We were immediately suspicious as the announcement implored investors not to take legal action,” Hanekom Attorneys said in response to emailed questions. “Africrypt employees lost access to the back-end platforms seven days before the alleged hack.”

The firm’s investigation found Africrypt’s pooled funds were transferred from its South African accounts and client wallets, and the coins went through tumblers and mixers -- or to other large pools of bitcoin -- to make them essentially untraceable.

South Africa Plans to Regulate Crypto Trading in Phased Manner

Calls to a mobile number for Cajee were immediately directed to a voicemail service. He and his brother, Raees, 20, set up Africrypt in 2019 and it provided bumper returns for investors. Calls to Raees also went straight to voicemail. The company website is down.

The saga is unfolding after last year’s collapse of another South African Bitcoin trader, Mirror Trading International. The losses there, involving about 23,000 digital coins, totaled about $1.2 billion in what was called the biggest crypto scam of 2020, according to a report by Chainalysis. Africrypt investors stand to lose three times as much.

Eoin Treacy's view

This is not confidence inducing and suggests the potential rebound for bitcoin will be contained as investors weigh the risks from various exchanges.

There was an article last week that highlighted the extraordinary measures Kraken are taking in securing their data and the behaviour changes required of employees both inside and outside the workplace. How sustainable that is remains a big question. My 15-year old daughter suggested the best people to run a crypto exchange are the Amish since they do not engage with the outside world in their spare time.  

Governance really is everything and the sums involved are truly incredible. The challenge for institutions will remain custody and key man risk.