Crypto Collapse Leaves Nigerian Student Ambassadors Stranded
LAGOS/NEW YORK – Nigerian student Cosmas Elijah’s phone has been ringing since crypto exchange AAX announced a withdrawal freeze for millions of customers in November.
The collapse of the Hong Kong exchange came on the heels of the implosion of the FTX crypto exchange, leaving students who had been tapped to recruit new investors in West Africa in a precarious situation, even dangerous.
“When I look at my phone, there is someone threatening to hurt me if I don’t pay back their money,” said Elijah, 22, a student at Ignatius Ajuru University in southern Nigeria.
“I sold land, even my bed…everything I bought with the money I earned from crypto, to pay people. It’s still not enough,” said he told the Thomson Reuters Foundation by telephone.
Elijah is one of dozens of Nigerian students recruited by investor-hungry companies to market cryptocurrencies to their peers, part of an industry push to expand their reach in East Africa. West, where economic instability has attracted desperate users.
Enrolled students had to meet monthly goals requiring both the number of new investors won and the total funds deposited. Some received a monthly stipend for their recruiting work; others worked for free in hopes of earning referral commissions.
AAX student ambassadors were asked to recruit 50 users to trade $250 per week on the platform, and were given a monthly target of $50,000 in trading volume, two ambassadors said.
The exchange had recruited nearly 50 ambassadors to Nigeria by the end of 2022, according to documents seen by the Thomson Reuters Foundation.
Those who achieved the goals were rewarded.
FTX Campus Ambassadors were tasked with recruiting 20 users per month to invest between $50,000 and $100,000 in total.
Students earned a commission on each new connection.
They coordinated and shared photos of promotional events and activities with national Telegram group managers. Those who reached their monthly goals received an additional $800 in cash.
“It was always, ‘you have to have 100 people, you have to bring students, you have to refer, you have to have them bring money,'” said Mary, 22, who joined FTX as a as Ambassador to the University of Nigeria, Enugu.
She asked to be identified only by her first name, for fear of reprisals.
Crypto adoption is growing in Africa, particularly in Nigeria, which ranks 11th on a global property index compiled by research firm Chainalysis, despite an official crackdown on crypto trading in the country.
It gained popularity in 2020 as Nigerians at home and abroad donated thousands of dollars in bitcoins to fund youth-led protests against police brutality, boosting its use among a demographic of increasingly suspicious of institutional scrutiny.
But inflation, unemployment and growing poverty have made it a lifeline for young Nigerians – who make up more than 60% of a population of 220 million people – and who have turned to crypto trading and recruitment as a new way of earning a living.
“It has given students like me financial freedom,” said Yemi, 22, a former FTX ambassador at the University of Lagos, who asked to be identified only by his first name.
“We were able to avoid having to look for jobs when we were done because there are no jobs.”
Additionally, when striking lecturers left students idle and out of class for months, it presented a perfect opening for crypto companies looking for cheap, willing labor.
Peter Howson, a professor at Northumbria University, said the ambassador programs were exploitative.
“Exchanges are dishonestly recruiting college students to push Ponzi schemes on the world’s poorest and most vulnerable communities,” the UK crypto adoption expert said.
“Ambassadors are recruited and left behind.”
WELL PLANNED FLIGHT
Elijah was briefly arrested last month after angry investors who put $30,000 into AAX on the student’s recommendation reported him to authorities in an attempt to get their funds back.
Two other AAX ambassadors said they had gone into hiding for fear of being harmed by the investors they recruited.
Another AAX Ambassador, Abduraoff Aderonmu, was recruited from Ilorin University and encouraged to meet weekly goals of finding 50 new traders.
He organized events at his school and convinced dozens of classmates to invest thousands of dollars in the exchange.
In November, AAX blocked customer withdrawals from its platform pending a “system upgrade” which it said was vital to protect users from “malicious attacks”.
“It was a planned scam from the start…a very well planned theft,” Aderonmu said.
AAX did not respond to a request for comment.
Ben Caselin, former vice president of marketing at AAX, said West African students were good candidates for crypto because they were often shut out of traditional banks.
Caselin resigned from AAX in November after the exchange stopped processing withdrawals.
“It’s a very bad situation,” he said in an interview, although Caselin is still supportive of crypto adoption in West Africa.
“In emerging markets, especially West African countries, students are a very important demographic to be part of this growing industry,” he said.
Personal piggy banks
The collapse of FTX triggered a ripple effect that sent the value of various tokens plummeting and prompted users to withdraw from exchanges, including some in Africa, where users had been trading
FTX has also made West Africa a particular focus of its business expansion, with founder Sam Bankman-Fried personally calling on crypto users in the region to trade on its exchange just days before its collapse.
In Nigeria, FTX had recruited a class of 19-year-old students like Mary, who were asked to onboard 20 students a month and run “education-focused” FTX events.
She even distributed FTX flyers at her church meetings.
“I had to get creative. I was thinking about how people would say ‘wow’ when I post pictures of the events on social media,” she said. “I was young. It was a big achievement for me.”
But now that FTX has gone bankrupt and its founder is indicted, Mary feels used.
“I started thinking, there are universities, high schools in America – they don’t host crypto programs like we do in Africa, especially in Nigeria,” she said.
“They were using us to sell a product that they cannot sell alone in Africa.”
(Reporting by Bukola Adebayo and Avi Asher-Schapiro; Editing by Lyndsay Griffiths)
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