South Africans lose ‘billions’ in Africrypt crypto scam

By Stephen Timm
Johannesburg, 17 Jun 2021

Two months after two Durban brothers shut down their crypto trading platform after what they claim was a hack, and apparently disappeared, investors who invested millions of rands in the platform are still trying to piece together what went wrong.

On 26 April, the Gauteng South High Court granted a provisional liquidation order against Africrypt directors Ameer, 17, and Raees Cajee, 20, in favour of a group of about 20 investors, and the two brothers have until 19 July to argue against the liquidation.

Gerhard Botha, the attorney representing the group of investors under the company Badaspex, said he had not received any response from the two brothers to the provisional liquidation order.

“In the meantime, we will advertise the liquidation as per the order obtained,” he said.

It comes after Africrypt COO Ameer Cajee issued a letter to investors on 13 April, a copy of which ITWeb has seen, stating the company, which he and his brother founded in 2019, had been forced to halt all operations after a “recent breach” in which clients’ wallets had been compromised.

“At this point, it is unknown to us the extent of personal client information breached during the attack,” wrote Cajee at the time, adding that clients would be updated on any progress made in recovering the “stolen funds and compromised information”.

Investors say after issuing the letter, Cajee and his older brother and CEO, Raees disappeared, leaving investors who took to messaging service Telegram to speculate where the two may be.

When ITWeb contacted Raees’s cellphone, he did not answer calls. ITWeb, however, then received a WhatsApp message saying he could not talk as he was “not available today”. He suggested a time for a call a few days later and said his legal team would draft a written response. However, at the appointed time for the call, he did not answer his phone or return messages. No written response has since been received.

Daniel Opperman, who was listed as the company’s compliance officer, said he could not speculate on what had taken place or where the Cajees now were.

Some investors ITWeb spoke to claim the Hawks are investigating the matter. Hawks spokesman Lieutenant Colonel Philani Nkwalase asked for the case number before he could comment. Nkwalase did not respond to subsequent request to comment, when told that investors have not yet lodged any charges.

Faint hopes

A Durban businessman, who says he invested R15 million in Africrypt and asked not to be named, declined to explain why investors had not lodged charges, but claimed the matter had been reported to the Hawks and that investors are “in the process of lodging charges”.

“Everyone wants to keep it quiet at the moment. Everyone is hoping to get their money back,” he said.

ITWeb was told by one investor that another investor, US-based crypto-currency platform Yellowcard, has hired a private investigator after Africrypt took a R3.5 million investment from the company and failed to deliver any Bitcoin in return. However, in an e-mailed response to ITWeb, Yellowcard CEO Chris Maurice said “we don’t have any comment at this time”.

Another investor, a Johannesburg businessman that ITWeb spoke to, recalls how the brothers had “a certain level of politeness” and were easy to talk to, but had since gone quiet. “They don’t respond to any e-mails, voice messages or anything,” he said, asking that he not be named.

He said his last communication with the brothers was on 5 March, when he said Africrypt started freezing accounts and doing KYC (know-your customer) verification and asking for proof of accounts from investors.

Africrypt’s three staff members, he claims, were laid off after being paid up until April and being told to hand over their laptops and not to speak to anyone about the company. ITWeb messaged two staff members on LinkedIn, but did not receive any response from either.

The investor claims Raaes is a childhood prodigy who was able to create a trading algorithm that allowed them to trade while they attended school. It became so successful that Huobi, a Chinese crypto platform, flew him to China when they discovered the returns he was getting on the crypto platform.

“I think they ran away because there are some dark threatening people in Durban,” said the investor, adding that “there are some dodgy people who have put money into it [Africrypt]”, without elaborating further.

It’s not clear how many investors Africrypt had. One investor claims the company had a few thousand South African investors but that the real client base was overseas, meaning the number of clients could run into the tens of thousands.

FSCA probe

While it’s understood the group of investors pressing for liquidation had invested about R80 million in the platform, the total amount invested could run into billions of rands, with two investors that ITWeb spoke to putting the figure at $3.6 billion.

If correct, this would far exceed the $588 million netted by Mirror Trading International, rated one of the biggest crypto scams of 2020.

The Financial Intelligence Centre (FIC), whose policy is not to comment on whether it is investigating any individual or company, said it is “unable to confirm or deny” whether it has or has not received any regulatory reports related to Africrypt.

However, the Financial Sector Conduct Authority’s (FSCA’s) head of enforcement Brandon Topham said the FSCA is investigating Africrypt.

“We did a preliminary investigation and closed our file, as it appeared that we had no jurisdiction in this matter as they did not deal with a financial product. However, I requested my team to re-open the file a little over a week ago and relook at it to see if there was any way we could identify jurisdiction on the back of a complaint by a large company who had invested money with them under an understanding which may have indicated that there were derivative products involved,” he said.

He urged investors to report any information they may have to the FSCA.