Ameer and Raees Cajee, on either side of the rider. Photo: Instagram
Grand Theft Crypto: FCSA says the Cajee brothers’ Africrypt resembled a Ponzi scheme
The Financial Sector Conduct Authority (FCSA) said the Africrypt scandal is beyond its jurisdiction but it is considering declaring cryptocurrency a financial product in order to protect the public. The Cajee brothers’ platform reportedly resembled a Ponzi scheme with the unrealistic returns on investment it offered.
Ameer and Raees Cajee, on either side of the rider. Photo: Instagram
Africrypt, a South African cryptocurrency exchange headed by Ameer and Raees Cajee was allegedly hacked in April. The Cajee brothers told their investors that the hackers had siphoned billion dollars’ worth of Bitcoin.
Alarm bells sounded for some investors when the Cajee’s asked them not to notify the relevant authorities about the hack – claiming that this would hinder the recovery of the funds. The brothers themselves disappeared shortly after the $3.6 billion (R51 billion) did and are nowhere to be found according to investigators hired by burnt clients.
ATTORNEYS CANNOT FIND CAJEE BROTHERS
Hanekom Attorneys, which were hired by sceptical investors, said the brother cannot be traced and reported the matter to the Hawks, the South African Reserve Bank (SARB) and the Financial Sector Authority.
The hack could potentially be the largest cryptocurrency loss in history, eclipsing the approximately $200 million CAD (R2.3bn) that was lost when the founder of Canadian exchange, QuadrigaCX, died while travelling through India.
Brandon Topham, the head of enforcement at the FCSA, said the authority has not launched a formal investigation but they are examining the complaints about the Cajee brothers and Africrypt to see if a financial product is hidden there.
FCSA HANDS TIED
The FCSA said it is aware of the concerns regarding investments made by the public in Africrypt in a statement on Thursday, 24 June. The authority said it is investigating the complaints to determine if a recognised financial product or service was offered to the public.
“At this stage, we have only found evidence of crypto asset transactions” said the FCSA. Cryptocurrency assets are not regulated by any of South Africa’s financial laws and therefore the FCSA cannot take any regulatory action.
“The Authority has warned the public and continues to do so with respect t the high-risk nature of investing in crypto assets as an asset class for investment, due to the lack of an underlying business model and the risk of large fluctuations in the market place in most cases, the Authority is concerned over the large number of scams being perpetrated by persons purporting to provide the crypto asset to the public,” said the FCSA.
CAJEE BROTHERS’ AFRICRYPT RESEMBLED A PONZI SCHEME
The FCSA said its preliminary investigations into the Cajee brothers’ Africrypt led them to believe that regardless of the measures they may have put in place, Africrypt was offering “exceptionally high and unrealistic” returns on investments – this closely resembled the offerings made by unlawful investment schemes commonly known as Ponzi schemes.
The Authority stressed that if an investment company is offering unrealistically high returns it is most likely fraudulent.
“To protect the public, the Authority is in the process of considering declaring crypto assets as a financial product, which would give the FCSA jurisdiction over these transactions” said the FCSA.
However, the Authority warned that crypto assets are a highly speculative and risky area which the majority of South African investors are not suited to.
