Major bitcoin scam roils Egypt

CAIRO – Egyptian authorities this month succeeded in partially unraveling one of the country’s biggest online fraud cases to date by arresting the members of a network that set up a fake digital currency platform and duped thousands of people into easily handing over their life savings . .

The network consisted of 29 people, including 13 foreign nationals, according to the Egyptian Interior Ministry.

They established the fictitious HoggPool crypto-mining platform and lured users by promising them high returns for their investments, stealing 19 million Egyptian pounds ($615,000) from them, the ministry said in a statement released last week.

It noted that the members of the network rented a villa in Cairo and used it to operate the platform, before suddenly shutting it down and disappearing.

The arrest of the members of the network came shortly after hundreds of victims of the platform approached security directorates in different cities to complain of being cheated and robbed.

The platform, some of them said, convinced them to use their savings in crypto mining in return for high profits distributed to users on a daily basis.

“My savings were gone in less than a second,” said one HoggPool victim on social media.

Nada Hussein, a mother of two in her mid-30s and another victim of the platform, told Al-Monitor about her case. “Sorry to say, I invested my money in this platform because of the high returns it promised. These returns were very tempting, especially with some of my friends and relatives who had tried the platform for months before and made a lot of money,” she said.

The platform lured people like Hussein to join an extensive fraud network by promising them profits in return for inviting other people to join.

This was the reason why new users quickly turned from ordinary investors to staunch advocates of the platform in the hope of collecting more profits.

Hussein and other users did this, but they ended up being purged. Hussein lost 60,000 Egyptian pounds ($1,940), which she borrowed from her husband and several relatives.

Egypt is moving cautiously – and sometimes confusedly – ​​towards digital currencies.

In January 2018, the Central Bank of Egypt warned against these currencies, citing the high risk associated with them. Commercial transactions in Egypt, it said, would be limited to the paper money issued by it.

This warning came against the backdrop of growth in the number of locals venturing into the digital currency sphere.

Nevertheless, in December of that year, a central bank official told the Egyptian news website Masrawy that the bank was considering issuing its own digital currency.

In a report released in January this year, the central bank said it is considering using the central bank’s digital currency.

This occurred almost three years after the Egyptian Parliament in September 2020 approved Law No. 194, which introduced technological and digital means to assist in the national digital transformation campaign, particularly in the banking sector, including digital finance, digital settlement of checks and digital. currencies.

Earlier in 2020, Dar al-Ifta, the main Islamic legislature in Egypt, said in a video posted on its social media pages that digital currencies, including bitcoin, were against the teachings of Islam.

“Egypt is treading carefully against digital currencies because it is afraid they could be used to get huge funds outside the country,” Abdelnabi Abdelmutaleb, a former adviser to the Ministry of Foreign Trade and Industry, told Al-Monitor. “Digital currencies are traded away from regulators, making them a good money laundering tool.”

Specialists such as Abdelmutaleb cite growing interest in digital currencies among Egyptians, with more trying to capitalize on the huge profits these currencies can bring them, despite the risks associated with them.

This interest also comes as inflation continues to rise, dwarfing returns from investment and savings tools introduced by local banks and financial institutions.

To curb rising inflation, absorb liquidity from the market and prop up the local currency against foreign currencies, especially the US dollar, local banks introduced savings and investment schemes in recent months with returns as high as 25%.

The Egyptian economy was hit hard by Russia’s war against Ukraine, which has put unprecedented pressure on Egypt’s balance of payments, forcing the populous country, which is heavily dependent on food imports from other countries, to pay more for its imports.

The central bank has weakened the Egyptian pound several times since early 2022, causing the pound to lose nearly 50% of its value against foreign currencies, draining the savings of millions of Egyptians and partly helping to push up commodity prices to rise up. money in people’s hands, regardless of the amount.

To protect their savings, Egyptians put their money in anything that seems profitable, from real estate to vehicles and gold. And some put their savings into digital currencies too, trying to make easy and quick profits.

Nevertheless, scammers are apparently taking advantage of this growing interest by setting up fake platforms that end up wiping out people’s savings.

A security official spoke to Al-Monitor on condition of anonymity about the crypto-mining scam. “We advise people to be very careful about where they put their money,” the official said. “A large number of people fell victim to the latest crypto mining [scam] because they thought they would collect huge amounts of money while sitting in the comfort of their homes.”

The platform first appeared in August 2022 and has since reportedly attracted 600,000 people.

Some estimate the amount of money they robbed from Egyptians at 6 billion Egyptian pounds ($194 million).

Hussein learned about HoggPool from the internet and through some friends. After subscribing, she convinced six of her relatives to put their money on the platform as well.

Her loss has caused a marital dispute as her husband now wants the money back that he lent her.

“I really don’t know what to do,” Hussein said. “I’m staying at my parents’ house until the problem is resolved.”

Meanwhile, others are calling for the creation of a legal framework to regulate digital currencies, including bitcoin.

This must be done, they say, in a way that protects the savings of members of the public and allows them to capitalize on the economic prospects of these currencies.

This idea is also supported by some members of the lower chamber of the Egyptian parliament, the House of Representatives. They want Egypt to take advantage of the growing international digital currency market.

Mahmud al-Saeedi, a member of the Economic Affairs Committee of the House of Representatives, told Al-Monitor that legal action is necessary. “We just need to formulate the laws necessary to regulate digital currency trading. This will help state governments monitor these trades and also collect taxes on them in a manner that benefits the exchequer,” Saeedi said.