Page 16 - Unlicensed Digital Investment Schemes (UDIS)

7 THE DARK WEB COMPLICATES THE PONZI essarily in the dark web), which records transactions and
PICTURE reflects the balance on account. Although considered
less secure, many services offer free wallets, which are
Because anti money-laundering regulations have made good enough for the novice trader. More secure wallets
life more difficult for criminals, they seek a less regu- are available for a fee paid in cryptocurrency making the
lated space in which to conduct criminal activities. The inclusion process very easy. Starting from ground zero, a
dark web or deep web offers fraudsters a petri dish for person can start trading cryptocurrency within thirty
growth and financial gain. It also offers anonymity, lit- minutes. Tutorials to become a cryptocurrency trader
tle likelihood of being caught by law enforcement, and are available online guiding newcomers step-by-step.
it allows access to many potential victims. Of course, Once connected with the cryptocurrency ecosystem,
the deep web was constructed with noble intentions: the user is exposed to a plethora of UDISs which adver-
such as freedom of expression and access to informa- tise themselves within the dark web and in the public
tion in mind; nonetheless, the dark web is actually an domain, even the infamous MMM scam has a bitcoin in-
ideal environment for criminals too. vestment channel.
The dark web’s economy is not based on any fiat cur-
rency, it is instead based on crypto currencies (e.g. Bit- 7.2 Monetization
Coin). In this regard, the rise of cryptocurrencies has 7.2.1 Darkweb and crypto currency
also enabled criminal activities to flourish within the Cryptocurrency in all of its variations is not an official
protection of the dark web. However, the use of crypto- currency anywhere in the world although Zimbabwe
currencies does not always imply that criminal activities is considering it, thus making the task of converting
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are afoot. Certainly, there are legitimate uses for cryp- it into fiat currency quite difficult. On the other hand,
tocurrencies (e.g. an investment, unit of exchange, or cryptocurrency can very easily converted into goods
store of value). and services, some legitimate, but many of which are
In this section, we will address two primary ques- illegal. Cryptocurrency in all of its variations is not an
tions: official currency anywhere in the world although Zim-

a) Inclusion: does the DFS user community have, or can babwe is considering it , thus making the task of con-
it easily gain access to the dark web in order to par- verting it into fiat currency quite difficult. On the oth-
ticipate in these unlicensed investment schemes? er hand, cryptocurrency can very easily converted into
goods and services, some legitimate, but many of which
b) Monetization: How do DFS users who own crypto- are illegal.
currency earned from Ponzis convert the funds to As of 2015, more and more payment processors are
actual fiat currency, because the three focus coun- accepting cryptocurrency. As for the illegal side, the
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tries do not acknowledge cryptocurrency as a legal dark web offers dozens of marketplaces for drugs, sto-
currency? len credit card numbers, guns and human trafficking, all
of which accept payment in cryptocurrency.
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This paper will most likely raise more questions than
it answers. Our purpose is simply to highlight that this In effect, cryptocurrencies are booming in develop-
financial activity is happening under the cover of the ing countries, due to three main reasons:
dark web, and formulate a plan to better understand 1) It offers protection from fiat currency fluctuations
and deal with this dynamic and growing marketplace and rising inflation, in most developing countries
for financial fraud. (e.g. in Zimbabwe, where Bitcoin has become very
popular). Our focus countries are no exception: in-
7.1 Inclusion flation rates are high and the exchange rates of the
The dark web is usually associated with hackers, and official currency are not stable, thus it is believed
cybercriminals, who are very computer literate. While that using cryptocurrency and exchanging for
connecting to it may seem like a difficult task with goods and services protects the user from govern-
many prerequisites, it is in fact a mere two clicks away ment induced inflation and from the central bank’s
for anyone with Internet access. The main highway monetary strategy;
to connect is the Tor, which requires a special web
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browser to surf it. Once installed, access to the dark 2) It is proven easier to move cryptocurrency across
web is granted. This access is also available on mobile borders because its virtual nature. Trading abroad
platforms such as on Google store, which means that and moving the profits into the country have no re-
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the prerequisites for connecting are just a smartphone, strictions, nor are there taxes/fees associated with
or a computer and a data connection. importing foreign currency.
With access made easy, inclusion into the world of 3) Anonymity and security: cryptocurrency isconsid-
cryptocurrency requires one additional item—a wallet. ered secure, anonymous and untraceable. This makes
Since cryptocurrency is a virtual coin, a virtual wallet for it a very lucrative venture for traders who wish to
cryptocurrency is also required. A cryptocurrency wallet conduct illegal activity such as crime and tax evasion
is described as a secure storage on the internet (not nec- because trading in cryptocurrency is not regulated.

14 • Unlicensed Digital Investment Schemes (UDIS)