Fears are growing that a highly lucrative “investment scheme” that promises to pay out ten-fold cash deposits within two weeks, which has taken this small rural town in KwaZulu-Natal by storm, will soon crash.
The allure of easy money has seen more and more hopeful people unwittingly risk their money every time they make deposits into the investment scheme.
Analysts warn that such schemes – also known as Ponzi schemes – tend to implode after a while. A Ponzi scheme, also known as a pyramid scheme, generates returns for early investors by acquiring new investors and using their funds to pay earlier backers.
Located in a shabby building that used to be a pawn shop – just off Alexander Street, between MICA hardware and Office National – are the Bitcoin Wallet offices.
Long queues form outside Bitcoin Wallet daily. The attraction is Bitcoin Wallet’s investment scheme that promises 100 percent returns on monetary deposits, from R100, in exactly 15 working days.
Owing to the popularity of the scheme, it no longer takes in amounts less than R5,000.
By all indications, Bitcoin Wallet is a multimillion-rand operation and probably has the largest daily cash flow in the whole of Ladysmith.
Owned and operated by a local man in his 30s who was a paramedic until recently, Sphelele “Sgumza” Mbatha, the investment scheme is reportedly taking more than R2 million in cash deposits on a daily basis.
On Tuesday, about 200 eager prospective investors queued outside Bitcoin Wallet offices, with some saying that they do not want to be left behind by the easy takings as many people have benefitted already.
Vehicles belonging to other businesses operating around the Bitcoin Wallet premises now have to manoeuvre through a human curtain that has blocked the entrance to their parking lot, but they don’t appear to be complaining.
“I’ve actually not invested anything yet as this was my first time here, but a woman I know invested R50,000 and she has just received R100,000. I’m told Sgumza only takes R5,000 now, so I also have to invest as well,” claimed a woman in the queue.
An elderly man, who asked not want to be named and was seen carrying a blanket around midday, said that he had been queuing since 3am. He said his daughter would come a little later so they could make their investment.
Another lady, who also did not want to be named, said employed members of her family have invested various amounts in Bitcoin Wallet, from R1,000. She said they had been taking turns to queue every day to collect their returns.
In an interview with a community radio station last week, Mbatha said the deposits made into his Bitcoin Wallet were taken and re-invested in bitcoins. He said after some time he cashed in from the cryptocurrency by simply selling it back to the market at a higher price.
Everything at Bitcoin Wallet is simple. Investors only have to put in their personal details on a single page form, hand over the amount of cash they wish to invest, and wait 15 working days before coming to collect 10 times the amount they invested.
The scheme only takes 10 percent as an administration fee.
Mbatha initially agreed to an interview with ANA over the phone last week, but reneged on the agreement when ANA visited his operation in Ladysmith on Tuesday.
“I don’t have time for interviews now. I’m a very busy man. Any minute I spend away from my business is losing me money,” Mbatha told this journalist over the phone.
When told that the interview was just seeking clarity on how he enriches people and he can see it as a marketing platform for his business, Mbatha insisted that his time is money.
He did not entertain questions about his business plan or any questions around the workings of bitcoin as a cryptocurrency.
“I actually don’t have a problem with giving you the interview, but how much are you going to pay me? If you are not going to pay me anything, then there is no interview. Call me when you have decided how much you are going to pay me,” he said, before ending the call.
Mbatha, who not surprisingly has a love of finer things and has somewhat become a local celebrity, drives around in flashy sports cars. He even has a police escort. Rumours abound that he carries huge sums of money in cash.
Ladysmith residents post videos of Mbatha’s flashy cars on social media, and call him “uNkulunkulu waseMnambithi” [The Lord of Ladysmith]. He is growing a reputation for throwing parties, where alcohol flows freely just like the cash he dishes out.
Despite Mbatha insisting that his business is legit and that he has the necessary certificates to prove it, authorities have not been able to confirm the registration and legitimacy of his business.
The Financial Services Conduct Authority (FSCA), which is a market conduct regulator of financial institutions and protects financial customers, has not been able confirm the licence registration of the scheme, but said the signature of the registrar in the certificate used by Bitcoin Wallet looked suspicious and needed to be investigated.
Lebogang Selibi, media relations officer at the National Credit Regulator (NCR), red-flagged a number of issues on the certificate being used by Bitcoin Wallet, and said the scheme had no business having an NCR certificate in the first place as it was not a credit provider but an investment taker.
“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.
“Bitcoin Wallet is not a registered credit provider and the NCRCP Number used belongs to a Trust based in Drummond, not Ladysmith.”
Captain Simphiwe Mhlongo, spokesperson for the Directorate for Priority Crime Investigations (The Hawks), has also not been able to respond to a detailed inquiry about the police escort provided to Mbatha and whether there have been complaints lodged against Bitcoin Wallet or if there is any ongoing investigation into the scheme.
– African News Agency (ANA)