Fraud cases within South Africa’s crypto-currency sector surged by 25% during the last quarter, demonstrating the growing sophistication of fraudsters in exploiting the booming crypto market.
This is one of the biggest findings from research conducted by Sumsub, a transaction monitoring and verification services provider.
The research sheds light on the fraud trends that emerged during the first half of 2023, based on an analysis across South Africa, Tanzania, Kenya and Nigeria.
According to Sumsub, Africa’s rapidly-evolving digital landscape has opened new doors for innovation, but has also become a hotbed for evolving fraud tactics.
Deep fake fraud and forced verification are also on the rise on the continent, says the firm.
The report comes as South Africans continue to lose money through crypto-currency scams.
In May, IOL reported that Planet Mining Pool, which described itself as a leading global one-stop blockchain cloud mining platform, was accused by “investors” of scamming them out of “substantial” amounts of money.
It closed down its platform, leaving thousands of people devastated.
Last year, the US Commodities Futures Trading Commission (CFTC) charged South African resident Cornelius Johannes Steynberg in a Bitcoin fraud scheme case totalling $1.7 billion (R31.6 billion).
Steynberg allegedly created and operated, through Mirror Trading International, a global foreign currency commodity pool that only accepted Bitcoin to purchase a participation in the pool, with a value of over $1 733 838 372.
At the time, this action was the largest fraudulent scheme involving Bitcoin charged in any CFTC case.
Another incident involved Africrypt, which was allegedly hacked and investors lost billions of rands.
On country-specific details, Sumsub says Tanzania witnessed a 250% increase in crypto fraud and a significant 150% growth in fintech-related fraud.
It adds that Kenya experienced more than a doubling of crypto fraud cases, highlighting the rising challenges faced by the industry. Nigeria reported a 59% rise in IT services fraud and a 46% increase in fintech-related fraud.
Sumsub adds that a novel threat emerged in 2023 as deepfake fraud surfaced, accounting for 0.6% of all fraud cases in Kenya and 2.2% in South Africa.
This technique involves the creation of life-like personas using authentic individuals’ documents, posing a unique challenge for verification providers.
According to cyber security firm Kaspersky, deepfakes are sold per minute on the darknet, with the price of one video ranging from $300 (R5 510) to $20 000 (R367 374).
It adds that deepfakes are sold on the darknet for many use cases, ranging from advertising for crypto scams, to bypassing verification in payment services.
Sumsub also found that South Africa and Kenya experienced an alarming surge in forced verification cases, constituting 6% and 7% of all fraud instances in 2023, respectively.
It explains that forced verification occurs when individuals are subjected to verification procedures against their will, potentially indicating illicit activities.