Crypto Ponzi Scheme Says It Has 'No Cash to Pay out' to Upset Investors

Hundreds of locals who used to eagerly gather outside the Bitcoin Wallet office in Ladysmith, South Africa are now mobbing the office to demand their money back.

AccessTimeIconJul 8, 2019 at 5:30 p.m. UTC
Updated Sep 13, 2021 at 9:24 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Bitcoin Wallet, a lucrative South African “investment scheme,” used to attract hundreds of investors a day, many of whom clamored at the company's doors to invest. Now, the company's shuttered office is attracting hundreds of protestors demanding their cash back, according to Ladysmith Gazette.

As of July 4, the enterprise that many regulators and media had begun suspecting of operating as a Ponzi scheme shut down. The firm enticed investors with promises of 100-percent returns in just over two weeks by reinvesting customer deposits in cryptocurrencies. These same investors want to know where their money went now that the company closed.

Bitcoin Wallet founder Sphelele “Sgumza” Mbatha admitted to the Ladysmith Gazette on Saturday that he doesn’t have any more cash to pay out to clients.

“I don’t know what’s going on. I don’t know online or how this system works. [It has] to be workshopped,” he said.

Before closing, Bitcoin Wallets had grown so popular that Mbatha stopped taking in deposits of less than 5,000 rand or $350. At the time, African News Agency speculated the firm received more than R2 million in cash deposits per day, representing “the largest daily cash flow in the whole of Ladysmith.”

A former paramedic, Mbatha claimed in a June radio interview that his operation was aboveboard though efforts by the ANA to confirm the legitimacy of the business registration proved futile.

The news agency spoke with market regulator Financial Services Conduct Authority (FSCA) which reportedly stated that the registrar’s signature in Bitcoin Wallet’s business certificate looked like it had been forged and needed to be investigated.

Despite these reported concerns of potential fraud, hundreds of South Africans had invested in the cryptocurrency upstart. Mbatha certainly made it easy.

According to ANA, investors would queue up overnight outside the Bitcoin Wallet office, provide basic identification information, sign a single page form, deposit however much they could, and then wait 15 working days to receive 100-percent returns.

The company charged a 10-percent administrative fee.

When asked about his business operations Mbatha stated funds entrusted to Bitcoin Wallets were reinvested in cryptocurrencies and then resold to the market at a higher price. Later, Mbatha declined a follow up interview stating, “time is money.”

Now, Mbatha claims he was only the “manager of the Ladysmith branch,” and that “I won’t continue working. I don’t have cash anymore. The owner says people must go online and collect their money online. I, myself, have invested my money in there. I submitted my banking details online and now I am also waiting.”

ANA previously reported Mbatha had become a local celebrity, drove luxury cars, and even had a police escort.

Map image via Shutterstock

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.