South African crypto scheme shuts up shop over fraud claims

A once-popular investment vehicle in South Africa has closed its doors after claims that the organisation may in fact be a front for fraud.

Bitcoin Wallet, which was based in the city of Ladysmith in KwaZulu-Natal, has long since been a destination for investment.

The company made a series of grand promises, including a pledge that 100% returns would be on offer in a fortnight.

There was high demand for its services, and at one stage the firm was so overwhelmed by customers looking to add cash to its investment vehicles that it had to cease accepting deposits which were worth under 5,000 South African rand – which is equivalent to over £275 British pounds or around $350 or so US dollars.

According to media estimates, Bitcoin Wallet was receiving over two million rand every single day at one stage.

The firm would regularly welcome people to invest their cash physically in its offices. On some occasions, investors would wait overnight in order to be able to leave sums of cash.

They were under the impression that in around two weeks’ time they would receive their cash back – and, with the profit factored in, doubled.

However, five days ago it became apparent that the firm may in fact be a Ponzi scheme. In a Ponzi scheme, cash which comes from newer investors is then used to pay older investors, to create the illusion of profit.

Reports from the African News Agency also alleged that when conversing with the South African regulator known as the Financial Services Conduct Authority (FSCA), more red flags were raised.

The FSCA supposedly claimed that a signature on the official business forms of Bitcoin Wallet which was meant to be from a registrar appeared to have been faked.

In the most recent development, it became clear that Bitcoin Wallet did not have the funds in place to return its cash to clients.

According to a local newspaper in the Ladysmith area, the founder of Bitcoin Wallet Sphelele Mbatha, who is also known as “Sgumza”, denied all knowledge of being able to return the cash to investors.

Mbatha is believed to have lived the high life and to have invested in status symbols commonly associated with cryptocurrency wealth such as high-end cars. One unconfirmed report said that Mbatha was given police protection at one stage.

He is now denying knowledge of how to fix the problem.

“I don’t know what’s going on. I don’t know online or how this system works. [It has] to be workshopped”, he is quoted as saying.

He has also apparently claimed that he was simply a “manager” at the Ladysmith Bitcoin Wallet offices rather than the leader of the organisation.

“I won’t continue working. I don’t have cash anymore. The owner says people must go online and collect their money online. I, myself, have invested my money in there. I submitted my banking details online and now I am also waiting”, he said.

Chris Lee

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