It is said that those who forget history will inevitably repeat the same mistakes. Of course, times change and the behaviors, tendencies and practices that were the norm before, often stay in the past. Unfortunately, financial scam is not one of them.
Scamsters and fraudsters take many forms, and the best way to remain informed is to scrutinize previous cases. Here we present you the WinCapita scam and why we should never forget it.
WinCapita fraud took place in the early 2000’s and it remains the biggest financial scam that ever happened in Finland. It consisted in a Ponzi scheme in the form of a currency exchange investment club. To join, newcomers were required an initial investment with the promise of large returns. These “entry” payments would be what previous investors would collect as proceeds. This meant that the latest members would never see capital gains and end up losing the whole invested amount.
How WinCapita grew and went undetected
Even though Ponzi schemes were not new at that time, there were several factors that contributed to WinCapita’s momentum and growth.
Firstly, it was at a time when the internet was young and not as integrated in our lives. The public did not have that much “user-level” computer literacy and they were likely to be more gullible. We could say that the last decade was a golden era for online scams.
The fraudsters would bait their victims with an “infallible” signal software that predicted good sell and buy opportunities. And with the help of online forums, early investors who would get “returns” contributed to spread the popularity and trust of the software, and hence, the club. After all, the internet has made conveying information easy.
Another factor that helped with WinCapita’s growth was the peer pressure. Newcomers would attend presentation meetings and be persuaded into joining by older member’s loyalty. In fact, the allegiance for the club was such that many chose to believe conspiracy theories as opposed to face a fraudulent truth.
WinCapita’s founder and fraud perpetrator Hannu Kailajärvi, went into hiding and was apprehended in 2008 in Sweden. He was sentenced to serve 5 years of prison in Finland. Kailajärvi was released on parole in April 2014.
WinCapita scam came to an end in 2008. However, the practices that made it possible, still constitute a threat today. New tech, AI, cryptocurrency, IoT, the ongoing economic recession among other factors give room to potential fraudsters to operate at will. The best defense is to engage in one’s investment activities after having done a deep due diligence research. One can never be too careful.
— Fyggex (@fyggexchange) August 12, 2020
Image: Pete Linforth
*Disclaimer: Fyggex, does not give any guidance, advice or recommendations to neither invest or not in any available cryptocurrency directly or indirectly via any trading platform, exchange or provider. Our sole purpose is to make you aware of the related real or potential risks and opportunities so that you can make your own research prior to any financial decisions you may want to take. Past performance and position are not a guarantee of risk-free future returns.