Africrypt: One of the biggest Bitcoin scams in History

Empty client accounts and up to $3.6 billion vanished, thousands of affected clients and two teenagers in the crosshairs.

Ameer and Raees Cajee, aged 18 and 20 respectively, founded the Africrypt cryptocurrency platform, which started operating from South Africa in 2019.

According to a complaint filed in April by a law firm on behalf of a group of investors with the police, hundreds of users stopped having access to their accounts, coinciding with the weeks in which bitcoin reached its all-time high. The most famous cryptocurrency reached US $63,226 per unit, the highest price in its history.

That month, Africrypt’s chief operating officer, Ameer Cajee, the older brother, informed customers that the company had been a victim of a cyber attack and announced that the platform had stopped its operations.

“Our system, customer accounts, their wallets and our nodes were compromised,” he wrote in an email.

They deny the theft

In the email they advised investors to not to follow the “legal route”, since “it would only delay the process of recovering the missing funds.”

After that email on April 13, the brothers disappeared for a few days.

Attorney John Oosthuizen, who represents Raees and Ameer Cajee, told the BBC that the brothers who founded Africrypt categorically deny any involvement in a “robbery” or that they ran away with funds.

“There is no basis for the accusation,” he said.

Both “hold that it was a hack and that they had been victims of a robbery,” he added.

Many users in Africa invest in bitcoin in hopes of improving their finances.

However, in the complaint sent to an elite South African police unit, known as the Hawks, the legal services hired by those affected estimate that thousands of bitcoins “completely vanished.”

This disappearance of about 69,000 bitcoins at peak bitcoin prices, it is worth around $4 billion, which would represent the biggest loss of dollars in a cryptocurrency scam.

Following the trail

The investigation commissioned by the law firm of those affected found that the platform’s funds were transferred from the accounts and wallets of clients based in South Africa.

But the trail of the coins was lost because in the operation they were used “various dark web nodes and mixers,” wrote the law firm of those affected.

This process essentially makes impossible to track money.

Bitcoin futures can be traded on the Chicago Cboe Global Markets.

Furthermore, everything seems to indicate that “Africrypt employees lost access to support platforms to clients seven days before the alleged attack,” said the legal services firm.

Ponzi scheme

The South African Financial Sector Conduct Authority (FSCA) said in a June 24 press release that crypto assets are not regulated in South Africa “and consequently the FSCA is not in a position to take any regulatory action”.

And it is that, as happens in many other countries, the financial authorities of South Africa have no jurisdiction about this type of scams, since cryptocurrencies are not legally recognized as financial products.

The press release stated that Africrypt “was offering exceptionally high and unrealistic returns similar to those offered by trading schemes commonly known as Ponzi”.

The BBC asked the South African police if an investigation is underway, but as of this writing they have not responded.

Second big fiasco in South Africa

On the now-inactive website, Africrypt described itself as “an investment firm focused exclusively on cryptocurrency and blockchain technology.”

The company told investors that, in just a few years, it had grown from a platform managed by a single person working from his bedroom to “one of the largest and most successful commerce and artificial intelligence companies in Africa.”

The medium specialized in finance Bloomberg recalled that the “fiasco” with Africrypt occurs after the last year collapse of another South African platform for bitcoin, Mirror Trading International.

Up to 23,000 digital currencies were then compromised, at prices then around US $1.2 billion, according to a report by Chainalysis.

Africrypt investors could face losses three times greater.