Faruk Fatih Özer, founder of the Turkish crypto exchange Thodex, was sentenced to 11,196 years in prison on September 7, 2023 for a massive cryptocurrency fraud. An Istanbul court also fined Özer 135 million liras ($5 million). Ozer’s two brothers, Serap and Guven, received the same sentences as co-defendants. Prosecutors said the crimes affected 2,027 victims. The harsh penalties highlight issues with Turkey’s loosely regulated crypto industry.
Faruk Fatih Özer and the Founding of Thodex
Thodex was launched in 2017 by Faruk Fatih Özer, a high school dropout who had gained notoriety by selling products online and running technology companies. The exchange allowed users to trade major cryptocurrencies like Bitcoin and Ether using Turkish lira. Özer was the CEO while his younger siblings helped run operations. Leveraging an energetic social media presence and savvy marketing, the ambitious Özer grew Thodex swiftly. By 2021, Thodex had over 390,000 registered users and handled daily crypto trading volume in large amounts.The 24-hour trading volume on Thodex was $538 million on its last trading day in 2021, according to Coinmarketcap. Thodex’s rise coincided with surging interest in cryptocurrencies in Turkey as people sought to protect their savings from the lira’s decline. But the Thodex fraud led to greater scrutiny, and Turkey has since passed stricter regulations on crypto assets.
Warning Signs Preceding Thodex’s Collapse from Turkish investors
Behind the scenes, there were red flags at Thodex. The exchange operated without official oversight and seemed to promote itself using fake endorsements. In early 2021, users complained of delayed withdrawals from the platform. Thodex blocked accounts of users who questioned its practices. Despite this, the exchange continued expanding while Turkey’s crypto market boomed due to Bitcoin’s soaring value which drove intense interest from Turkish investors.
The Sudden Shutdown and Özer’s Disappearance
In April 2021, Thodex abruptly halted trading for four days, initially citing unspecified technical issues. Then Özer fled Turkey for Albania, confirming suspicions of wrongdoing. It emerged that Özer had been diverting assets from Thodex into accounts held under false names. About $2 billion in investors’ funds vanished along with Özer.
Authorities Crack Down and Victims Seek Answers
Turkish authorities issued arrest warrants for Özer and detained around 60 people linked to Thodex. But by this time, Özer had disappeared with the stolen crypto assets. Panicked investors who lost access to their funds on Thodex desperately waited for information. Losses were estimated around $43 million, though some claimed it amounted to billions.
The Extradition and Trial of Özer
Özer was apprehended in Albania within days and languished in custody during extradition proceedings. He was extradited to Turkey in June 2022. The prosecutors had initially requested a 40,562-year prison sentence for Faruk Fatih Ozer, citing charges of establishing a criminal organization and other financial crimes. Turkey is known for issuing massive prison sentences, which became more common after the country abolished the death penalty in 2004 as part of its efforts to join the European Union.
Özer and his siblings were eventually charged with fraud, money laundering, and establishing a criminal organization. After an expedited trial, Özer and his siblings were each sentenced to over 11,000 years in prison.
Ongoing Efforts to Compensate Victims
Turkish authorities continue seeking Özer’s stolen crypto assets abroad. But the opaque nature of cryptocurrencies and lack of international coordination makes this challenging. For Thodex victims, the case highlights the urgent need for better consumer protections and security standards in cryptocurrency markets. Tighter regulation could help prevent such brazen scams.
Lessons from the Thodex Debacle
The Thodex fraud showcases the potential for abuse and manipulation in the absence of oversight in the cryptocurrency industry. It led to calls for regulating crypto exchanges similar to financial institutions. Turkey has since mandated licenses and transparency for crypto exchanges. But truly robust global regulatory standards are still lacking. Until then, investors must exercise caution when trusting unregulated crypto platforms.
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