Kazakhstan authorities seize $10M in crypto in Ponzi scheme investigation

Authorities in Kazakhstan are seizing millions of U.S. dollars’ worth of cryptocurrency as part of an investigation into a Ponzi scheme that lured investors across the region.

The financial pyramid scheme has been active for several years in Central Asia and parts of Eastern Europe, offering victims high returns on investments in various crypto projects.

Kazakhstan brings down massive crypto pyramid

Amir Capital, an entity posing as an international investment fund, is under investigation in Kazakhstan for allegedly running a crypto Ponzi scheme.

The company actively solicited funds from citizens of Kazakhstan and several other former Soviet states, including Kyrgyzstan, Belarus and Russia, the Central Asian nation’s Financial Monitoring Agency announced.

It offered potential victims 5-10% income from cryptocurrency trading, mining and investments in different projects, the agency detailed in a press release on Thursday.

Investors were required to register on the platform’s website and create personal accounts. They were asked to deposit amounts in several cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), and the stablecoin Tether (USDT).

Authorities seek seizure of $10 million in digital assets

Part of the funds received were then redistributed among previously recruited participants in the pyramid-style structure, with interest paid using money deposited by newer members.

Amir Capital restricted withdrawals at the end of 2021. Its managers attributed this to technical issues they promised to solve, but access to customer balances was never restored.

Investigators said they have obtained a court order for the seizure of crypto assets valued at more than $10 million, as well as a land plot in the Almaty region.

More than 40 people are believed to have been involved in the criminal scheme, according to officials from the local department of the Anti-Monopoly Service (AFM) in Almaty, Kazakhstan’s largest city, who are leading the ongoing investigation.

One of the Ponzi scheme’s alleged organizers, a female suspect whose identity was not revealed in the announcement, has been arrested and remanded in custody for two months.

Kazakhstan’s opening to crypto comes with challenges

The emergence of crypto-related criminal organizations, such as the recently busted large pyramid scheme, seems to be a side effect of Kazakhstan’s rapid rise to prominence in the crypto space over the past few years.

The Central Asian nation became a hotspot for Bitcoin mining in the wake of China’s decision to enforce a ban on crypto-related activities, including the minting and trading of digital coins in 2021.

That same year, Kazakhstan’s power grid was literary overwhelmed by the influx of miners, attracted by its low electricity rates, and the country faced energy shortages until authorities addressed the issue through restrictions and pricing.

At the same time, the government in Astana took steps to tap into the industry’s profits, legalizing and regulating the market, including by offering mining firms options to trade their coins on authorized domestic platforms. It now plans to expand the licensing regime to add more exchanges.

In early June, the National Bank of Kazakhstan gave the go-ahead on a project to issue crypto payment cards, and a local bank started testing the first offering in early September. In August, a Kazakhstan-based exchange announced the listing of the country’s, and the region’s, first Bitcoin ETF.

Criminals have also been exploiting Kazakhstan’s opening to crypto assets. In August, financial and law enforcement authorities revealed they had unraveled a scheme to mine cryptocurrency on illegally supplied electricity that cost the state over $16 million.

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