About 69,000 bitcoins worth more than $3.6 billion have disappeared, along with the owners of Africrypt, a crypto investment platform, after the South African brothers who founded and ran the company announced in April that they had been hacked.
Brothers Ameer Cajee, 18, and Raees Cajee, 20, founded Africrypt in 2019.
Chief Operating Officer and child prodigy Ameer, 18, sent a letter to investors on April 13 saying the company had been forced to halt all operations after a “recent breach” in which clients’ wallets were compromised, according to tech news platform ITWeb.
“At this point, it is unknown to us the extent of personal client information breached during the attack,” Ameer Cajee wrote at the time, adding that clients would be updated on any progress made in recovering the “stolen funds and compromised information”.
Investors were asked not to report the incident to lawyers and authorities, as it would slow down the recovery process of the missing funds, Bloomberg reported. Then the brothers disappeared, investors say.
A Johannesburg businessman and investor told ITWeb that the brothers had “a certain level of politeness” and were easy to talk to before they disappeared. He said his last communication with the brothers was on March 5, when he said Africrypt started freezing accounts, doing know-your-customer (KYC) verification and asking for proof of accounts from investors. “They don’t respond to any e-mails, voice messages or anything,” he said.
ITWeb said it learned that U.S.-based cryptocurrency platform Yellowcard has hired a private investigator after it invested 3.5 million rand ($245,000) in Africrypt but did not receive any bitcoin in return. Yellowcard CEO Chris Maurice told ITWeb, “We don’t have any comment at this time”.
The Africrypt collapse represents the biggest-ever dollar loss in a cryptocurrency scam and could motivate regulators to impose order on the market amid rising cases of fraud, Bloomberg reported.
The scale of the Africrypt collapse dwarfs an earlier South African bitcoin platform collapse at Mirror Trading International. The Mirror losses involved about 23,000 digital coins worth about $1.2 billion in what was described as the biggest crypto scam of 2020, according to a report by Chainalysis. Africrypt investors stand to lose three times more.
Raees and Ameer Cajee were featured on the December 2020 issue of Umhlanga Magazine, a lifestyle magazine on the North Coast of KwaZulu-Natal, home to the indigenous Zulu people. The brothers said they have been mining bitcoin since 2010, initially on desktop computers, and started the business in 2013. They credited their parents with mentoring them, and said they got “valuable insight from our cousin Zaakira Laher, who at the time was a student of law. She assisted us as a legal advisor for several years.”
They described their greatest achievements, including “mining our 100,000th Ethereum” and “being invited out to China to meet the executive team of Huobi (the world’s largest cryptocurrency exchange), gaining us our first institutional investors from mainland China, being offered a buyout for our intellectual property, launching the first AI-driven trading platform in Africa, setting up our offices in both Hong Kong and South Africa, developing our very own hybrid blockchain on which we will launch our first cryptocurrency token, Africoin, and being recognised globally by institutions in our field for the work we are doing by safely exposing individuals and institutions to the cryptocurrency market.”
Their future goals, they said before they disappeared, included developing the first African cryptocurrency-focused bank and bridging the gap between cryptocurrency and fiat currency in a seamless transition.
Some skeptical investors hired the law firm Hanekom Attorneys and another group has started liquidation proceedings against Africrypt, Bloomberg reported
“We were immediately suspicious as the announcement implored investors not to take legal action,” Hanekom Attorneys said. “Africrypt employees lost access to the back-end platforms seven days before the alleged hack.”
South Africa’s Finance Sector Conduct Authority is looking into Africrypt but is prohibited from launching a formal investigation because crypto assets are not legally considered financial products, according to Brandon Topham, the head of regulation enforcement.
U.S. federal officials this month recovered more than half of the ransom paid in bitcoin to hackers who attacked the Georgia-based Colonial Pipeline Co. on April 29, effectively shutting down the gas supply to several major Eastern U.S. cities and sending motorists into a panic. The Russia-based hacker group known as DarkSide held the fuel-delivery company ransom. Joseph Blount, CEO of Colonial Pipeline, told The Wall Street Journal that he authorized the ransom payment of 75 bitcoin — roughly valued at $4.4 million — to get the pipeline operating again.
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