• Mon. Apr 22nd, 2024

Cryptocurrency Exchanges and the Plague of Scams and Bans


Cryptocurrency exchanges have seen a lot of activity in the past 12 months with the bull market taking many coins to new all-time highs. Bitcoin was in charge of the proceedings recording a new all-time high above $64,000.

But, as the investments kept flowing into the cryptocurrency market, criminals have also come in to steal funds from unsuspecting traders and investors. The increase in the frequency of crypto scams has prompted regulators and authorities around the world to ban trading and investment within their jurisdictions.

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The crypto world has experienced a lot of topsy-turvy times. On one hand, El Salvador approved bitcoin as a legal tender earlier in June while on the other hand, China came down massively on mining operations in its mainland. The move by China to ban crypto mining crashed the global value of cryptocurrencies.

On June 24, a $3.6 billion scam involved in cryptocurrency exchanges trading in South Africa was unearthed. This theft is being termed as the largest ‘heist’ in the short history of the crypto market.

Africrypt Exchange Founders Missing With $3.6B Of Investors’ Money

Brothers Ameer and Raees Cajee launched Africrypt in SouthAfrica in 2019. The firm operated like most of the other cryptocurrency exchanges offering its users updates on crypto trading and enabling them to create portfolios of crypto investments. By April 2020, Africrypt had acquired 69,000 bitcoins, roughly worth about $4 billion, for its users.

The COO, Ameer, then told the clients that Africrypt had been hacked and all their accounts and wallets had been compromised. He also urged the clients to avoid reporting this matter to authorities since any involvement by the authorities would delay the recovery process.

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Several suspicious clients contracted attorneys to look into this matter but the Cajee brothers disappeared when the federal crimes unit tried to track them. More investigations found that the employees of this firm had lost access to the back-end platforms, about seven days before the alleged ‘hack’.

First National Bank (FNB), Africrypt bankers, purportedly facilitated the transfer of the firm’s pooled funds onto the BTC network in April 2021 after the ‘hack’. However, the bank has denied all that and refused to reveal more details, according to Independent Online.

Africrypt Defrauds Investors Over $2 Billion In An Exit Scam

Finance Sector Authority, South Africa’s financial regulator, does not consider crypto to fall within its jurisdiction. Bank for International Settlement stated:

“Cryptocurrencies are speculative assets rather than money, and used to facilitate money laundering, ransomware attacks, and other financial crimes.”

The unauthorized and unregulated cryptos normally lack safeguards for the investors. In 2019, more than 115,000 people were left without their share of deposits, when the CEO of the biggest bitcoin exchange in Canada, QuadrigaCX, Gerald Cotten passed away.

Months after his death, the widow of the CEO announced that QuadrigaCX’s funds were held entirely in cold wallets. She said that these offline crypto storages had passwords known only to Cotten meaning that they are lost forever. Engadget reported that this loss was 200 million CAD (~163 million USD).

While the QuadrigaCX might be quite unfortunate, 400,000 users lost their money when Thodex, one of the Turkish cryptocurrency exchanges, shut down in April 2021 after the government banned cryptos for buying goods and services.

Having been in operation since 2017, Thodex launched a freeze in transactions for 5 days to facilitate its eventual sale. Users did not access their accounts or withdraw their money and the CEO of the exchange, Faruk Fatih Ozer, left the country. On this occasion, the total amount that investors lost was alleged $2 billion.

Huobi Bans Crypto Derivatives Trading Services For Users In China

Users in China will no longer have the option to trade crypto derivatives on the Huobi exchange amid a major crackdown on cryptocurrency exchanges by the government. Due to the latest developments, Huobi has updated its user agreement document, which now bans crypto derivatives trading for Chinese customers.

Based on this updated user agreement section of the Huobi Global site, the ban on cryptocurrency derivatives trading covers the uses in countries like Israel, Taiwan, China, and Iraq. Other banned countries include the UK while those that have restricted retail clients include Bangladesh, Bolivia, Ecuador, and many others.

Crypto derivatives trading ban is also in addition to the longstanding restrictions of the use of its platform in areas like Iran, Cuba, Japan, Hong Kong, Sudan, North Korea, the United States, and Canada among others. The platform went on to insist that users who violate the set restrictions might lose their accounts.

The Huobi ban on crypto derivatives trading in China might be due to renewed crypto crackdowns from the authorities in Beijing. Earlier in June, the platform stopped new users within the Asian country from trading crypto derivatives while also minimizing the allowable leverage from 125X to around 5X.

Huobi Japan Raises $4.6M for Expansion

The Chinese authorities have increased their tempo in recent weeks, even targeting the mining industry with nearly 90% of Bitcoin (BTC) miners forced to shut down or leave the country entirely.

In that context, some of the companies have started to shift their operations overseas, with BTC’s hash rate expected to see its biggest difficulty drop with a considerable segment of the network’s hash power offline, at least temporarily.

This ban also seems to shrink the options available to the Chinese crypto derivatives traders. Platforms like OKEx and Binance might be the next port of call for seeking to trade highly leveraged crypto contracts.

On its part, Binance has also been the subject of elevated regulatory scrutiny. In the past week, the exchange giant got compelling notices from regulators in Japan, the United Kingdom, and Ontario, Canada.

Binance Among Cryptocurrency Exchanges Restricted In The UK

In the past week, Japan’s Financial Services Agency mentioned that Binance was operating in the country ‘illegally’. Binance crypto exchange has now been prohibited from operating within the United Kingdom by the nation’s regulating body. This move appears to be the latest sign of a growing crackdown that is targeting the cryptocurrency industry worldwide.

Britain’s Financial Conduct Authority (FCA) stated on June 26 that the U.K. division of Binance, Binance Markets Limited:

“is not permitted to undertake any regulated activity in the U.K.”

Starting June 30, the firm must add a conspicuous notice in a prominent segment in its site and apps targeting UK users. The notice should read:


As a result of the imposed requirements set by the FCA, Binance Markets Limited cannot undertake any regulated activities without the written consent of the FCA. There is no other entity within the Binance Group that holds any type of UK authorization, registration, or license to operate regulated activity in the United Kingdom.

In the cryptocurrency exchanges sector, Binance is the biggest by trading volumes. It was scheduled to launch its digital asset marketplace in Britain. But, it was one among the many crypto companies that withdrew their applications to register with the FCA due to not fulfilling anti-money laundering (AML) requirements.

A spokesperson for the FCA told CNBC:

“Binance Markets Limited withdrew their 5MLD application on 17 May 2021 following intensive engagement from the FCA. The action taken today on Binance Markets Limited has been in train for some time.”

Regulators are going down hard on cryptos due to the increase in the rate of scams that have even spilled into cryptocurrency exchanges.

In the case of Binance, the FCA spokesperson said that the scope of the ban was somehow limited. Although Binance Markets Limited is banned from providing regulated services within Britain, the non-registered companies and cryptocurrency exchanges can still interact with UK-based users.

Binance Exchange

It means that Binance might still offer Brits crypto trading services through its site. A Binance spokesperson told reporters:

“The FCA U.K. notice has no direct impact on the services provided on Binance.com … Our relationship with our users has not changed. We take a collaborative approach in working with regulators and we take our compliance obligations very seriously. We are actively keeping abreast of changing policies, rules, and laws in this new space.”

One financial analyst at AJ Bell, Laith Khalaf, commented via email:

“The FCA has stated that Binance is not permitted to conduct regulated activities in the U.K. Providing access to cryptocurrencies itself is not a regulated activity, but offering derivatives is, which is presumably the activity the FCA is clamping down on.”

The Financial Conduct Authority is not the only regulator that is clamping down on the cryptocurrency industry. Japan’s Financial Services Agency is also cleaning the cryptocurrency exchanges space within its jurisdiction.

In the meantime, China has increased its efforts to eliminate crypto speculation, ordering all crypto miners to stop operating in various regions. Beijing has also directed banks and other payment firms not to offer any crypto-related services.

A lot of regulatory scrutinies has weighed on the budding cryptocurrency market. Bitcoin had started the year on a front pedal, with the bulls pushing the prices to reach an all-time high near $65,000 in April. Since then, it has nearly halved in value, trading around $34,500 on June 28.

While referring to the FCA’s restrictions on Binance exchange, Khalaf said:

“This isn’t a step change in regulation which is going to knock the crypto craze on the head, but it is part of a growing trend of regulatory intervention in crypto markets. The idea that policymakers are simply going to allow a decentralized shadow payments system to emerge without any regulatory oversight is fantastical, and if the use of crypto assets becomes more widespread, we can expect beefed-up regulation to follow suit.”

These scams and bans affecting companies and cryptocurrency exchanges might be the reason why the crypto markets are plunging seemingly into a bearish trend. If these bans and crimes continue consistently, experts and analysts warn that the bear market might return to the cryptocurrency market sooner than earlier expected.

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Kevin Moore - E-Crypto News Editor

Kevin Moore - E-Crypto News Editor

Kevin Moore is the main author and editor for E-Crypto News.