A debt expert says that a rapidly growing number of deeply indebted consumers are getting themselves into financial trouble by investing in cryptocurrencies including Bitcoin and Ripple.
Neil Roets, CEO of debt counselling company, Debt Rescue, said he was amazed when the first clients started applying for debt counselling who had been driven to the brink of bankruptcy by buying into what he termed ‘get-rich-quick schemes’ involving cryptocurrencies.
“We interviewed our first cryptocurrency victims towards the end of last year who wanted to go under debt review because they were no longer able to adequately service their debt.
“To my amazement, many of them had been the victims of scams involving cryptocurrencies which promised massive returns.
“Some of them had gone as far as pawning their vehicles, taking out second bonds on their homes and borrowing money on credit cards in order to buy cryptocurrencies.
“When the promises of great fortunes that would be made through these purchases failed to materialise, many of them did the right thing by seeking help by going under debt review,” Roets said.
He said some of the scams involved accounts being hacked by offshore hackers who stole every last penny or by sellers who never actually delivered the digital currency after they had been paid.
In most cases, however, Roets said, losses were incurred as a result of extreme volatility of these currencies.
Having soared more than 1,500% in 2017, Bitcoin has declined more than 30% from a record high in mid-December.
“If anything ever proved the saying by the great American showman and circus owner PT Barnum that ‘there’s a sucker born every minute’ this experience did just that. To most of us with even a semblance of knowledge of how wealth is accumulated, it was patently obvious that cryptocurrencies are probably one of the most volatile commodities on earth or quite possibly an outright scam.
“The fact that two of the world’s most successful investors, Warren Buffett and his long-time partner Charlie Munger, both agreed that they would never invest in cryptocurrencies says it all. They predicted that the two best known cryptos – Bitcoin and Ethereum – would both take a massive nosedive early in the new year,” Roets said.
Buffett told CNBC in an interview recently, that that cryptocurrencies “will come to a bad end”.
Roets said total consumer debt now stood at close to R1.71-trillion which clearly showed that South African consumers have not cut back on spending.
He said almost half of all consumers were three months or more behind in their debt repayments. The major culprits were credit and store cards followed closely by unsecured debt.