Istanbul, Turkey – Hulya Ozkal thought she was investing wisely when she ploughed her savings into Bitcoin.
“Maybe it wasn’t millions but I saved half a Bitcoin for the future,” the 65-year old pensioner told Al Jazeera.
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In most circumstances, that bet would be paying off handsomely this year. One Bitcoin was worth just over $29,000 at the open of 2021, according to Coinbase, soaring to a high of nearly $65,000 last month before giving back some of those gains to currently trade above $55,000.
Meanwhile, the Turkish lira has plummeted more than 10 percent in value against the US dollar since the beginning of January.
Ozkal, who ran a beauty salon and other businesses, said her crypto holdings were worth roughly 279,000 lira (around $33,600). But she fears those assets are now lost forever.
She is one of the hundreds of thousands of unfortunate investors who held an account with Thodex – a local crypto exchange which halted trading abruptly last month, sparking a probe, a wave of arrests and an international manhunt for Thodex’s CEO, who reportedly fled to Albania with $2bn belonging to some 400,000 clients.
“I thought about burning everything down and committing suicide,” said Ozkal. “I closed my business, I sold my house. Now I’m in debt.”
I thought about burning everything down and committing suicide
Thodex is not the only cautionary tale that has shaken Turks’ faith in investing in cryptocurrencies as a hedge against a weakening lira and double-digit inflation. Two days after Thodex went offline, another local crypto exchange, Vebitcoin, announced it was halting operations due to financial strain.
Financial watchdogs in Turkey started to tighten their grip on the loosely regulated crypto sector only last month.
On Friday, a decree announced in mid-April came into force banning cryptocurrencies for payments. The next day, a presidential order added crypto exchanges to the list of firms subject to anti-money laundering and terrorism financing rules.
But for many, that government intervention came too late, leaving many at a loss as to where they can safely shield their savings.
From embrace to bust
Before the collapse of Thodex and Vebitcoin, and the tightening of the regulatory noose, Turkey was in the grips of cryptomania, spurred by an annual inflation rate that climbed to 17.14 percent in April – its sharpest spike in nearly two years- and the lira’s loss of half its value against the dollar over the last three years.
President Recep Tayyip Erdogan sacked three central bank chiefs within two years, and the government called for Turks to sell their foreign currency savings and deposit gold in banks to prop up the lira.
Meanwhile, crypto was subject to lax oversight and taxation, which incentivised legions of Turks to shield their capital in ‘kripto para” – crypto money – rather than stand by and watch their lira savings erode.
A survey by the World Economic Forum published in February found that 16 percent of Turks said they used or owned cryptocurrency – level pegging with Peru which, along with Turkey, ranked fourth globally after Nigeria, Vietnam and the Philippines, where the currencies are used for overseas remittances.
Now many Turks have seen their crypto savings wiped out by the exchange scandals.
Interpol has issued a red notice for Thodex’s fugitive CEO Faruk Fatih Ozer, and more than 80 people were detained last week in connection with a fraud probe into the exchange. Six people, including Ozer’s brother and sister, are being held in prison pending trial.
Most of the victims are students, low-income officials and workers
Meanwhile, four people were arrested after Vebitcoin – which had some 200,000 clients – stopped trading on April 23.
In both cases Turkey’s Financial Crimes Investigation Board blocked the platforms’ onshore bank accounts. But thousands of the exchanges’ victims are reeling from the blow.
Oguz Evren Kilic is a lawyer who represents Thodex clients. He told Al Jazeera that while Thodex’s deposits ranged from $50 to upward of millions of dollars, the exchange’s downfall has wreaked financial havoc primarily on low and middle-income investors.
“Most of the victims are students, low-income officials and workers,” said Kilic, who leads the Ankara Bar Association’s capital market and finance law commission. “The crypto market is their only escape from the economic and social crisis in Turkey.”
“They don’t know anything about cryptocurrency and its technology, economy and politics,” he added. “They just want to gain some money from the market for their daily goods, rent and so on.”
One client, a 30-year-old shop assistant who asked Al Jazeera to withhold her name, said she lost her entire savings of 7,000 liras ($840) when Thodex went offline.
“My loss wasn’t much compared to the other victims but I still felt cheated,” she said. “I signed up for Thodex in 2018 and it was different at the time. I made an investment and transferred my savings there.”
Cyber-law specialist Kursat Ergun also represents Thodex victims. “I’m afraid we’ve been watching the news of the people who recently took their own lives because of this incident,” he told Al Jazeera. “There are those who risked their entire financial assets in this situation,” he said, adding that some had even taken out loans to invest in cryptocurrencies.
The faithless and the faithful
For some Thodex victims, their days of investing in crypto are over.
“I’ll never use cryptocurrencies again,” said the shop worker who lost her savings on Thodex. “I don’t trust any of them and they’re not reliable. In the future, I’ll keep my money in Turkish lira at home.
But though some have turned their backs on cryptocurrencies, Kilic believes a Turkish love of risk-taking and the draw of supposedly easy profits will continue to eclipse many people’s reservations.
I’ll never use cryptocurrencies again,
“The crypto market is a casino for Turkish people,” he said.
Though he thinks that the regulatory framework was slow in coming, he believes more oversight will continue to make crypto an attractive hedge against Turkey’s lira struggles and the economic uncertainty surrounding the COVID-19 pandemic.
“The Turkish working and middle classes are looking for some exit plans or emergency plans to survive,” said Kilic.
Meanwhile, hundreds of thousands of Turks are left gazing at the ruins of their savings and retirement plans, wondering if they will ever recover.
“I was going to buy a house, a little car, that was my dream retirement,” said Ozkal. “Now I’m living in dire straits. It’s better to die.”