Ladysmith residents gather in large numbers outside the offices of Bitcoin Wallet, an investment scheme that promises 100% profits in 15 working days. PHOTO: Simphiwe Mbokazi / African News Agency (ANA)
Ladysmith residents gather in large numbers outside the offices of Bitcoin Wallet, an investment scheme that promises 100% profits in 15 working days. PHOTO: Simphiwe Mbokazi / African News Agency (ANA)

Ladysmith 'Bitcoin' scheme says it was hacked after trading online

By Siphelele Dludla Time of article published Jul 9, 2019

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JOHANNESBURG - Bitcoin Wallet, the investment scheme that took Ladysmith by storm, promising 100% returns on monetary deposits in only 15 working days, said on Tuesday that it was "hacked" and investors' monies had been paid into fraudulent accounts after it decided to trade online.

Last week, panic set in among hundreds of investors as Bitcoin Wallet's offices closed down on Thursday in order to move to new premises, allegedly on instruction of Ladysmith's Alfred Duma local municipality, following complaints by other businesses within the precinct.

The scheme's owner, Sphelele "Sgumza" Mbatha, then assured investors that the business had not collapsed but was moving into doing transactions online to avoid long queues that forced people to sleep on the streets waiting to be first in line the following day.

The allure of easy money had seen more and more hopeful people depositing their money into the investment scheme, with some investing as much as R100,000 in cash at a time.

Speaking to the Ladysmith's community radio station, Nqubeko FM, on Tuesday afternoon, Mbatha said that the online platform had been rendered unsafe and insecure by hackers who had accessed investors' details and stolen their monies. 

Mbatha denied allegations that he and his family had fled Ladysmith in the wake of the collapse of his business, saying that he had to attend a "workshop" in Durban to be trained how to run the business using the online platform. 

"What is happening online is that people are failing to upload their documents. Those who have uploaded have been facing delays in withdrawing their pay outs, some have waited for three days without getting paid. I've been receiving a lot of inquiries as some people are only receiving R100 or R200," Mbatha said.

"But what is happening is that some people have hacked our website. The money is now being diverted and what is supposed to be investors' pay-outs is being diverted into other people's accounts. There are many people who have lost monies. 

"Someone told us that he has lost money from his personal account that had nothing to do with Bitcoin Wallet. What I can advise now is that let us leave this online thing. If you have not uploaded your details online, do not do so now until I give a further update." 

Mbatha phone's on Tuesday rang only twice before going off and did not allow for the leaving of any messages. Mbatha has become something of a local celebrity, driving around in flashy sports cars and carrying huge sums of cash which he randomly hands out or throws at strangers.

Over the weekend, local newspaper the Ladysmith Gazette reported that Mbatha had admitted that he doesn’t have any more cash to pay out to clients and that he said he was just a manager, not the owner, of the scheme.

"I don’t know what’s going on. I don’t know online or how this system works. The owner of the company is operating the online business. I was only the manager of the Ladysmith branch. I won't continue working. I don't have cash anymore. The owner says people must go online and collect their money online," Mbatha told the paper.

Mbatha had claimed that the deposits made were invested in cryptocurrency Bitcoin, and cashed in after some time by simply selling it back to the market at a higher price,

There have been allegations that the investment operation amounted to a Ponzi scheme, with analysts warning that such schemes, also known as pyramid schemes, tend to implode after a while. Ponzi schemes  generate returns for early investors by acquiring new investors and using their funds to pay earlier backers.

The National Treasury, the South African Reserve Bank, the Financial Services Board, the South African Revenue Service and the Financial Intelligence Centre, have all warned members of the public to be aware of the risks associated with the use of virtual currencies for either transactions or investments.

Currently in South Africa, there are no specific laws or regulations that address the use of virtual currencies, and thus no legal protection or recourse is afforded to users of virtual currencies. 

"Due to their unregulated status, virtual currencies cannot be classified as legal tender as any merchant may refuse them as a payment instrument without being in breach of the law," National Treasury has said.

"Because virtual currencies are not regulated, users are not protected and are at the risk of losing money. Transactions are also irreversible. We advise users to exercise extreme caution when participating in virtual currency transactions."

African News Agency (ANA)

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