Hundreds of thousands of investors were scrambling to find out what happened to funds they had invested in failed crypto scam Mirror Trading International (MTI), a far bigger crypto disappearing act that has been playing out without hardly anyone paying attention.
Africrypt, which had high profile celebrities among its investors, was reportedly hacked with about US$3.6-billion ( R54-billion) being swiped out of multiple wallets controlled by directors of the company in a matter of hours.
Sources had it that a few days after the unfortunate incident, the two founders of Africrypt – Raees and Ameer Cajee disappeared to the UK.
The investigation is still ongoing to ascertain those behind the hack, multiple regulatory authorities now looking into it, this may turn out to be one of the biggest financial scandals in South Africa’s history.
According to Hanekom Attorney who represents several Africrypt clients said that recovery of R50-billion assets from the hackers could be difficult, as the owners of the crypto firm asked the clients not to alert the government as it could frustrate their efforts in retrieving the funds.
Money-laundering operation?
It begs the question: How did a low-key crypto company with a trading history of little less than two years end up with crypto assets of nearly R50-billion (nearly five times the size of MTI).
Darren Hanekom of Hanekom Attorneys believes it is unlikely all these funds came from South Africans, saying it was more likely a money-laundering operation for international players, of which the Cajees were just a part.
Also suspicious is the fact that clients were requested to sign an investment agreement with Hong Kong-based RaeCreateWealth Limited, which limited the liability of the company for virtually any kind of loss. The agreement is so weighted in favour of RaeCreateWealth Limited that it exonerates it from any hacks – but this contractual limitation of liability does not apply where a crime has been committed.
Whether this was an international money laundering operation or not, the case does little to enhance South Africa’s reputation as a safe haven financial centre, coming so soon after the collapse of MTI, and brings urgency to the growing clamour for crypto regulations.
Some clients are known to have invested R1.5-million, with a few as much as R15-million and R20-million.
While some Africrypt clients are known to have been paid commissions for referring new clients, it does not appear to have been a multi-level marketing scheme (unlike MTI). The real success of the company was its ability to scout for clients among a relatively limited pool of high-net-worth investors who knew each other.
While MTI was offering returns of up to 10%/month using a trading bot, Africrypt’s sales pitch was even more outrageous, with some clients being promised 10%/day, also using a computerised algorithm. Clients were invited to choose between a conservative, moderate and aggressive investment approach.
In an investor presentation, Africrypt boasted returns of 2-11%/month depending on whether you chose a passive, passive-aggressive or aggressive portfolio. In the 20 months to August 2020, there was not a single losing month.
Something of a secret
The results were so mouth-watering that it was treated as something of a secret among the inner circle admitted to this exclusive club.
Hanekom says Africrypt bore all the hallmarks of a scam, with the Cajees posting pictures of their luxury cars and boasting on social media about their extensive experience in crypto: “Whilst we are aware of the many opportunities available for young people in the cryptocurrency space, we were suspicious of the claims that over 100 000 Ethereum coins were mined from home-based computer systems. Given South Africa’s high electricity costs, and unstable power generating capabilities, we found this claim particularly difficult to accept.”
