Cautionary Tale in Cryptocurrency: The Thodex Scandal and Its Aftermath
- Faruk Fatih Özer, CEO of collapsed Thodex, receives a historic 11,196-year prison sentence for crypto fraud.
- Once a prominent Turkish crypto exchange, Thodex abruptly halted operations in 2021, affecting 400,000 investors.
- Özer, captured in Albania and extradited to Turkey, faced trial for aggravated fraud and leading a criminal organization, claiming Thodex was merely a bankrupt company.
Faruk Fatih Özer, the founder and CEO of the collapsed Turkish crypto exchange Thodex, has been sentenced to 11,196 years in prison. This sentence comes as a response to the Thodex scandal, which led to massive losses for investors and raised serious questions about the security and regulation of cryptocurrency exchanges.
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Thodex: From Prominence to Infamy
Established in 2017, Thodex quickly rose to prominence as one of Turkey’s largest cryptocurrency exchanges. However, in April 2021, Thodex suddenly ceased all operations, leaving around 400,000 investors without access to their funds. The abrupt shutdown of the exchange resulted in the loss of an estimated $2.6 billion, according to Chainalysis data.
This staggering figure has been cited as one of the largest “rug pulls” of 2021. The actual losses, as reported by state-run Anadolu Agency, are estimated at 356 million liras (approximately $13.3 million), significantly lower than the value reported by Chainalysis.
The Manhunt and Legal Proceedings
Following the collapse of Thodex, Özer vanished, leading to an international manhunt. He was eventually captured in Albania on August 30, 2022, after Turkey issued an INTERPOL Red Notice for him. The extradition of Özer from Albania to Turkey in April marked the culmination of a legal battle against deportation.
In his defense statement, Özer denied having established a criminal organization, asserting that Thodex was simply a company that went bankrupt. He maintained his innocence, claiming that if he had intended to establish a criminal organization, his actions would not have been so “amateurish.”
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The Verdict and Its Implications
Özer, along with his two siblings, who were also involved in Thodex, have been convicted on charges of aggravated fraud, leading a criminal organization, and money laundering. Each sibling received a prison sentence of six years and four months, in addition to a fine of 135 million liras (approximately $5 million) on charges of fraud through the use of information technologies. This trial saw a total of 21 defendants, with 16 being acquitted of fraud due to a lack of evidence.
This historic sentence marks a pivotal moment in the cryptocurrency industry, especially in Turkey, where crypto has been widely used to protect savings from high inflation and the lira’s steep devaluation. The Thodex case serves as a stern reminder of the potential risks in the crypto market and underscores the need for more stringent regulations and oversight to safeguard investors’ interests.
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