Africypt BTC scam: South Africa regulators, banks and exchanges play blame game

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It’s been one of this year’s biggest headlines in the digital currency space—the mysterious disappearance of billions of dollars in South African scam Africrypt. With each new day, new details are emerging about the scam. The latest is links to a convicted mob boss, even as banks, regulators and digital currency exchanges play a blame game on who exactly is at fault for the massive scam.

Africrypt was a digital currency investment company targeting the rich and celebrities, promising them ludicrously high returns. The founders, brothers Raees and Ameer Cajee, claimed earlier this year to be hacked and lost all the investors’ money. As CoinGeek reported, they even implored the victims not to report.

The two brothers have denied scamming investors and held on to their statement that they were hacked. However, investigators have found that some of the BTC addresses that drained the exchange had been in use by the operators months before the hack in the course of normal business.

The two brothers vanished from South Africa months ago and are thought to be in the U.K. They told the Wall Street Journal that this was necessary as there were threats on their lives. As local reports now reveal, the threats were allegedly from an associate of a convicted gangster.

The brothers said they received threats from Juan Meyer, the director of Badaspex (Pty) Ltd. Badaspex is spearheading legal efforts for victims of the scam, seeking to gain some of the money back.

The two brothers said Meyer, who was one of the investors in Africrypt, threatened their lives immediately after the collapse of the firm. Meyer is linked to Radovan Krejcir, a Czech crime boss who’s convicted in South Africa for gold smuggling and owning illegal oil refineries.

Gerhard Botha, the attorney representing Badaspex, has denied the claims by the two brothers.

In yet another unfolding situation, institutions alleged to have either aided or failed to thwart the scam are trading blames. One of these is the First National Bank (FNB), the local bank that’s believed to have processed payments for the scam. According to one outlet, over $7 million passed through an FNB account controlled by the brothers. The bank, however, has vehemently denied the claims.

“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, the FNB spokesperson told local media.

Digital currency exchanges that reportedly processed payments for the scam have also been on the spotlight. In turn, they have also denied the allegations. One of these is Luno, one of Africa’s largest exchanges. While blockchain analysis has shown that its hot wallet transacted with Africrypt’s wallet, Luno has refused to admit its role in the scam.

“Although Africrypt began the process of applying for a Luno account in 2019, the process was never completed and therefore the business account was never opened,” Marius Reitz, the general manager of Luno Africa told one outlet.

Nevertheless, Luno has continued working with authorities in the investigations, Marius added.

Regulators are also on the spotlight over their laxity. The South African Reserve Bank, just like everyone else, denied its role in the scam. Instead, the focus should be on the Financial Services Conduct Authority (FSCA), a spokesperson told local media.

The FSCA, on its part, claims to be investigating whether Africrypt offered a financial service. This would put the firm under its jurisdiction and allow it to get involved. As CoinGeek reported recently, the regulator is considering declaring digital currencies as financial products to give it authority over the industry.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple and
Ethereum—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.