Colombo, Sri Lanka – The Central Bank of Sri Lanka (CBSL) has announced it is considering criminal action against a group that ran a crypto investment program called Sports Chain, seven months after an Al Jazeera investigation exposed it as a scam.
In a notice published on March 21, the monetary authority stated that the investment venture had been conducted as a pyramid scheme, which is prohibited under Sri Lankan banking law.
“We’ve been investigating for months,” MDSN Gunatilleka, the additional director of the CBSL’s resolution and enforcement division, told Al Jazeera. He immediately declined to give further details.
The CBSL said it is seeking advice from the attorney general – the government’s chief legal adviser – about bringing criminal charges against those responsible.
Under Sri Lankan law, running pyramid schemes can result in a prison sentence of three to five years. Violators must also pay a fine of 2 million Sri Lankan rupees ($6,222) or twice the amount received from scheme participants, whichever is greater.
In August 2022, Al Jazeera revealed that as the economy collapsed around them, thousands of Sri Lankans, including professionals such as doctors, politicians and security personnel, fell prey to the fake crypto scheme.
Some gave up their jobs hoping for high returns, while many pawned their jewelry, mortgaged their property, and sold their vehicles to invest as much as possible in the cryptocurrency introduced to them as Sports Chain. Despite being promised a five times higher return, they barely got what they invested and many didn’t even get that.
What they didn’t know at the time was that the cryptocurrency called Sports Chain never existed in the virtual currency market.
Sri Lanka’s Financial Crimes Investigation Division (FCID) launched an investigation less than a month after Al Jazeera’s revelations and has since charged nine suspects with money laundering charges.
If found guilty under the money laundering law, the suspects will have to pay the state a fine of up to three times the value of the defrauded property. They can also face a prison sentence of five to 20 years.
But for the investors to get their money back, Sri Lanka’s central bank will have to charge the suspects under the banking law with running a pyramid scheme.
Lawyers appearing for the defendants argue that their clients cannot be charged with money laundering.
“Our customers were not the creators of this app. They had no control over it,” said lawyer Tivanka Ekaratne, who appeared before the defendant.
“This has not yet been proven to be a pyramid scheme. It is the investors who have made such claims,” Ekaratne said in response to Al Jazeera about the CBSL’s decision to ban Sports Chain.
During hearings at Colombo’s Chief Magistrate’s Court late last month, attended by Al Jazeera, the FCID said it was continuing its investigation into the suspects.
“They had defrauded more than 15 billion Sri Lankan rupees ($46.6 million) from more than 8,000 Sri Lankans,” the FCID said in a petition filed with the Colombo Chief Magistrate’s Court.
The suspects – Shamal Bandara, Zhang Kai, Wang Yixiao, Shanaka Madushan, Viraj Madushanka, Amith Wickramage, Rovinda Manjula and Pradeep Kumara – had been remanded in December and released on bail. Isuru Lakshika, the ninth suspect, was released on bail in March.
While their bank accounts are frozen, the FCID is also seizing assets such as vehicles and houses that they suspiciously acquired. The suspects are not allowed to leave the country.
Where’s the money?
In court cases seen by Al Jazeera, the FCID has made damning revelations about how the suspects invested part of the money they received from their victims in expensive vehicles and two- to four-bedroom luxury apartments in a residential complex in the capital Colombo.
Shamal Bandara, who has been named as the prime suspect in the case, had told investigators his only possessions were a house in the northwestern town of Kurunegala and an old vehicle. However, the FCID discovered that Bandara had been using a jeep purchased under his mother’s name.
He had also separately paid 5 million Sri Lankan rupees ($15,556) and 20 million Sri Lankan rupees ($62,226) to buy two residential units in the luxury Destiny Mall & Residency complex, which was built on a 4,046 square meter land in Colombo last year, according to a report filed by the FCID with the court.
A Mercedes-Benz car purchased under Bandara’s brother’s name had been used by Zhang Kai and Wang Yixiao – the two Chinese nationals who are also suspects in the case.
Court documents show that it was Bandara and Kai who attempted to promote this investment scheme by hosting events, sometimes in luxury hotels. Kai was introduced to the investors as the global founder of Sports Chain ZS Society.
Other suspects like Shanaka Madushan had bought three units in the same apartment complex as Bandara, while Rovinda Manjula and Pradeep Kumar had bought one each. Manjula also had a two-story luxury house built in Kurunegala for 27.5 million Sri Lankan rupees ($85,561).
At the time of Bandara’s arrest, law enforcement had seized the personnel IDs of any suspects who produced them to claim they were employees of a company called Bionics Healthcare. However, it had come to light that the company was fake and that the company address on the IDs was misleading.
“The suspects had attempted to link themselves to a bogus company to create the impression that they had legally acquired these assets,” FCID said in a report filed with the court.
Escape attempt
When Shamal Bandara was questioned after his arrest on October 11, 2022, police officers handed him his mobile phone to explain how his team had used a mobile app to implement the investment plan.
According to court documents, Bandara had used this as an opportunity to sneak in a WhatsApp message to an unknown recipient. The message read: “Ask ZK to leave, you keep the key and leave too”.
The FCID said it had identified the person referred to by the initials ZK as Zhang Kai.
When detectives visited the rented house where the two Chinese nationals were staying, other residents with whom they had shared the residence claimed that the suspects frequented a five-star hotel.
However, soon after, Zhang Kai and Wang Yixiao were taken into custody at the Bandaranaike International Airport as they attempted to flee Sri Lanka.
‘Give us our money’
Investors say they are desperate to get their money back in light of the economic crisis in Sri Lanka, where inflation was about 54 percent in February 2023.
When Al Jazeera spoke to Harshana Pathirana last year, who invested 2.2 million Sri Lankan rupees ($6,844), he said he was looking to migrate to find a job and rebuild his finances.
“I now work in a hotel in Qatar. I use the money I earn to pay off my debt. I am not yet able to save anything,” Pathirana said seven months later.
The 38-year-old said he was riddled with debt that he took on to make ends meet until he managed to find a new job.
He had sold his car to invest in the crypto venture and had even quit his job in hopes of getting rich from his investment. “My family still doesn’t know that I invested the money in this scheme. I kept it a secret,” he said.
Pathirana’s name has been changed to protect his identity as his family is unaware that he has lost his money.
Another investor, Priyanga Kasturiarachchi, 40, told Al Jazeera that getting the money back would make a huge difference in his life given the economic constraints he faces.
Kasturiarachchi had deposited nearly his entire savings of 1.8 million Sri Lankan rupees ($5,600), which he earned over a decade as a tourist guide, and had managed to withdraw 1.3 million rupees ($4,044), he said.
“Because we invested everything we had at the time, we had to start all over again to make some money. If we manage to get it back, it would be very helpful for all of us,” he said. “We’re exploring all possible legal options because we want them to give us our money.”
Kasturiarachchi said he and other investors are aware that they would not be able to recover their lost money if the charges only concern money laundering.
“We will be happy if they are sent to prison. But it is also important for us to get our money back,” he told Al Jazeera. “We will have to wait and see what happens if the CBSL press charges against them. Ultimately, we need our money back.”
The Colombo Chief Magistrate’s Court will rehear the case filed by the FCID in August.