard.

Earlier in 2020 when it unleashed a series of online campaigns to attract users to its platform, the SEC had to issue a statement warning Nigerians that the activities of iBSmarty were illegal.

“These activities are perpetrated by suspected promoters of Ponzi and other fraudulent schemes under the following identities: Loom Nigeria Money, Box Value Trading Company Ltd, Now-Now Alert, Flip Cash Investment, Result Investment Nigeria Limited, Helping Hand and Investment and No Failure Development and Empowerment Nig. Ltd.,” the SEC said.

Nigerians still flock to Inksnation three months after scam warning from SEC
InksNation logo

While participants are not allowed to post on the Telegram group, many of them have taken to the platform’s social media handles to express their grievances many of which range from not being able to get registered after making payment to getting locked out of the platform for different reasons, a BusinessDay investigation found.

Does InksNation have red flags?

Apart from the several ambitious claims, the Whitepaper of InksNation makes many of which do not add up with the realities in the blockchain world, Paul Ezeafulukwe, President of Stakeholders in Blockchain Association of Nigeria (SiBAN) said the red flags are really fundamental. To start with, while InksNation claims to be a project on a blockchain there is no evidence to show that it actually exists. The only explanation provided of the type of blockchain is that it is “backed by human asset”.

One of the easiest ways to understand the word blockchain is to separate them into “block” and “chain”. This simply refers to digital information (the block) stored in a public database (the chain). Blocks store information about transactions like the date, time, and naira amount of the most recent purchase from Jumia Nigeria. A fundamental characteristic of a public blockchain is that it is open for anyone from any part of the world to view by harsh transaction or address or other means. This is why the blockchain is mostly described as transparent.

“Even if theirs is private like Monero, they should show us. What are they offering and what particularly are they talking about?” Ezeafulukwe said. “For us in SIBAN, we are not against people exploring any particular option or anything concerning the blockchain. But what we are against is whereby your exploration is at the expense of gullible investors who do not understand what you are talking about.”

Another red flag for SiBAN is the promised salary for life. According to InksNation, its reserve coin called PinKoin is capable of paying every single Nigerian, African and human on earth including babies born every day a minimum of N120,000 ($330) monthly for life universal child basic income (UCBI). There are different classification of investments that users can access. In one of the categories, a user with N1000 gets a salary for life.

This claim suggests InksNation would have to determine the price of its minted tokens, therefore obstructing market forces.

While there are over 2500 cryptocurrencies listed on hundreds of digital exchanges, they all have limited or predetermined coin supply. Their value therefore is determined by supply and demand. For instance, when a coin’s supply is limited or highly restricted, like Bitcoin, and demand is increasing, the price of that coin goes up.

“In the blockchain, you do not determine the price of your minted tokens even if you predetermine it, the market forces are supposed to control. It is like coming out with a bank and I say buy my shares N10 and I tell you that every month the money you spent will give you N1000 for life. It is not possible. I do not control like itself and I do not control the economics of the business to give you a predetermined salary structure for life. That is what he has been able to do,” Ezeafulukwe said.

A third red flag is that the supposed blockchain is not tied to any product or service. In other words, people on the platform are not paying money for any visible value. Notable scams like MMM also attracted millions of Nigerians with similar mouthwatering promises and had them part with their money for no visible value or product only to crash later with people’s life savings.

Blockchain projects like Bitcoin were anchored on creating a seamless payment system that serves as an alternative for the world’s monetary system.

Ezeafulukwe told BusinessDay about a meeting he had with the founder of InksNation, Amos Sewanu Omotade-Sparks, during which he interrogated the founder.

“We had a meeting and I asked him three questions and he failed them woefully. I asked him when people come in do you pay them and he said ‘Yes’. I asked ‘How do you get to pay them?’ He couldn’t answer. So I said ‘You pay old subscribers with the money that new subscribers enrolled with?” He said “Yes.” I said that is a practical example of a ‘Ponzi’ and the moment you begin to do that you are in trouble,” Ezeafulukwe recalled.

BusinessDay’s investigation in the activities of InksNation corroborates the Ponzi claim and also found that the rules keep changing without the knowledge of potential subscribers.

A certain exchanger by the name of Abubakar – he would not give out his surname – told BusinessDay that unlike what was advertised on InksNation website, it is not possible to withdraw the N120,000 at a go, rather you are only allowed to take out N12,000 if you paid N1000 as registration. Those who subscribed with N10 get to take out N18,000 and they are issued a PinKard which they can use to buy what they want from licenced vendors. Subscribers who do not want to shop at the vendors are told to “buy and sell.”