Pensioner claims cryptocurrency trader could have stopped fraud

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A court case in which a pensioner fell victim to a cyber-scam highlights that cryptocurrency traders can’t shift their responsibility to verify clients’ identities onto trading platforms.

Fraudsters accessed Dirkie Wessels’ bank account and siphoned off R960 960.19 in 23 separate transactions, within a day. The money ended up in accounts belonging to Rowen Petrus, a part-time cryptocurrency trader who uses the Binance trading platform.

Upon discovering the fraudulent activity, the 67-year-old Wessels contacted the banks involved: Capitec and Absa. The banks initially froze Petrus’s accounts as a precaution. However, they informed Wessels that they could not do so indefinitely without a court order.

Wessels initiated legal proceedings in the High Court in Pretoria. In Part A of her application, she sought urgent relief restraining the banks from releasing the hold on Petrus’s accounts pending finalisation of the determination of relief sought in Part B. The relief sought in Part B was the repayment of R934 115 in a further action.

Wessels submitted that Petrus received the funds mala fide (in bad faith).

Petrus, on the other hand, contended that he sold the cryptocurrency as part of a legitimate business activity, and the funds in his bank accounts were his to do with as he liked. He said Wessels should have known she was being scammed, and her claim was against the scammers and not him.

Setting the crime scene

In 2023, Wessels invested her inheritance into a six-month fixed account with Capitec. On 2 February, she received a suspicious SMS claiming a payment of R11 700 to Takealot, a purchase she had not made.

Worried, she phoned the number and spoke to “Tessa Smit”, who claimed to be from Capitec’s fraud department. Smit claimed that Wessels’ account had been hacked and instructed her to transfer funds from her fixed account to a savings account at a Capitec branch. Wessels was asked to notify Smit via WhatsApp once the transfer had been completed, so the fraud could be reversed.

Wessels went to Capitec’s Centurion branch where she moved R1 026 590.23 to her savings account. Smit guided her through the process that would apparently reverse the fraud. This included installing the AnyDesk app on her phone. Once installed, the scammers took over her phone.

Shortly thereafter, Wessels noticed R3 500 deposited into an Absa account under the name of “Tarryn Hill”. When she asked Smit about it, she was told it was where the hacker deposited money. Smit claimed she was busy reversing the transaction. Then a notification of a transfer to Petrus’s Absa account appeared on Wessels’ phone, with more following as his name kept popping up in notifications.

Smit informed Wessels that transactions were happening on her account but said she was busy with the “Nigerian Fraud Department”. Their telephone conversation lasted for several hours. When she finally ended the call, Wessels received a notification showing that she had only R35 left in her account. It was then that she realised she had been scammed.

Wessels rushed to the Capitec branch to get help. The bank promptly froze her savings account and reported the issue to its Forensic Investigation Department.

Every one of the 23 withdrawals from Wessels’s Capitec account was transferred directly into Petrus’s Capitec account. The consecutive deposits into Petrus’s account ranged from R18 000 to R44 900.

Bank records showed that, on the same day, Petrus transferred R26 500 and a further R29 500 from his Capitec account to his Absa account immediately after Wessels’ funds were transferred into his Capitec account.

Luckily, not all was lost. On 5 March, Capitec’s Forensic Investigation Department informed Wessels that it had traced and recovered some of the funds debited from her savings account. These recovered amounts, totalling R467 125.70, were deposited into her account on 28 and 29 February.

Additionally, Wessels was told that Petrus had R102 879.11 in a Capitec savings account. Capitec had placed a precautionary security hold on the account.

Cryptocurrency traders and FICA

A “crypto asset service provider”, as defined in Item 22 of Schedule 1 to the Financial Intelligence Centre Act (FICA), is an “accountable institution”.

In terms FICA, when an accountable institution engages with a new client for a single transaction or to start a business relationship, it must verify the client’s identity. If the client is acting for someone else, the institution must also verify that person’s identity and the client’s authority to act on their behalf.

Accountable institutions must file a cash transaction report with the Financial Intelligence Centre (FIC) if they receive cash of more than R49 999.99 from the client, or on their behalf, or from someone for whom it is acting.

Additionally, if an accountable institution suspects that a transaction or activity relates to the proceeds of unlawful activities, money laundering or terror financing, it must report the transaction or activity to the FIC, irrespective of the amount involved.

Petrus explained that he mainly trades on Binance by buying and selling Tether Dollars, a type of cryptocurrency stablecoin backed by real assets. Tether represents a claim on the underlying reserve of a fiat currency.

He buys cryptocurrency and offers it for sale on Binance’s P2P trading platform or exchange, known as “Binance P2P”.

Petrus contended that without his knowledge, scammers used Wessels’ stolen funds to buy cryptocurrency from him. Unbeknown to him, Petrus transferred the cryptocurrency to the scammers’ “designated wallet”.

He asserted that he trusted Binance to verify buyers’ identities, stating that Binance ensures compliance with FICA for all users.

He said, “It is one of the reasons that I trade with Binance, as it assures that all the FICA requirements are met, as all users of Binance identities are verified and copies of their IDs taken.”

However, evidence presented in the case showed that the scammers guided Wessels through the steps to register her identity on Binance without her knowledge, including taking a photograph with head movement.

Acting Judge E. Labuschagne noted in the ruling: “The facts of this matter indicate that the Binance platform assists in identifying persons who are being defrauded in money-laundering schemes but does not identify the fraudsters who are transacting on the Binance platform on behalf of such victims.”

In other words, the Binance platform can be used by fraudsters to register victims as clients, allowing them to transact anonymously on their accounts.

‘Indifference and in breach of statutory duties’

Wessels sought an interdict to prevent Petrus from depleting or moving assets to avoid her claim (Part B). To succeed, Wessels had to prove Petrus’s intention to do so.

Labuschagne AJ noted Petrus’ “unquestioning” behaviour throughout the process.

“The fact that such a multitude of transactions came through under the limit of R50 000 was in itself a red flag, which obligated the third respondent [Petrus] to report the transactions to FICA as being suspicious. His failure to verify the identity of his true client in respect of the trades is the reason why these transactions proceeded at all.”

The judge said Petrus, as a cryptocurrency trader, cannot delegate his obligations to identify his client as required by FICA to Binance, which cannot verify that the registered client is in fact the person transacting on the Binance platform.

A cryptocurrency trader should foresee the risk of money laundering on a platform such as Binance and for that reason verify the identity of his clients.

However, Labuschagne AJ ruled that – although Petrus received the funds “by virtue of such indifference and in breach of statutory duties” – it could not be proved that he intended to deplete assets to thwart Wessels’ claim. Without this allegation and supporting evidence, Wessels could not establish a right for the interdict.

The application was dismissed with no costs order.

While this may not be the result Wessels hoped for, it does allow her to continue pursuing her claim to recover the remainder of her lost funds.

Click here to download the judgment.

2 thoughts on “Pensioner claims cryptocurrency trader could have stopped fraud

  1. Every single day at least one pensioner will fall victim to a cyber scam. Why is that?

    1. 1.Because they were brought up and been taught to trust people and are not familiar with all the tec available to scam people.
      2. We live in an ear where nobody can be trusted
      3. There is a big shortage of income and some get desperate about being able to pay for their medical expenses
      IS there a difference between these scams and the cost involved in Frail care?

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