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South African Brothers Vanish, and So Does $3.6B in Bitcoin Exit Scam
- azinman2 5y agoI wonder if in the history of banking the first banks had this much fraud with normal currency? Or is this just specific to Bitcoin? It feels like the stats now are just where by default everything with Bitcoin is (eventually) fraudulent and honest services are the exception.
- prepend 5y agoI’d like to know this as well. I suspect there’s more because now the entire contents of the vault can fit onto a slip of paper. So just logistically can be moved around more than previous bank eras.
- an_opabinia 5y agoWhat if the exit scams happening today in China are 10x worse than South Africa’s, because it’s so much bigger, but we aren’t hearing about them? Never mind history.
- moneywoes 5y agoAny examples?
- dragontamer 5y agoThere's a reason why the middle ages had a huge number of coins. A mint could be trustworthy for a generation as some Noble family takes care of it with high degrees of trust. (Usually proven amounts of silver in each coin, for example) Then the wrong child becomes the leader of the family and and bam, they start reducing the silver weight and replacing the coins with cheaper metals and the entire trust in that coin disappears. And that ignores issues like the Conquistadors coming back from the new world with literally tons of gold / silver and royally messing up the gold / silver coinage economy.
- Dracophoenix 5y ago>>Then the wrong child becomes the leader of the family and and bam, they start reducing the silver weight and replacing the coins with cheaper metals and the entire trust in that coin disappears. // That's actually a plot point in an anime called Spice and Wolf[1]. I encourage anybody who has an interest in medieval economics and early capitalism to watch it. [1]https://myanimelist.net/anime/2966/Ookami_to_Koushinryou https://myanimelist.net/anime/2966/Ookami_to_Koushinryou
- dragontamer 5y agoA lot of my historian friends liked that show, especially because it tried to focus more on the mundane issues in the Middle Ages. Mr. Lawrence had a leg up on his rivals because he's the main character with practically a modern economics degree. So his ability to predict market trends and focus on important information is head-and-shoulders above everyone else. Holo the Wise Wolf in contrast, is a minor, fictional pagan deity without much understanding of human culture. But her sharp wits gives her a lot of street smarts that stands above even Mr. Lawrence. It seems that she can control the yields of wheat fields to a certain degree, but since the recent invention of crop rotation and some fertilizers, her followers were no longer praying to her (and probably don't need her anymore). So she heads off with Mr. Lawrence (the first merchant to swing by after she decided to leave). Holo serves as a good stand in for the audience as well: as Mr. Lawrence holds roughly 15+ different coins out and describes their relevant marketplaces, Holo of course gets bored of the discussion (much like the audience probably does). Giving Mr. Lawrence "knowledge", while giving Holo "wisdom" allows the pair to balance each other out in their journeys. Especially since the basic plot of the show is "follow rumors to make money". Holo can accurately sniff out the truth out of rumors, while Lawrence can predict where the markets go once he's given the facts. EDIT: In many ways, Holo serves as Watson while Lawrence serves as Sherlock in most situations. Lawrence explains the plans to make lots of money to Holo (much like Sherlock explains the situation to Watson, since Watson is the audience stand-in). But unlike Watson, Holo quickly catches onto the money-making game and is quite capable to changing the plan for the better. So its actually a very fun dynamic to watch the two. Just enough explanation from Lawrence, and just enough improv from Holo to keep things interesting, even though they're just buying and selling things throughout the show.
- cowvin 5y agoI mean a currency that protects you from government intervention also protects criminals from law enforcement. They're just two sides of the same coin. The first banks would have dealt mostly with physical money / gold, so it would be a lot harder to pull off this kind of fraud.
- colonwqbang 5y agoWhy? Just take the gold and run. Bank robbery was a thing, and it's much easier to rob your own bank.
- dorgo 5y ago> a currency that protects you from government intervention also protects criminals from law enforcement. Not if the government intervention is a smart contract. Why do we fear government intervention? - (individual) errors - (individual) misconceptions - corruption ( individual incentives ) What if we had direct democracy and your case would be reviewed by every citizen? Would you still fear to be spyed upon? Would you fear to be detained without reason? That's what Cryptography promises. A uncorruptable system which serves society with incentives correctly alligned.
- doggodaddo78 5y agoI think hard currencies took care of trust about intrinsic value. It's only the establishment of rule-of-law and regulations allowed fiat currencies to proliferate. Regulations were written in the tears, fears, and anger of common folk. There's essentially no way to trust someone else with a BTC wallet and there's no trust in BTC's value because there's nothing behind it... it shouldn't be used to store value long-term, only for quick, transactional events. Banks and municipalities who issued their own fiat currencies I believe encountered many more problems.
- makomk 5y agoEven in the modern era there's a lot of fraud and scamming going on. This sounds like a classic Ponzi scheme, and Bitcoin-based Ponzis are just one corner of a broader universe of similar scams all across the globe. They've even brought down governments and the odd country...
- vmception 5y agoProbably a great time to introduce you to ACH fraud https://www.afponline.org/publications-data-tools/reports/survey-research-economic-data/Details/payments-fraud/ https://www.afponline.org/publications-data-tools/reports/su... Its just as large and just as consequence free as bitcoin/crypto heists and fraud despite the paper trail Some reinforce their respect of one system by looking at the proportions of the money supply and transactions, I would say that isnt that important as the industry / interest in fraud has a fixed size
- NicoJuicy 5y agoNo, it isn't. ACH fraud was 1% on 21 billion$. That's 210 million in total, way less than the 4 billion from the article with 1 Bitcoin scam ( of an exchange, again). None of the ACH frauds were the exchange/bank running away with your money fyi. And probably a lot of them, if end users, was even insured. Edit: Sorry. Made a mistake corrected below by a comment and follow-up. 0,08% fraud on 51 T. Is still way less than this sole scam vs. BTC market cap.
- vmception 5y agoThe perpetrators are often not prosecuted, which is what I meant by consequence free. ACH Fraud has also been going on for at least 20 years or so in similar amounts Yes big bitcoin heist and no insurance for those victims of that exchange Both true
- sokoloff 5y ago> ACH fraud was 1% on 21 billion$ 21 Billion per year is close to the annual ACH transaction volume measured in count of transactions. The total value of those transactions in dollars is somewhere over $50T (Trillion) dollars. 1% of that is $500B.
- NicoJuicy 5y agoMmm. Where did you see those numbers? I haven't found that number. + The number i found for fraud in ACH afterwards was actually 0,08 % > ACH fraud is extremely low at 0.08 basis points, or 8 cents for every $10,000 in payments https://silamoney.com/ach/understanding-the-basics-of-ach-fraud/ https://silamoney.com/ach/understanding-the-basics-of-ach-fr...
- marc__1 5y agoyou don't need to go that far back in time to find banking issues basically in every major geography, with different kinds of currencies, digital or not. Case in point: https://en.wikipedia.org/wiki/Danske_Bank_money_laundering_scandal https://en.wikipedia.org/wiki/Danske_Bank_money_laundering_s... https://www.cnn.com/2021/01/21/europe/vatican-bank-money-laundering-intl/index.html https://www.cnn.com/2021/01/21/europe/vatican-bank-money-lau... https://www.justice.gov/opa/pr/bank-julius-baer-agrees-pay-more-79-million-laundering-money-fifa-scandal https://www.justice.gov/opa/pr/bank-julius-baer-agrees-pay-m...
- NovemberWhiskey 5y agoMoney laundering is a different kind of a problem from what we're talking about here, though. Those are mostly KYC or internal controls failures - I'm not saying they're a good thing but they're not impacting other customers of the bank really. Find some recent example of the owners of a bank/exchange absconding with their client funds: that would be closer to the matter at hand.
- hectormalot 5y agoWirecard :) But you’re right. Mostly the normal banks and exchanges are regulated and incidence of fraud is low. A lot of that regulation is “lessons from past failures”, which crypto hasn’t had yet.
- NicoJuicy 5y agoWirecard wasn't a bank/exchange either. But a payment processor. It was fraudulent though.
- NovemberWhiskey 5y agoDid any customers actually lose money over the Wirecard thing, or was it just the shareholders and lenders that lost out? I couldn't immediately find anything about customer losses.
- tedunangst 5y agoReinventing modern finance one disaster at a time.
- agumonkey 5y agoseems like wheel shaped things enjoy regular reinventions
- acdha 5y agoI think it's more that the problem can seem deceptively simple because you're using the default system everyone's assumptions are based on and you don't need to understand the history behind it to have the basic banking experience. The average cryptocurrency booster hasn't studied the current system or its history[1] so it's easy to focus on the happy path and say you're making things easier until you hit a reminder of just how hard it is to stymie abusers when the rewards are high. 1. education from their fellow salespeople is typically worse, like getting medical advice from a health-supplement vendor.
- dorgo 5y ago> the problem can seem deceptively simple Simple or not, the current solution is far from perfect and will be reinvented and will fail again and again until a better solution emerges. There is no way that the current banking/government/democracy/economy system will survive this century.
- api 5y ago"Speed running the last 200 years of financial history..."
- ska 5y agoThere is a great word for this "recapitulation".
- rchaud 5y agoDeposit insurance is a relatively new concept, at least in North America. It didn't exist in the US until the Great Depression. Canada did not introduce it until 1967. A lot of what's happening in the crypto space is just self-professed libertarians re-discovering fire. They start off by being skeptical of banks and monetary authorities, but eventually realize that an unregulated free-for-all attracts bad actors that ruin it for everyone else. Hence the wet blanket of AML + KYC + Deposit ratios.
- anonyxyz 5y agoThis still happened as recently as 100 years ago. Con men would set up false banks in small towns and make off with a lotnof money. Lookup Yellow Kid Weil.
- saalweachter 5y agoI wonder how many bank robberies were scams. Bank owner embezzles for awhile, bank robber shows up, publicly robs the bank, makes off with $1000, bank owner claims $10,000 was stolen. Bank owner now has a reason why he can't give everyone their money back.
- azinman2 5y agoSo what changed? I'm not concerned with any current bank making off with my money (although I'm more concerned with risky practices leading to them to go under, which is legal and as 2008 proved, the tax payer will absorb).
- deleted 5y ago[deleted]
- nerfhammer 5y agoThe US has had periods where banks or even corporations could print their own money. https://en.wikipedia.org/wiki/Wildcat_banking https://en.wikipedia.org/wiki/Wildcat_banking It wasn't fiat money, they were deposit notes representing gold or silver. And while outright fraud wasn't much of an issue since physical banks can't just disappear and leave town overnight, if the bank collapsed the currency would probably not be redeemable anymore.
- manquer 5y agoFraud was high. It was not fraud by the institutions as such, but counterfeits was a big problem with as many as 7000 unique notes it was next to impossible to know which was genuine. Post the civil war as much as half the currency was estimated to be counterfeit. The secret service was given the policing money task as a direct result. There was streamlining of currency issue after that.
- jsrcout 5y agoGeorge Byron Merrick's book Old Times on the Upper Mississippi: The Recollections of a Steamboat Pilot from 1854 to 1863 [0] has a fascinating chapter on how people got rich on wildcat banking swindles. [0] https://www.gutenberg.org/ebooks/47262 https://www.gutenberg.org/ebooks/47262
- slowhand09 5y agoNevada, New Hampshire, and Utah have gold notes that are legal tender now. https://www.jmbullion.com/gold/gold-notes/ https://www.jmbullion.com/gold/gold-notes/ https://www.jmbullion.com/1-nevada-goldback-gold-note/ https://www.jmbullion.com/1-nevada-goldback-gold-note/
- ffhhj 5y ago> Nothing is known about Diogenes' early life except that his father, Hicesias, was a banker. > Hicesias and Diogenes became involved in a scandal involving the adulteration or debasement of the currency,[10] and Diogenes was exiled from the city and lost his citizenship and all his material possessions. https://en.wikipedia.org/wiki/Diogenes https://en.wikipedia.org/wiki/Diogenes
- thesausageking 5y agoMuch more fraud is committed using US Dollars than Bitcoin. It's just not news so you don't read about.
- deleted 5y ago[deleted]
- sam_bristow 5y agoA lot more non-fraud is done with USD too though.
- shkkmo 5y agohttps://xkcd.com/2476/ https://xkcd.com/2476/
- dreyfan 5y agoprops to Elon and Kimball for running the ultimate long con
- bserge 5y agoJesus Christ, all the popups and ads make this website an unreadable mess on mobile. Literally the dream of the evil execs in Ready Player One, "75% screen coverage for ads before inducing epilepsy".
- benrapscallion 5y agoAny time I want to read something on Bloomberg.com, I first send it to Instapaper. It’s almost an instinct now.
- chx 5y agohttps://archive.is/MCdnL https://archive.is/MCdnL for a more readable version.
- jessaustin 5y agoPlease, improve your life: https://ublockorigin.com/ https://ublockorigin.com/ That isn't helpful on mobile Chrome, but that's why I only use Firefox on mobile.
- jhloa2 5y agoI assume he's on IOS which does not support uBlock.
- jessaustin 5y agoI hear great things about IOS, but whenever I've tried to help my father use his iPhone I have been astounded by how terrible every aspect of it really is. Clearly I am doing something wrong.
- doggodaddo78 5y agoWhat's terrible about it? Is it an old phone that hasn't been updated in years or a recent one?
- 5y ago
- CyberDildonics 5y agoIt is ironic that you can use your money electronically without a middle man with cryptocurrency, but people choose to leave it with a middle man regardless.
- deleted 5y ago[deleted]
- cbm-vic-20 5y agoThat's because nobody treats it as a currency, but as a speculative commodity.
- rchaud 5y agoNot ironic, because nobody that has serious money in BTC cares about using it as a currency. It's a get-rich-quick scheme for regular people, and a way to launder money for everybody else. In both cases, you need a middleman.
- tracedddd 5y agoPlenty of people with “serious money” use their cryptocurrency - be it as a currency or for whatever other purpose it was designed. In fact, they probably use it more than the average person since many of them made it from being a crypto developer. In any case, there’s a big difference between “needing a middleman” to do something and leaving your funds with a middleman indefinitely. That’s like needing to use a taxi and paying with cash versus leaving your life savings with the taxi person so some day when you maybe want to use a taxi it’ll be easier.
- shuntress 5y agoEven if it was viable to use bitcoin as a currency, I would still want to leave most of mine with a bank.
- rytcio 5y agoThe point is that you don't need a bank/exchange/middleman with bitcoin. You just need the wallet key and password. Bitcoin can be stored on a post-it note.
- swayson 5y ago"Not your token, not your coin"
- holstvoogd 5y agoAbout as useful a take as ‘dont click on phishing links’
- Havoc 5y agoSlightly more actionable though
- aaroninsf 5y agoWho could have possibly have guessed that an unregulated dark-money scam would turn out to be a poor get rich scheme? Teasing 20K by the weekend...
- doggodaddo78 5y agoHey everybody, use my new bitcoin exchange! I'm based in... Bulgaria and absolutely not the Caribbean with a margarita and twin models. Deposit your BTC for safekeeping today!
- phantom_oracle 5y agoSouth Africa is a small economy relative to US, EU(block) or China and has large income disparity(small, very wealthy upper/middle class). $3.6B = ZAR51.17B (xe.com). That seems like a lot of savings for the small upper/middle class. The name of the crypto company "afri" suggests it might have targeted the African market as a whole. Can any Africans/South Africans explain how ZAR51.17B of savings accumulated in this crypto company(or scam)? Is it like Madoff who conned rich people or did these guys manage to reach pensioners and steal their money too?
- Beehivewax 5y agoWith a population of approximately 60 million people that's an average of R850 (approx. $60) per person in SA at the current exchange rate. Obviously only a small fraction of the population are going to have invested. Even if I guess an improbably high number of 1 million investors the losses are R51000 per person (around $3600). That's more than a month's salary even for those just inside the top 1%, since it only takes $3500 per month to be in the top 1% of earners in SA [1]. [1] https://www.goodthingsguy.com/opinion/perspective-salary-south-africa/ https://www.goodthingsguy.com/opinion/perspective-salary-sou...
- valas 5y ago$3.6B is at peak valuation. The actual contributions maybe much lower?
- joshuahedlund 5y ago> The name of the crypto company "afri" suggests it might have targeted the African market as a whole. Need someone with context knowledge, but I suppose the name suggests it could also have been targeting Afrikaners in South Africa (ex. "AfriForum"[0]) [0]https://en.wikipedia.org/wiki/AfriForum https://en.wikipedia.org/wiki/AfriForum
- jonathanlydall 5y agoSouth African here and although not culturally Afrikaans (I only really know English), I wouldn’t see “Afri” targeting them specifically. If anything it associates it with Africa and Afrikaaners (like most people of European descent here) identify more as European residents of South Africa, rather than as African. To make clear, Caucasians here will refer to themselves as South African, but not as just African. If someone on the internet told me they were African, (and not in a bad way) I would assume they are of dark colour.
- Animats 5y agoThey were apparently offering 10% per day returns. What could possibly go wrong?
- dkjaudyeqooe 5y agoSounds like it was a Ponzi scheme combined with an exit scam. That combination was sort of inevitable.
- agumonkey 5y agostrangely enough, there was a similar bust happening in France last week (RRcrypto)
- FabHK 5y agoIt boggles my mind that people don’t become a tad skeptical upon seeing such claims.
- miohtama 5y agoGreed and lack of education.
- vmception 5y agoBecause there are many fully collateralized products in the crypto space that offer those kind of returns. There are many custodial solutions that offer access to those products Many people have no clue about the difference between custodial and noncustodial solutions And even if they are aware, it then becomes impossible to discern which custodial solution is more legitimate or has more assurances of security
- FabHK 5y agoSorry, no “fully collateralised” product delivers 10% return per day, doubling every week, turning 1$ into a million billions within a year, enough to buy the entire GDP of the USA over that same year 50 times over. (Or, if there is such a product and you have access to it, let me send you a dollar, and you give me the US GDP in a year and keep the other 49 US GDPs for yourself for services rendered).
- torcete 5y agoAny recommendation of a bitcoin wallet for a Chromebook? Somebody close to me put some money on bitcoins. I told him to get a wallet and move the coins to the wallet where he is in control of they keys. This person only has a Chromebook as a computer. Does anybody have any recommendations of a software wallet for a Chromebook?
- deleted 5y ago[deleted]
- krobbn 5y agoSomething like a Trezor, https://trezor.io/ https://trezor.io/ , or Nano Ledger https://www.ledger.com/ https://www.ledger.com/ are relatively inexpensive things to let you have control over your own keys.
- fastball 5y agoI just bought a Ledger Nano X after being out of the crypto game for a while and I like it a lot so far. Very nice that it's able to communicate with my phone over bluetooth and so don't have to plug it in every time like with the Ledger Nano S.
- Cipater 5y agoThe first signs of trouble came in April, as Bitcoin was rocketing to a record. Africrypt Chief Operating Officer Ameer Cajee, the elder brother, informed clients that the company was the victim of a hack. He asked them not to report the incident to lawyers and authorities, as it would slow down the recovery process of the missing funds. and While South Africa’s Finance Sector Conduct Authority is also looking into Africrypt, it is currently prohibited from launching a formal investigation because crypto assets are not legally considered financial products, according to the regulator’s head of enforcement, Brandon Topham. The police have not yet responded to a request for comment. $3.6B is 1% of South Africa's GDP. That's a lot of money.
- YoungWeb 5y agoIt's only a matter of time until this hits the news cycle and the sell off ensues. Hopefully it won't because it's international
- Bombthecat 5y agoUhhh if they stole so much, they probably also stole from really rich guys who don't care if you live or die..
- uniqueid 5y agoIt would be very nice if the thieves are kind-hearted, gentle people themselves. On account of they have enough money to fund a militia and invade a small country now.
- Havoc 5y agoIt’s questionable whether all of it is South African money. Not sure whether this pay walled article mentions it but there is suspicion of it being a money laundering op. The scale just doesn’t make sense for straight SA retail money
- throw7 5y agoCan tumblers and mixers -- or to other large pools of bitcoin -- actually make bitcoins essentially untraceable? That doesn't make any sense to me if bitcoin is truly a trustable public ledger.
- bdcravens 5y agoYou can trace transactions in and out to addresses, but with enough inputs and outputs, connecting the same actor becomes a very hard problem.
- coolspot 5y agoActually it’s the opposite. The more transactions you have for statistical analysis - the better your chances of tracing the actor. In the end, after all mixing, you want to land it on some off-ramp to cash. And you want not a dollar, but significant sum.
- acdha 5y agoIt's a question of how much effort someone wants to put in and how much information they can gather: you can trace all of the transactions in and out, and you can try to get information the operators or other parties involved. Since the goal of the crooks is to spend that money, simply looking at high volumes going from tumblers to exchanges would make it hard to conceal that much money unless they're willing to sit on it for a long time. Someone laundering a small amount of money probably won't get that much effort but $3.6B is a much harder problem because it's an unusually amount of money to launder and it's enough to get law enforcement involved. It's not inconceivable to image _everyone_ receiving bitcoin traceable back to the tumbler being asked to prove that they weren't involved. That factor limits the total volume going through a tumbler and increases the cost since everyone using it is risking being targeted as an accessory.
- cwkoss 5y agoI've liked Bitcoin for a while now, but have always found tumblers scary. Seems like many users are tumbling their personal-use-quantity drug bitcoins for bitcoins from crimes with much more LEO/regulatory oversight - like money laundering (and increasingly ransomware). I wonder how many people have gotten a knock on the door by the Secret Service and found their risk mitigation strategy actually painted a bigger target on their backs.
- SunshineReggae 5y agoEvery time that I read a story like this I am always wondering: how come the people doing exit scams (suppose it is one) aren't more afraid of the repercussions. Given Bitcoins track record, it wouldn't surprise me if some of the funds would belong to quite questionable characters, so you are basically stealing money from organized crime groups. It is obvious that you can buy some protection with $3.6B, however your face and name is publicly known, meaning that you will be on the run for the rest of your life or possibly face a very gruesome death. Is that really worth it?
- rightbyte 5y agoYe it is hard to grasp. I mean if they can get a 1% fee it is still 36 million USD and they would not have to hide from mobsters.
- moneywoes 5y agoNot to mention South Africa as well
- miohtama 5y agoYou are correct and gruesome deaths happen, like with OneCoin. The ponzi queen, however, is gone and “no one” know if she is dead or managed to disappear alive. https://www.coindesk.com/promoters-of-crypto-ponzi-scheme-onecoin-murdered-in-mexico https://www.coindesk.com/promoters-of-crypto-ponzi-scheme-on...
- SunshineReggae 5y agoYes, I was asking myself the same question back then, considering the news articles about the connections to the eastern european mob.
- vmception 5y agoThe simple answer is that they can affect the change that they are interested in, with that money now. Instead of imagining for their whole lives. Basically, life isnt worth living poor, or the current state of the world isnt worth being unable to change. Death is more favorable than skimming table scraps. Although the luxury consumptive spending is a tiny portion of what is possible, and nobody can take those experiences away from you, the funds contributed to charities, political campaigns, and investments allow shaping the world as you see fit now. So thats the explanation, without justifying it. Despite recent attempts of making society seem more fair, this has always been the history of the world. Seize and lock in a millennium of control and favor for your family.
- jokoon 5y agoThere needs to be a list of news related to Bitcoin fraud. I mean just to document and warn new comers. It seems we already forgot about mtgow.