The news is going around at full speed everywhere. New Financial Technology Ltd. of Silea (Treviso but with registered office in London) has blocked the accounts of its clients, preventing them from withdrawing their respective funds. The company, active in investments in cryptocurrencies, guaranteed a fixed interest of 10% for investments greater than 10 thousand euros. Among the clients there are those who have even lost hundreds of thousands of euros.
You need to understand what happened, why it happened, and how customers can get their money back.
New financial technology and arbitrage
For the Treviso-based company, cryptocurrencies were a means of investment based on arbitrage, that is, on capital gains obtained from the price difference between the various exchanges, that is, buying and selling services. Leaving the virtual aspect, it is a very similar operation to that of buying and selling currencies to obtain profits. The New Financial Technology, which accepted investments from 10 thousand euros and guaranteed 10% monthly interestturned off the taps of six thousand Italian customers.
However, the suspicions that something was wrong did not date back to yesterday, as in mid-May there were doubts about the real soundness of the investment company. The first thing that has failed is the culture of the clients, attracted by that 10% monthly return that is another alarm signal, although not necessarily, because when you act in innovative markets you can obtain gains (and losses) of a certain substance.
There have been irregularities, as highlighted by the lawyer and New Financial Technology partner Emanuele Giullini who, giving an interview to Repubblica, announced that he had eliminated the other two partners Christian Visentin and Mauro Rizzato, whose traces have been lost. However, the lawyer’s responses are difficult to read: he first says that he has eliminated the other partners, then suggests that they have eliminated themselves. He also claims that he has not yet had access to corporate funds or investment portfolios but, despite this, he guarantees that clients will get their money back.
How to recover the money?
If lawyer Giullini were to go back on his word, the class action path would not be feasible, because New Financial Technology is under English law. It is possible to act both criminally and civilly, but it is an issue that can last for years and can give variable results.
Regardless of the company or platform that deals with cryptocurrencies, it is necessary to move with caution because the recovery of the investment is usually complicated, or because they are true scams and, those who implement them, have no interest in being discovered, or because taking action legal when the counterparty is a foreign entity and unsound does not offer many guarantees.
What to consider
When investing, regardless of whether you choose the cryptocurrency market, it is advisable to talk to a person with all the necessary authorizations. Consob draws up periodic lists of companies that act without these requirements. The brochure must be given to clients before they sign a contract or equivalent commitment.
In the specific case of the Treviso-based company, it is not so much the rate of return offered but the guarantee of the fixed rate applied to investments made in highly volatile markets that makes us laugh. Another clue that should have made the six thousand customers suspicious.
When it comes to cryptocurrencies, the topic becomes very complicated. In the first place because “cryptocurrencies” mean little, just as it is vague to pretend to invest in “raw materials” or “in the automotive market”. At the time of writing, there are 20,540 cryptocurrencies and this is a number that is constantly being updated. Not all of them are worthy of the attention of a large audience, but among these there are also the most famous. Bitcoin, EtherealTether, Cardano and Solana (just to name a few of the best known and most widespread).
If mere investing by exploiting price fluctuations may seem easy, there are also mechanisms less obvious to most that cause significant disasters, destroying investor confidence with repercussions on investments.
The first is related to two cryptocurrencies linked to each other TerraUSD and Luna. TerraUSD was designed to be worth a dollar and is now worth less than three cents. Luna has gone from 120 dollars in April to 1.97 euros today. Terra used an algorithmic system to stabilize its value, issuing new cryptocurrencies to prevent the price from rising too high or to destroy them in the event of a loss in value. Also included in this game is Luna, which investors can use to convert TerraUSD tokens they own. For every Luna Coin generated, one TerraUSD was destroyed to stabilize its value. Everything held up well until the point where the market was flooded with Luna, causing its own value to plummet and TerraUSD’s to plummet.
In May, the market value of the two cryptocurrencies was 60 billion dollars, today it is around 250 thousand dollars.
The second example, of a completely different nature, is even fantozzian. Brokers in the cryptocurrency market are not all dishonest. There are also those who are not very awake, as in the case of the exchange service offered by Nomad which, to give a simple explanation, has lost tens of millions of dollars by not being able to understand which transactions had already been made and which. were yet to be done. Hackers, using a technique known as a replay attack, have replicated completed transactions by taking possession of amounts that other users have already collected, obviously without giving anything in return. Those who had deposited their cryptocurrencies can, in all likelihood, say goodbye for good.
A programming error, of course, but capable of showing that disasters can also occur due to lack of precautions. In this specific case, after a software update, the receipt verification services for operations already carried out had not been reactivated.
The cryptocurrency market may seem attractive and easy to approach. That it is capable of consistently rewarding is true, just as its opposite is true. It can be an investment field, as long as the feeling that has convinced many to consider cryptocurrencies as a safe asset and that, in reality, it is an investment sector that is poorly protected and difficult to protect, is lost. A proper culture is needed, as in any other field. Not everything is to throw away but it is not the new El Dorado.
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