Bitcoin Exchange Founders Missing After "Hack." So Is $3.6 Billion

Crypto enthusiasts are seeing some topsy-turvy times. After El Salvador approved bitcoin as a legal tender earlier this month, China came down heavily on mining operations on its mainland, crashing the value of cryptocurrencies globally. Now a $3.6 billion scam involved in cryptocurrency trade has come to light in South Africa, which is being termed as the biggest "heist" in the short history of cryptocurrencies.

Brothers Ameer and Raees Cajee started Africrypt in South Africa in 2019. The company provided its users with updates on cryptocurrency trading and allowed them to create portfolios of cryptocurrency investments. By April last year, Africrypt had purchased 69,000 bitcoins, which is roughly worth $4 billion, for its customers.

Ameer, the COO, then informed their clients that Africrypt had been hacked and their wallets and accounts had been compromised. He also asked the clients to not report this to authorities since it would delay the recovery process.

A few suspicious clients contracted attorneys to look into the matter but the Cajee brothers were untraceable and involved the federal crimes unit. Further investigations found that Africrypt employees had lost access to the back-end platforms, seven days before the alleged 'hack'.

Africrypt bankers, First National Bank (FNB) allegedly facilitated the transfer of Africyrpt's pooled funds onto the bitcoin network in April after the 'hack' but have denied this and refused to reveal further details, Independent Online reported.

South Africa's financial regulator, Finance Sector Authority does not consider cryptocurrency to fall under its jurisdiction.

Bank for International Settlement said, "Cryptocurrencies are speculative assets rather than money, and used to facilitate money laundering, ransomware attacks, and other financial crimes."

Unregulated and unauthorized, cryptocurrencies often lack safeguards for investors. In 2019, over 115,000 people were left without their share of deposits, when the founder and CEO of QuadrigaCX, Canada's biggest bitcoin exchange, Gerald Cotten passed away. Months after his death, Cotten's widow revealed that QuadrigaCX's funds were held in cold wallets - offline storage for cryptocurrency, whose passwords were known only to Cotten and now lost forever. Engadget reported this loss to be $200 million CAD (~163 million USD).

While the QuadrigaCX incident might be termed unfortunate, 400,000 users lost their money when Turkish cryptocurrency exchange, Thodex, ceased operations in April this year after the government banned cryptocurrencies for buying goods and services.

Operating since 2017, Thodex introduced a freeze in transactions for a five-day period to facilitate its sale. Users could not access their accounts or withdraw their money and the CEO, Faruk Fatih Ozer, left the country. The investor amount lost was reported to be $2 billion.