How does Bitcoin Wallets make money?
Most modern scam artists use bitcoin as the investment, relying on their target market knowing very little about bitcoin.
WARNING: Bitcoin Wallets customers’ accounts hacked online
UPDATE: Bitcoin Wallets has closed its doors
We wanted to placed this simple question to 30-year-old former paramedic, Sphelele “Sgumza” Mbatha the owner of Bitcoin Wallets, the investment scheme is reportedly taking more than R2 million in cash deposits on a daily basis.
This is what he had to say; absolutely nothing! This despite agreeing to an interview with us, he repeatedly failed to turn-up.
His business situated behind Mica in the Ladysmith CBD they have been trading from 5am in the morning until 1am in the last few days. The business first set up offices in Queen Street and has been operating since last year.
Rumours that major Ladysmith businesses TFS and BAWAS Furniture have invested in the scheme forced the businesses to publicly distance themselves from Bitcoin Wallets in a statement.
The Alfred Duma Municipality also issued a warning to its staff to not invest in the scheme during working hours. The municipality stopped short of calling Bitcoin Wallets a Ponzi scheme.
According to the National Credit Regulator (NCR) they are not an authorised financial services provider and documents they produce are altered or misleading.
Despite a national news story being run in our sister paper the Citizen, that Bitcoin Wallets is very likely to be a Ponzi scheme investors are still queuing up to invest.
Now no one can accuse Sgumza of hiding his wealth with high profile visits to supermarkets, shops and petrol stations where he has been seen to give thousands of Rands to anyone nearby. A visit by Sgumza normally ends with cash being thrown in the air…
Tens of thousands of people have invested anything from R1300 for higher. Many have been paid out large sums of money.
While others continue to reinvest their growing wealth, hoping that their money will continue to grow. Long queues are seen every day at Bitcoin Wallets, with hundreds of people staying until the late hours of the night to make sure that they are the first in line the next day to invest.
Speaking to those in the queue they say that they are there to invest their money as so many other people have done. They also want to be rich.
The Ladysmith Gazette ran an editorial in last week’s print edition warning people against the scheme.
Easy money is a lie
If you are standing in a queue right now, ready to invest your hard earned cash, think long and hard. How did you hear about this business and very importantly, if it is a Ponzi scheme, can you afford to lose the money?
So what is a Ponzi scheme?
A Ponzi scheme is an investment fraud, in which clients are promised a large profit at little to no risk. Companies that engage in a Ponzi scheme focus all of their energy into attracting new clients to make investments. Similar to a pyramid scheme, the Ponzi scheme generates returns for older investors by acquiring new investors, who are promised a large profit at little to no risk.
Both fraudulent arrangements are based on using new investors’ moneys to pay the earlier backers. Companies engage in Ponzi schemes pay almost no attention to their investors.
Basically, once you invest, they are done with you. This new income is used to pay original investors their returns, marked as a profit from a legitimate transaction.
Ponzi schemes rely on a constant flow of new investments to continue to provide returns to older investors. When people stop investing and the money stops coming in, the scheme falls apart.
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