Turkey is a country with extreme social differences. If the inflation rate rises, the lira tumbles and price stickers in supermarkets are rewritten daily, which means those who already have little can afford less and less. The current currency crisis is making the poor even poorer. But it will not spare the rich for long, because many have long been financing their lifestyles or their company on credit, with cheap loans in euros and dollars, which are now becoming prohibitively expensive.
Turkey is also a country with its share of experience when it comes to crises, and solidarity is usually high in times of need. But this crisis will not unite the country, it will divide it even more deeply. After the lira crash last Friday — the biggest fall the currency has had on a single day for 20 years — Turkey is not only in a difficult financial situation. The crisis will become a political test for the new, already highly controversial presidential system that Recep Tayyip Erdogan has tailored for himself.
So far, the only thing that's come to Erdogan's mind as a response has been to appeal to the pride and strength of the Turkish people, and to their God. But this won't work with everybody: "Allah will not pay our debts, nor will knowledge of the Koran help us when the bailiff comes," so goes the sarcastic reaction.
Bad luck for Turkey, it has messed with Donald Trump.
Contradiction and opposition are absent in the new Turkish system, and yet, the emergency already makes the first cracks appear, in the form of a family argument: Erdogan says that the interest rates must be further lowered, something that hardly any expert would recommend in a fight against inflation. On the other hand, the Turkish president's son-in-law, Berat Albayrak, now the country's Finance Minister, emphasizes the independence of the Turkish central bank, which alone decides on the level of interest rates.
Erdogan's great promise was that the Turkish people could live in prosperity as long as they were hard-working and kept him in charge. For a long time, he kept this promise. Incomes kept on rising, as did pensions and the minimum wage. But now, the escalator is no longer leading only upwards. Memories of 2001 come back to mind. That year, Turkey suffered its worst economic crisis since its foundation, with inflation shooting up to almost 70%. We're far from reaching those levels, so far. But the 2001 crisis was not only economic, it also showed the failure of the political system. Indeed, that is what eventually brought Erdogan to power. That's why he won't like recalling that memory.
Bad luck for Turkey, it has messed with Donald Trump, which makes it absolutely impossible to predict how this dramatic situation will play out. Strength, pride and prejudice — these are words that the U.S. President appreciates as much as Erdogan. Mutual mistrust has been weighing on relations between Ankara and Washington for some time, and the Syrian war has made things worse.
So did the failed coup attempt of July 2016. Since then, Erdogan has consistently accused the U.S. of being partly responsible because of their hosting the preacher Fethullah Gülen. That is why Turkey has imprisoned an American pastor, whose release Trump is trying to force by all means. True, the attempted coup was and remains a mysterious and strange event, which makes conspiracy theories flourish. But that doesn't change the fact that we now have two NATO partners who trust each other so much they believe the other capable of any extreme of nastiness. How this will end is anybody's guess.
It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money for a blockchain-powered e-commerce app. But the simplest of errors exposed the scam and limited the damage to investors. A cautionary tale for the crypto economy.
PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.
Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.
Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.
Share capital of one billion
The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).
The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.
Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.
While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.
The infamous typo that brought the Air Next scam down
Raising Initial Coin Offering
Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.
For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."
What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".
Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.
Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.
Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.
- Crypto Tipping Point: Is Digital Currency Too Big To Fail ... ›
- Bitcoin, Petro, Libra ... Why Cryptocurrency Isn't Really Currency ... ›
- Inside The Himalayan Hideaway Of Chinese Bitcoin Mines ... ›