Two South African brothers have disappeared, along with 69,000 Bitcoin, worth $3.6 billion from their own cryptocurrency investment platform.
A Cape Town law firm hired by investors says they can’t locate the brothers and has reported the matter to the Hawks, an elite unit of the national police force.
It’s also told crypto exchanges across the globe should any attempt be made to convert the digital coins.
Following a surge in Bitcoin’s value in the past year, the disappearance of about 69,000 coins represents the biggest-ever dollar loss in a cryptocurrency scam. The incident could spur regulators’ efforts to impose order on the market amid rising cases of fraud.
The scam was being set up for a while, when in April, the price of Bitcoin skyrocketed.
Africrypt Chief Operating Officer Ameer Cajee, the elder brother, informed clients that the company was the victim of a hack.
He asked them not to report the incident to lawyers and authorities, as it would slow down the recovery process of the missing funds.
Some skeptical investors roped in the law firm, Hanekom Attorneys, and a separate group started liquidation proceedings against Africrypt.
“We were immediately suspicious as the announcement implored investors not to take legal action,” Hanekom Attorneys said in response to an email by Bloomberg. “Africrypt employees lost access to the back-end platforms seven days before the alleged hack.”
The firm’s investigation found Africrypt’s pooled funds were transferred from its South African accounts and client wallets, and the coins went through tumblers and mixers or to other large pools of bitcoin to make them essentially untraceable.
Cajee and his brother, Raees, 20, set up Africrypt in 2019 and it provided bumper returns for investors. Calls to Raees also went straight to voicemail. The company website is down.
The saga is unfolding after last year’s collapse of another South African Bitcoin trader, Mirror Trading International. The losses there, involving about 23,000 digital coins, totaled about $1.2 billion in what was called the biggest crypto scam of 2020, according to a report by Chainalysis. Africrypt investors stand to lose three times as much.
China has recently escalated its crackdown on cryptocurrency trading after a frenzied surge in Bitcoin and other tokens over the past six months heightened longstanding Communist Party concerns about the potential for fraud, money laundering and trading losses by individual investors.
FNB, which banked Africrypt, has also been questioned about the episode, according to documents seen by Independent Online. The local bank denied any involvement.
“FNB once again confirms that it does not have a banking relationship with Africrypt. Due to client confidentiality, FNB cannot provide any information on specific bank accounts,” Nadiah Maharaj, FNB risk spokesperson, told Independent Online.
As the brothers remain missing, some efforts to get to the bottom of things have hit roadblocks.
For instance, South Africa’s Finance Sector Conduct Authority, the country’s financial institutions regulator, said cryptocurrency-related matters do not fall under its jurisdiction.
As the prices go up, scams such as these are likely to happen and this might actually signal that regulation is coming.
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