South Africa’s financial regulator says its hands are tied in the alleged US$3.6-billion (R51-billion) bitcoin fraud at Africrypt because cryptocurrency is not yet a regulated product there.

While saying the investment platform looks like a Ponzi scheme, the Financial Sector Conduct Authority said all it can do is review complaints because “crypto assets are not regulated in terms of any financial sector law in South Africa and consequently the FSCA is not in a position to take any regulatory action”.

“This entity was offering exceptionally high and unrealistic returns akin to those offered by unlawful investment schemes commonly known as Ponzi’s,” the FSCA said in a statement on Thursday. “The public is urged to understand that unrealistically high returns suggests that the investment scheme is likely to be fraudulent.”

Johannesburg-based Africrypt launched in 2019 and was run by South African brothers Ameer and Raees Cajee. They promised a minimum return of five times the amount invested, according to a police statement by one investor. In the end, he invested close to R1.8-million, the statement said.

Lawyers acting on behalf of a group of clients say the brothers and bitcoin worth as much as $3.6-billion have gone missing. Calls to the brothers’ cellphones were immediately directed to a voicemail service. The company website is down.

Hawks

The matter has been reported to the Hawks for investigation, a representative said by e-mail. It has not yet determined where the case would be prosecuted, the representative said.

The FSCA has taken steps to have crypto assets declared financial products as theft related to crypto assets pile up in South Africa.

“The authority is concerned over the large number of scams being perpetrated by persons purporting to provide the crypto assets to the public,” it said. “The public must be aware of the very large number of unscrupulous players in this sector. — Reported by Roxanne Henderson and Loni Prinsloo, (c) 2021 Bloomberg LP