The National Consumer Commission (NCC), a consumer protection agency in South Africa, recently announced that it had uncovered the “Obelisk” pyramid scheme, a well-known crypto mining enterprise that defrauded over 4,000 citizens of $6 million.
The NCC received 25 complaints from victims who lost about R750,000 ($41,500), but its preliminary investigation shows that there were over 4,000 participants spread across eight WhatsApp groups who lost R112 million ($6.1 million).
Obelisk is a company that was established by a part of the team that worked on the Siacoin cryptocurrency. The main goal of the Obelisk developers was to build a community where ASIC mining is a preferable way of gaining coins.
After a series of complaints by investors, the NCC disclosed that it had to swing into action by investigating the activities of the company. The NCC noted that most of its victims were from different social media platforms.
Investors on the platform disclosed that they were charged between $18.75 and $24,000 per mining equipment on the platform which the NCC described as an outrageous amount. Additionally, they were asked to pay a certain initial fee at the point of registration which was undisclosed.
Also, for investors to be able to withdraw their funds, again they are mandated to pay another fee to upgrade their mining equipment.
In all of this, South African Regulator NCC revealed that the company paid a smaller portion of the investor’s returns on their first investments to convince them to invest higher fees which is a gimmick synonymous with pyramid schemes to lure more investors.
However, problems began when investors discovered that the withdrawal button on their profiles had been suddenly deactivated making it impossible for them to withdraw their earnings.
In a bid to inquire about the issue, they were blocked and removed from the community groups they were added to. Furthermore, the NCC also discovered that WhatsApp groups that investors were added to were estimated to be more than 20.
In 2021 alone, South Africa lost about R1.8 billion ($99 million) to scams according to the Global State of Scams report.
The good news is that the South African Government is moving to address these scams. Last Wednesday, the Financial Sector Conduct Authority (FSCA) announced that crypto assets in the country would be treated as financial products which will help authorities tackle fraud.
The FSCA also announced that starting next year, crypto platforms in the country will need to get licensed in order to continue operations.