Turkish Authorities Arrest ‘Turcoin’ Founders for Running Ponzi Scheme
The founders of Turcoin, a Turkish cryptocurrency token that was revealed as a Ponzi scheme, have been arrested by authorities investigating the scam. Sadun Kaya and Muhammed Satıroğlu, founders of Turcoin and business partners at Istanbul startup Hipper, were apprehended on July 2 as part of an investigation that has seen three other people released on probation.
Turcoin’s Fancy Beginnings
Marketed to Turkish investors as a “national” digital currency to serve as an alternative to bitcoin and other digital assets, Turcoin was launched in 2017 with much fanfare by Hipper. The launch event for the coin was a flashy gala, reportedly attended by many favorite Turkish celebrities, athletes, and public figures.
Promising outsized rewards for investors, Turcoin generated a flurry of attention by giving away many luxury cars to its first adopters in October 2017, which was one of its many marketing promises. Seeing the apparent redemption of promises, investors poured into Turcoin, generating millions of dollars in revenue.
Every Turcoin investor who signed up another participant was guaranteed a cut of revenue from the new participant’s rewards, which is a classic marker of most existing Ponzi schemes. Despite criticism from many financial and public figures regarding the risk of investing in Turcoin, the coin continued to record extreme levels of investment, driven by word of mouth.
As is the case with every Ponzi scheme, the tipping point came when it became materially impossible to continue paying large rewards to older investors with funds from newer investors. The scheme soon ground to a halt in June 2018. When the company stopped paying out bonuses, furious investors called its contact center in Istanbul, only to be answered with silence.
In the time-honored style of Ponzi scams, the owners cleared out the accounts and suddenly disappeared, leaving thousands of investors out of pocket. Later in June, Kaya and Satıroğlu were apprehended and brought in for questioning by authorities, with Kaya accused of fleeing Turkey with more than 100 million Turkish Liras reaped from over 10,000 Turcoin investors.
Satıroğlu was released on probation, but on Monday, both men were officially arrested and remanded in prison ahead of a trial, while the prosecution builds its case. Satıroğlu insists that he has done nothing wrong and that Turcoin is not a Ponzi scheme. Speaking to Turkish media in June, he said, “I have not fled with the money. I will return all the money to the members if the authorities unblock my bank accounts.”
BTCManager earlier reported that authorities around the world are increasingly cracking down on crypto-based Ponzi schemes. In June 2018, Connecticut-based mining companies GAW Miners and ZenMiner were ordered by a US District Court to pay $10 million as fines for fraudulently misrepresenting a Ponzi scheme as a bitcoin cloud mining service selling shares in cloud mining contracts to investors.