Kenya Insights

Tag: crypto scams

  • I&M Bank Denies Involvement in CBEX Crypto Fraud Scheme as Interpol and FBI Take Over Investigation

    I&M Bank Denies Involvement in CBEX Crypto Fraud Scheme as Interpol and FBI Take Over Investigation

    A major Kenyan financial institution has found itself at the center of an escalating international fraud investigation, as I&M Bank fights allegations that it facilitated transactions for a cryptocurrency trading platform now accused of operating a multi-million dollar Ponzi scheme across Africa.

    I&M Bank has strongly denied any involvement with CBEX, the cryptocurrency trading platform at the center of a massive fraud investigation now being conducted by Interpol and the FBI.

    The bank issued a statement distancing itself from the alleged scam, which has reportedly defrauded investors across Kenya and Nigeria of millions of dollars.

    “I&M Bank is not involved in the operations of CBEX,” the financial institution stated in response to allegations made by researcher Antony Kagirison, who had linked the bank to the fraudulent scheme.

    However, the bank has not elaborated on whether it provided banking services to entities affiliated with CBEX or what due diligence measures were taken regarding the accounts in question.

    CBEX Operations and Allegations

    The Singapore-based Crypto Bridge Exchange (CBEX), which operated under various names including ST Technologies International Ltd and Smart Treasure/Super Technology, allegedly promised investors returns of up to 100 percent within 30 days.

    The platform is accused of running a sophisticated Ponzi scheme that targeted victims primarily in Kenya and Nigeria.

    According to Kagirison’s allegations, CBEX used a multi-currency consumer-to-business account at I&M Bank to receive funds from Kenyan ‘investors’.

    “CBEX has been using an I&M bank account to receive money from Kenyan ‘investors’ and converting it to dollars that were then used for trading in the futures market – specifically crypto futures trading,” Kagirison stated in documented communications allegedly with the bank.

    The scheme abruptly shut down operations after failing to honor withdrawal requests from thousands of investors, many of whom later discovered their wallet balances had reverted to $0.00.

    Scale of Losses and Enforcement Response

    Estimates of investor losses vary significantly. While initial reports suggested losses of $6.1 million, other sources claim figures as high as $800 million across Kenya and Nigeria.

    Cybersecurity experts have indicated that up to $1 million had been invested and lost by people worldwide in the scheme.

    The fraud’s magnitude has triggered the involvement of international law enforcement agencies, with both Interpol and the FBI now joining local authorities in the investigation.

    The collapse of the scheme has caused significant public outrage, with reports of angry investors storming and looting CBEX premises in both Kenya and Nigeria.

    For victims like Bola, a Nigerian investor who went viral after a video showed her weeping outside a CBEX office, the answers can’t come soon enough. “I collected all my friends’ money, all the money, which was like USD 1,000,” she said, explaining she had lost her entire life savings to the scheme.

    The CBEX case comes amid a significant increase in cryptocurrency-related fraud.

    According to a recent FBI Internet Crime Complaint Center (IC3) report covering January to December 2024, crypto-related scams led to the loss of approximately $9.3 billion, with crypto-investment scams accounting for about $5.8 billion of these losses.

    Overall, total losses traced to internet crimes amounted to about $16.6 billion, a 33% increase compared to the previous year. In 2024 alone, the FBI received almost 150,000 complaints related to fraudulent crypto schemes.

    Regulatory Implications

    Financial experts note that banks can potentially face liability for their role in facilitating fraudulent transactions, particularly if adequate anti-money laundering protocols were not followed.

    A recent study from the University of California, Berkeley School of Law suggested that holding banks accountable for their role in cryptocurrency transactions “would provide greater protection for investors and customers.”

    The Nigeria Securities and Exchange Commission has already denied any affiliation with CBEX, confirming the company was neither registered nor licensed to operate within the Nigerian capital market.

    “The commission is working with law enforcement agencies to take legal action against CBEX, its affiliates, and promoters,” a Nigerian SEC spokesperson stated.

    According to reports, authorities are particularly interested in tracing the money flow through traditional banking channels that enabled the scheme to operate across multiple jurisdictions.

    “The involvement of international law enforcement signals the seriousness of this investigation,” a Nigerian publication quoted an insider source. “They’re looking at the entire ecosystem that allowed this fraud to thrive, including the banking infrastructure that processed the transactions.”

    As investigations intensify, regulators across Africa are facing mounting pressure to establish stronger oversight of cryptocurrency platforms and the traditional financial institutions that service them.

    The CBEX scandal has highlighted significant regulatory gaps that allowed the alleged fraud to operate unchecked despite Nigerian authorities having previously flagged 58 companies operating illegally in the country’s investment space.

    I&M Bank has not responded to requests for further comment about their relationship with CBEX or any affiliated entities at the time of publication.

    Common Crypto Scam Tactics

    The FBI report identified several common tactics used in cryptocurrency investment scams:

    Pig butchering scams : Criminals fake online relationships with victims before luring them to invest in fraudulent crypto schemes. This method often targets older adults and led to losses of over $2.8 billion.

    FBI Operation Level Up identified almost 4,300 victims, with 76% unaware they had been victimized.

    Investment platforms : The most lucrative scams are disguised as investment and financial grooming platforms, with almost $11 billion lost to such platforms in 2024.

    Emerging techniques : New methods include QR code scams, crypto ATM fraud, stablecoin schemes, and the use of AI-generated personas to impersonate financial experts or online acquaintances.

    As cryptocurrency becomes more popular globally, law enforcement agencies and cybersecurity experts are working to update their tools and educate the public about these fraudulent tactics.

  • North Korean Hackers Cash Out Hundreds Of Millions From $1.5bn ByBit Hack

    North Korean Hackers Cash Out Hundreds Of Millions From $1.5bn ByBit Hack

    Hackers thought to be working for the North Korean regime have successfully cashed out at least $300m (£232m) of their record-breaking $1.5bn crypto heist.

    The criminals, known as Lazarus Group, swiped the huge haul of digital tokens in a hack on crypto exchange ByBit two weeks ago.

    Since then, it’s been a cat-and-mouse game to track and block the hackers from successfully converting the crypto into usable cash.

    Experts say the infamous hacking team is working nearly 24 hours a day – potentially funnelling the money into the regime’s military development.

    “Every minute matters for the hackers who are trying to confuse the money trail and they are extremely sophisticated in what they’re doing,” says Dr Tom Robinson, co-founder of crypto investigators Elliptic.

    Out of all the criminal actors involved in crypto currency, North Korea is the best at laundering crypto, Dr Robinson says.

    “I imagine they have an entire room of people doing this using automated tools and years of experience. We can also see from their activity that they only take a few hours break each day, possibly working in shifts to get the crypto turned into cash.”

    Elliptic’s analysis tallies with ByBit, which says that 20% of the funds have now “gone dark”, meaning it is unlikely to ever be recovered.

    The US and allies accuse the North Koreans of carrying out dozens of hacks in recent years to fund the regime’s military and nuclear development.

    On 21 February the criminals hacked one of ByBit’s suppliers to secretly alter the digital wallet address that 401,000 Ethereum crypto coins were being sent to.

    ByBit thought it was transferring the funds to its own digital wallet, but instead sent it all to the hackers.

    Ben Zhou, the CEO of ByBit, assured customers that none of their funds had been taken.

    The firm has since replenished the stolen coins with loans from investors, but is, in Zhou’s words, “waging war on Lazarus”.

    ByBit’s Lazarus Bounty programme is encouraging members of the public to trace the stolen funds and get them frozen where possible.

    All crypto transactions are displayed on a public blockchain, so it’s possible to track the money as it’s moved around by the Lazarus Group.

    If the hackers try to use a mainstream crypto service to attempt to turn the coins into normal money like dollars, the crypto coins can be frozen by the company if they think they are linked to crime.

    So far 20 people have shared more than $4m in rewards for successfully identifying $40m of the stolen money and alerting crypto firms to block transfers.

    But experts are downbeat about the chances of the rest of the funds being recoverable, given the North Korean expertise in hacking and laundering the money.

    “North Korea is a very closed system and closed economy so they created a successful industry for hacking and laundering and they don’t care about the negative impression of cyber crime,” Dr Dorit Dor from cyber security company Check Point said.

    Another problem is that not all crypto companies are as willing to help as others.

    Crypto exchange eXch is being accused by ByBit and others of not stopping the criminals cashing out.

    More than $90m has been successfully funnelled through this exchange.

    But over email the elusive owner of eXch – Johann Roberts – disputed that.

    He admits they didn’t initially stop the funds, as his company is in a long-running dispute with ByBit, and he says his team wasn’t sure the coins were definitely from the hack.

    He says he is now co-operating, but argues that mainstream companies that identify crypto customers are betraying the private and anonymous benefits of crypto currency.

    North Korea has never admitted being behind the Lazarus Group, but is thought to be the only country in the world using its hacking powers for financial gain.

    Previously the Lazarus Group hackers targeted banks, but have in the last five years specialised in attacking cryptocurrency companies.

    The industry is less well protected with fewer mechanisms in place to stop them laundering the funds.

    Recent hacks linked to North Korea include:

    • The 2019 hack on UpBit for $41m
    • The $275m theft of crypto from exchange KuCoin (most of the funds were recovered)
    • The 2022 Ronin Bridge attack which saw hackers make off with $600m in crypto
    • Approximately $100m in crypto was stolen in an attack on Atomic Wallet in 2023

    In 2020, the US added North Koreans accused of being part of the Lazarus Group to its Cyber Most Wanted list. But the chances of the individuals ever being arrested are extremely slim unless they leave their country.

    (BBC)

  • Crypto: Kenya Stands Firm Amid Pressure From The US To Lift Ban On WorldCoin

    Crypto: Kenya Stands Firm Amid Pressure From The US To Lift Ban On WorldCoin

    Kenya has rejected a push by the United States of America (USA) to allow the operations of cryptocurrency project WorldCoin to resume in the country.

    Interior Cabinet Secretary Kithure Kindiki told MPs  that the US government has been pressuring the Kenyan government to lift the suspension it imposed in August 2023 on the activities of WorldCoin.

    Appearing before MPs, Kindiki however clarified the government will not lift the suspension until all the data protection laws are adhered to

    He said: “The United States has been pushing the government on the issues of WorldCoin, but we have remained adamant and firm.”

    He added: “They (US) think that they (WorldCoin) still have a case to set up their activities here. We have remained adamant and the decision we took will remain. We are not going to review the suspension. The status quo remains as is.”

    Appearing before the Public Petitions Committee, Kindiki said that the government will ensure Kenyans are protected from issues touching on cybercrime.

    Interpol intervention

    The sentiments by Kindiki come hardly months after he revealed that the government had sought the intervention of Interpol to crack down on those behind Worldcoin activities after it emerged that there is a direct link between the activities of cryptocurrency to funding money laundering, and financing of terrorism.

    Kindiki, speaking in September last year, explained that the owners of WorldCoin started operating in Kenya under the guise that they were offering educational programmes on cryptocurrency.

    He explained it was not until the end of July 2022 when it emerged that the two US companies behind WorldCoin were engaged in the business of collecting sensitive biometric data from Kenyans by scanning their Irises in exchange for cryptocurrency inducement equivalent to Sh7,000 per individual.

    Citizens detained

    However, he clarified the government released Worldcoin American citizens who had initially been detained after the US government intervened and promised the Kenyan government of their availability whenever they are needed.

    Following the move, he announced that he had suspended all WorldCoin activities until concerned government agencies ascertain that the app is free of any risks.

    He said. “The Government has suspended forthwith activities of WorldCoin and any other entity that may be similarly engaging Kenyans until relevant public agencies certify the absence of any risks to the general public whatsoever.”

    He added: “Appropriate action will be taken on any natural or juristic person who furthers, aids, abets or otherwise engages in or is connected with the activities afore described.”

    At the time the Capital Markets Authority had also cautioned the public, saying World coin is not regulated in Kenya.

     “WorldCoin related products including crypto tokens and their derivatives are not investment products within the scope of the Capital  Markets Authority and hence not the regulatory purview of CMA,” the regulator said.

    The WorldCoin project gave each signup a digital ID that, according to the idea, will assist online users identify between real people and Artificial Intelligence (AI) programmes.

    According to the creator, eye-scanning will be essential in a future where it will be harder to tell humans from robots as a result of an increase in AI technology.

    The project was suspended just days after the Office of the Data Protection Commissioner issued a warning against it, advising Kenyans to exercise greater caution and make sure they are properly informed prior to revealing any personal or sensitive information.

  • Detained Binance Executive Escapes From Custody In Nigeria Using Kenyan Passport

    Detained Binance Executive Escapes From Custody In Nigeria Using Kenyan Passport

    Nadeem Anjarwalla, Binance director for West & East Africa and one of the firm’s two executives detained in Nigeria over tax evasion charges has escaped custody.

    According to reports from Nigerian media, the 38-year-old Briton, who also holds Kenyan citizenship, disappeared on Friday, March 22nd. Anjarwalla was allegedly allowed to leave the Abuja guest house, where he and a colleague were being held, for Ramadan prayers. Authorities believe he used this opportunity to escape.

    Guards on duty reportedly escorted Anjarwalla to a nearby mosque, adhering to religious customs during the holy month. However, the executive vanished during this brief outing.

    An Immigration source claims Anjarwalla used a Kenyan passport to flee the country on a Middle Eastern airline. Authorities are currently investigating how he obtained this passport, as he reportedly had only a British passport upon his arrest.

    This escape raises questions about security protocols at the detention facility and the potential involvement of the guards. The Nigerian government is likely to face heightened scrutiny as they work to recapture Anjarwalla and determine how he managed to escape.

    Why the Binance executives got arrested

    Tigran Gambaryan, a U.S. citizen and Binance’s head of financial crime compliance, and Anjarwalla, a British-Kenyan, flew to Nigeria following the country’s decision to ban several cryptocurrency trading websites and were detained on arrival on Feb. 26.

    The two were caught up in a crackdown following a period during which several cryptocurrency websites emerged as platforms of choice for trading the Nigerian currency, as the country battles chronic dollar shortages.

    A criminal charge was filed against the two executives before a Magistrate Court in Abuja. On 28 February 2024, the court granted the Economic and Financial Crimes Commission (EFCC) an order to remand the duo for 14 days. The court also ordered Binance to provide the Nigerian government with the data/information of Nigerians trading on its platform.

    Following Binance’s refusal to comply with the order, the court extended the remand of the officials for an additional 14 days to prevent them from tampering with evidence. The court then adjourned the case till 4 April 2024.

    Also on 22 March, the Nigerian government approached the Federal High Court in Abuja and slammed another four-count charge on Binance Holdings Limited, Mr Anjarwalla and Mr Gambaryan, accusing them of offering services to subscribers on their platform while failing to register with the Federal Inland Revenue Service to pay all relevant taxes administered by the Service and in so doing, committed an offence, contrary to and punishable under Section 8 of the Value Added Tax Act of 1993 (as Amended).

    The defendants were also accused of offering taxable services to subscribers on their trading platform while failing to issue invoices to those subscribers to determine and pay their value-added taxes and, in so doing, committed an offence contrary to and punishable under S.29 of the Value Added Tax Act of 1993 (as amended).

    Count Three of the charges accused the three defendants of offering services to subscribers on their Binance trading platform for the buying and selling of cryptocurrencies and the remittance and transfer of those assets while failing to deduct the necessary Value Added Taxes arising from their operations and thereby committing an offence contrary to and punishable under Section 40 of the Federal Inland Revenue Service Establishment Act 2007 (as amended).

    The last count of the charges wants the defendants punished for allegedly aiding and abetting subscribers on their Binance trading platform to unlawfully refuse to pay taxes or neglect to pay those taxes and, in so doing, committing an offence contrary to and punishable under the provisions of S.94 of the Companies Income Tax Act (as amended).

    The company announced early this month that it was stopping all transactions and trading in Nigeria’s naira currency after March 8.

    (Additional reporting by agencies)

  • Crypto Scandal: Kenyan Amongst Binance Executives Detained In Nigeria

    Crypto Scandal: Kenyan Amongst Binance Executives Detained In Nigeria

    When two executives from Binance arrived in Abuja, Nigeria’s capital city, to meet with the government over the role of the world’s largest cryptocurrency exchange in the country’s foreign exchange crisis, they were carrying only hand luggage, expecting to stay a few days.

    The first meeting on Feb. 26 started off neutral, the second took a hostile turn. The executives were escorted to their hotel, made to pack up their belongings and moved to a guesthouse, where their passports were taken.

    Against the backdrop of their detention, Nigeria is currently grappling with one of its most severe economic downturns in years, sparked by a sharp rise in inflation. The surge in prices is largely attributed to monetary strategies that have significantly devalued the currency. The naira has reached a historic low against the dollar. As a consequence, widespread discontent and demonstrations have erupted throughout the nation.

    In the midst of economic uncertainty, a growing number of Nigerians have embraced cryptocurrency as an alternative financial option. Recent statistics from Chainalysisreveal that Nigeria ranks second globally in crypto adoption, trailing only behind India.

    The exchange rate on Binance and other platforms, which reflect a parallel black market rate, continued to deviate from the official rate, which has been gradually depreciated.

    Nigeria has accused Binance of crashing the nation’s currency through rate manipulation for profit. The country is seeking a US$10 billion penalty from the company for processing $26 billion of untraceable funds in the country, according to reports.

    The two Binance executives who came to meet Nigerian officials remain detained, without being charged with any crimes.

    Both U.S. and U.K. authorities have been alerted of the detainment. Tigran Gambaryan, who lives in the U.S., is Head of Finance Crime Compliance for the Binance Security and Investigations Team. He also worked as a special agent for the Internal Revenue Service for over a decade until September 2021.

    The other executive, Nadeem Anjarwalla, Regional Manager of Africa, is a dual British-Kenyan citizen.

    On Feb. 28, the executive’s lawyers were told they would be held for two weeks while investigations took place. Both were taken to a medical center on March 4, and Anjarwalla was reportedly feeling unwell, according to family members. He refused to have tests without a foreign representative, fearing the results would be manipulated.

    Anjarwalla and Gambaryan’s next hearing — which was postponed until March 13 — failed to secure their release. While it didn’t explicitly extend the order allowing their detainment, they will remain in jail until an additional hearing on March 20, which gives Nigerian authorities more time to respond to the arguments of the Binance executives’ lawyers.

    Their families anxiously await their return. “I’ve been trying very hard to keep up the hope and stay optimistic,” Elahe Anjarwalla, Nadeem’s wife said while speaking to the media from Nairobi. “But it’s now day 18, it definitely does seem like it’s getting harder.”

    Binance has given few details publicly. “While it is inappropriate for us to comment on the substance of the claims at this time, we can say that we are working collaboratively with Nigerian authorities to bring Nadeem and Tigran back home safely to their families,” a Binance spokesperson told Consortium of journalists in statement. “We trust there will be a swift resolution to this matter.”

    But the Nigerian government doesn’t seem to be backing down. They are now asking Binance for information regarding its top 100 users in the country and transaction history spanning the last six months, according to reports.

    Anjarwalla said she has been chasing the British authorities, and that Wednesday was the first day they had called her “unprompted.”

    For now, Anjarwalla can only wait, and hope that her husband returns home in time for her son’s first birthday next week. “I’m anxiously hoping and praying that Nadeem will make it back in time for that,” she said.

  • Four Involved In GHash Crypto Mining Scam

    Four Involved In GHash Crypto Mining Scam

    Four suspects involved in GHash mining a crypto scam have been arrested in Kiambu.

    According to the Directorate of Criminal Investigations (DCI), 1,336 sim cards including 1,235 Safaricom lines, 80 Airtel lines as well as 21 Telcom lines were recovered from the suspects.

    The investigative agency further stated that detectives recovered eight mobile phones, a tablet and a laptop believed to be used by the scammers.

    Police stated that they are still in pursuit of more suspects believed to be accomplices of the four arrested individuals.

    “More suspects are being sought as the four pend arraignment on Monday,” posted DCI on its X account.

    The country has witnessed an upsurge in crypto mining over the last years who lure many unsuspecting youths to invest their money on the premise with a promise of high returns of upto 300 percent.

    Suspects arrested.

    How GHash crypto mining scam is done

    Investors are required to deposit funds into their accounts in a bid to optimize the process.

    Scammers’ demands for account recharges in order to allow investors to make withdrawals or receive a 345 percent return on investment.

    Many comply and replenish their accounts as asked, not thinking there’s been any ill-play.

    The scammers then disappear from the internet without warning, and victims are cut off from communication with them.

    A victim of GHash scam shares his story.
  • DCI Warns Kenyans On Rising Crypto Scams

    DCI Warns Kenyans On Rising Crypto Scams

    The Directorate of Criminal Investigations (DCI) has noted an alarming increase in reports of Kenyans falling victim to scammers operating through online cryptocurrency investment platforms.

    According to DCI, the fraudsters employ “deceptive tactics, enticing individuals to invest their hard-earned money with promises of lucrative returns, only for victims to end up losing substantial sums”.

    The DCI is investigating multiple cases where investors, swayed by enticing messages like “Make Money Sitting At Home” received via short messages (SMS), have found themselves ensnared in fraudulent schemes. These schemes, instead of delivering promised profits, result in significant financial losses for the unsuspecting victims.

    The DCI in a warning statement on Wednesday, urged Kenyans to exercise vigilance and caution against falling prey to this deceptive scheme. The public has been advised to verify the legitimacy of any online investment platform through recognized regulatory bodies such as the Capital Markets Authority (CMA) and the Communication Authority (CA) before committing their funds.

    The advisory comes in response to the escalating cases of cryptocurrency-related fraud in the Kenyan market.

    The DCI stressed the necessity for heightened awareness and improved verification processes to shield citizens from falling victim to these sophisticated scams.

    Kenya, alongside Nigeria and South Africa, was identified among the top countries where scammers generated the highest revenue per user last year, according to a report by the blockchain analysis firm Chainalysis.

    Chainalysis, a blockchain data platform, noted in its 2023 Crypto Crime Report, the value received by illicit cryptocurrency totaled $24.2 billion. This was a decrease compared to 2022 attributed to increased awareness and efforts to combat such illicit activities.

    Stablecoins have emerged as the preferred cryptocurrency for cybercriminals, surpassing Bitcoin in illicit transaction volume. However, the overall share of cryptocurrency volume related to illicit activity is decreasing. Crypto scamming and hacking revenue have also seen declines in 2023, indicating progress in curbing such criminal activities.

    Despite these positive trends, criminals remain innovative, employing techniques to finance and conceal illicit activities on the blockchain.

    Investigations often involve tracing funds across multiple tokens or chains, with the goal of presenting fully auditable data that can stand up in court.

    Detectives at DCI pledged to intensify efforts to combat cryptocurrency-related fraud, urging the general public to remain vigilant and informed to protect themselves from falling victim to evolving online scams.

    Various cases of financial exploitation in the rapidly changing landscape of digital investments are ongoing at various courts in the country.