The $3.6 Billion Crypto Scam You (Probably) Never Heard Of

Look at these trustworthy gentlemen. Would these faces lie to you?

Turns out, they would, and here's how one of the biggest cryptocurrency scams so far played out as a cautionary tale to bullish crypto investors.

The Tale of Young Prodigies and Epic Returns

In now-seemingly prehistoric 2019, brothers Raees (then 21) and Ameer Cajee (then 17) founded Africa's first-ever cryptocurrency trading platform, Africrypt.

The promise was a 10% return. Every. Single. Month. You could double your money in a year - who wouldn't want that?

The Cajees didn't seem like a pair of desperate naive teenagers riding the crypto hype either - they came from a good family, were supposedly financially and tech-savvy, were well-spoken, and overall knew how to present themselves.

Allegedly, the brothers have developed a proprietary algorithm that allowed for fairly phenomenal returns on a consistent basis. And when their first clients started cautiously depositing funds into their accounts, they watched the returns materialize as promised - at least, on paper. A huge boom followed, and Africrypt quickly grew in both influence and valuation.

Importantly, the brothers knew how to appeal to the Tik Tok gen too: they bought a Lambo - with cash - dressed in designer suits, rented a massive mansion, and otherwise promoted a lavish lifestyle they de-facto promised to their investors and clients. All you needed to do was throw some money at Africrypt.

And people did. About $3.6 Billion of it in under two years, in fact. Some sold their cars and refinanced their mortgages to be able to scrape together as much cash as possible. After all, it's a guaranteed 10% per month!

The consensus on social media was unanimous: if they have a Lambo, they must know what they're doing.

The Reality Check

The business was booming, the investors watched their portfolios grow at a phenomenal rate, Africrypt has been getting some serious media attention, and overall it seemed like an epic, unicorn IPO was just around the corner as well. And then, on April 13th, 2021, the investors received the following letter.

"Our system, client accounts, client wallets and nodes were all compromised," the letter read, and advised investors not to pursue the "legal route" as that would "only delay the recovery process".

Notably, to become Africrypt's client or investor, one had to sign a fairly standard-looking agreement. Dig deeper, however, and you'll find a clause releasing Africrypt from any liability - specifically, in the case of hacking. Well, nobody reads these things.

And this is when I must talk about our cybersecurity sponsor, Wembley Partners...nah I'm just kidding.

Naturally, the investors panicked and tried to immediately get in touch with the company. Some even attempted to visit Africrypt's head office...only to discover it was an empty lot with a carpeting and flooring business next door; hardly the headquarters of a multi-billion crypto firm.

Even the Africrypt website has gone offline.

The investors then proceeded down the "legal route", represented by a law firm called Hanekom Attorneys. The firm sent a complaint to the Hawks - an elite South African police unit.

At first, people thought finding the money will be easy. But the investigation into where the bitcoins went had been rendered near-impossible by the use of "various dark web tumblers and mixers", the law firm wrote.

You see, it's a common misconception that crypto funds are very easy to trace due to cryptocurrencies being powered by the blockchain technology, notorious for maintaining a public transaction ledger - a financial chain of custody, if you will.

This is easily circumvented by cybercriminals of various calibers through the use of tumblers: a service that mixes deposited crypto source funds from multiple inputs for a large and random period of time, and then spits them back out to destination addresses. As all the funds are lumped together and then distributed at random times, it makes it incredibly difficult to trace where the exact coins in question went.

The brothers have disappeared too. Their social media profiles have been taken down and they weren't responding via phones either. As it was quickly discovered, they've sold the Lambo, the mansion, and other assets days before the hack. And the more the investigators dug into the brothers' financial and travel plans, the sketchier things got.

Apparently, the Cajees bought citizenships of Vanuatu just a few months prior to the alleged hack. Vanuatu is a tax haven that offers visa-free access to over 130 countries. Then people started coming forward and said that one of the brothers' other crypto trading companies, Raecreate, had also been hacked in May 2019, with all the funds magically disappearing. And about a week before the hack, most Africrypt staff had lost all access to the company's back-end platforms.

The brothers have reached out online a few times since "the incident", denying any involvement in the hack, and reaffirming their intention to stay in hiding, supposedly to protect themselves and their families from harm.

Innocent until proven guilty? I'll let you decide.

The Consequences?

For Africrypt's investors and clients, any meaningful help from the government wasn't an option. South Africa’s Financial Sector Conduct Authority (FSCA) said, in a 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".

Notably, the Africrypt incident was one of two major scams that have taken place in South Africa in recent history. The other involved Mirror Trading International, which?defrauded investors of $589 million?in August 2020.

As a result, FSCA eventually decided to?prepare a regulatory framework?on how crypto trading should be conducted, hopefully addressing incidents like this in the future.

And where are the Cajees now? Will they ever be found and tried, or will they prove Africrypt to be one of crypto's history top get-rich-fast schemes? We might never know.

But I can tell you this: if something seems too good to be true, more often than not, it is.

Disclaimer: I cannot believe I have to type this, but this article does not constitute financial, or any other, advice. I do not promote or condone criminal activities in any shape or form. Bad, bad Cajee brothers.