Lawyers for investors in a cryptocurrency exchange in South Africa, which told clients in April their accounts had been hacked, say US$3.6 billion has disappeared from the platform and that the two brothers who ran it cannot be traced.
If confirmed, Africrypt's losses would rank among the biggest crypto losses yet. For the whole of 2020, losses in the crypto sector through fraud and other crime were US$1.9 billion, down from a record of $4.5 billion in 2019, according to crypto intelligence company CipherTrace.
Africrypt COO Ameer Cajee said in a letter to clients, dated April 13, that client accounts had all been compromised due to a recent breach in its system. The letter said Africrypt had halted operations and had "begun the process of attempting to retrieve stolen funds."
It gave no details of how much money was missing and warned clients that trying to get their money back using lawyers would "only delay the recovery process."
Hanekom Attorneys, a law firm hired by some of those who say they have lost money, in a statement their investigations had so far found a total of $3.6 billion had vanished from Africrypt. The firm did not immediately respond to a request for comment on how it reached that figure.
South Africa’s financial regulator says its hands are tied in the alleged $3.6 billion Bitcoin fraud at Africrypt because cryptocurrency is not yet a regulated product there.
While saying the investment platform looks like a Ponzi scheme, the Financial Sector Conduct Authority (FSCA) said all it can do is review complaints because “crypto assets are not regulated in terms of any financial sector law in South Africa and consequently the FSCA is not in a position to take any regulatory action.”
“This entity was offering exceptionally high and unrealistic returns akin to those offered by unlawful investment schemes commonly known as Ponzi’s,” the FSCA said in a statement. “The public is urged to understand that unrealistically high returns suggests that the investment scheme is likely to be fraudulent.”