South Africa’s Financial Sector Conduct Authority says it cannot act on Africrypt’s alleged theft of $3.6 billion in bitcoin.
Although the investment platform Africrypt looked like a Ponzi scheme, South Africa’s financial regulator said all it can do is review complaints. This is 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.”
The FSCA added that the “exceptionally high and unrealistic returns” offered by Africrypt likened it to a Ponzi scheme. “The public is urged to understand that unrealistically high returns suggests that the investment scheme is likely to be fraudulent,” the FSCA concluded.
Launched in 2019, Johannesburg-based Africrypt was founded by South African brothers Ameer and Raees Cajee. The platform promised a minimum return of five times the amount of bitcoin invested. According to lawyers acting on behalf of a group of Africrupt customers, the brothers and bitcoin worth as much as $3.6 billion have gone missing. Calls made to the brothers’ phones immediately direct to voicemail, and the company website is down.
The Hawks, a unit of South Africa’s police force focusing on corruption and economic crime, is investigating the matter. It has yet to determine where the case would be prosecuted.
Africrypt first showed signs of trouble earlier in the year. In April, Ameer Cajee said that the company had been a victim of a hack. Following this, investors hired a law firm to look into the case. However, Cajee also asked investors not to report the incident to authorities, which raised more red flags. Additionally, employees at the firm lost access to back-end platforms seven days before the alleged theft.
South African crypto regulations
The FSCA is trying to have crypto assets declared financial products due to the accumulating thefts related to cryptocurrencies. “The authority is concerned over the large number of scams being perpetrated by persons purporting to provide the crypto asset to the public,” it said. “The public must be aware of the very large number of unscrupulous players in this sector.
Earlier, South Africa’s Intergovernmental Fintech Working Group released a position paper calling for the regulation of the country’s cryptocurrency system. It states that it is necessary to initiate “a staged approach to bring crypto-assets within the regulatory remit through the regulation of crypto-asset service providers.”