Warning Over Ongoing South African Bitcoin “Investment Scheme”

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Bitcoin Wallet, a supposed Bitcoin investment fund currently running in Ladysmith, South Africa, is looking more and more like a Ponzi scheme, according to an investigation by South African newspaper The Citizen. The Citizen reports that would-be investors are queuing for hours outside the shabby offices in the town center in order to deposit into the scheme, which promises 100% returns on deposits in exactly 15 working days. Early investors have received payouts in full, prompting a wave of interest from locals and now officials.

The Lord of Ladysmith

Sphelele “Sgumza” Mbatha, the man behind Bitcoin Wallet, is a former paramedic in his 30s with no known financial experience. Despite this inexperience his Bitcoin “investment scheme” has been a local sensation, with deposits currently totaling around two million South African rand ($137, 670) daily, which he says he uses to trade Bitcoin, taking 10% as a fee. This percentage has been enough for him to earn a reputation as something of a playboy, hosting lavish parties and driving around in luxury cars with police escorts, which could well explain why he has been able to get away with the scheme so far. His new lifestyle has earned himself the nickname ‘The Lord of Ladysmith’, which doesn’t seem to be worrying investors.

Suspect Paperwork

As anyone with a passing knowledge of finance knows, Ponzi schemes involve early investors being paid out by later ones repeatedly until the new revenue dries up and the whole scheme collapses. When Charles Ponzi began running his scheme in the 1920s, his company’s offices were soon overrun with investors wanting the guaranteed returns, with queues forming daily.

The parallels are uncanny, and should concern anyone involved. Despite Mbatha’s insistence that his business is legitimate and that he has the necessary documentation to prove it, the authorities have not been able to confirm the license registration of the scheme, with Lebogang Selibi, media relations officer at the National Credit Regulator (NCR), stating:

The certificate is fraudulent. The font used on the name is not our font. The NCRCP Number used belongs to a different registrant. Name of branch – Not the NCR format. The certificate is not signed. The issue date and expiry dates are incorrect, our expiry date is 31 July each year.

With no complaints raised against the scheme so far, it will rely on the authorities to shut Bitcoin Wallet down before the inevitable happens and the scheme collapses, with the resulting loss of funds for later investors.