Cairo โ Egyptians who invested in a cryptocurrency mining app were shocked last week to realize that the incredible profits they thought they were making were down to fiction. The platform, called Hoggpool, launched in August.
In a promotional video, a man introduced the company by stating that it was founded in Colorado in
2019 and it was investing in cutting-edge industries, from โlife science technologyโ to โspace technology and blockchainโ. He called it "one of the world's leading energy providers" and said it offered "cryptocurrency mining at all levels."
Potential investors were offered various plans starting as low as $10, with a promised fixed profit of $1 per day for a specified period. Investment options ranged up to an $800 crypto mining โmachineโ with a payout of $55 per day.
Hoggpool told investors they could withdraw their money daily, minus 15% tax, or wait until the end of the month and withdraw all their earnings tax-free.
For Tarek Abd El-Barr, who works in medical supplies, it sounded like an incredible opportunity.
"They said they were 'mining workers,'" he told CBS News. "Nobody in Egypt knows what coin mining is. We don't know anything about these things. We thought it was an electronic investment, that they were like Amazon or Microsoft."
Pyramid and Ponzi schemes are nothing new in Egypt, but cryptocurrency scams are. Receptions, parties, and gatherings hosted by the people behind Hoggpool, at fancy hotels and other venues, gave users the impression that all was well.
Lawyers and victims told CBS News that the ads on social media platforms appealed to some, but to many, they were known to those who had already been hooked.
Courtesy of Hussein El-Faham
Abd El-Barr's brother-in-law, who used the app and made steady profits, convinced him to join. Skeptical at first, he started with an investment of just 6,000 Egyptian pounds (about $200) in February. It seemed to work as promised, as scams often do, and he got his money back with the winnings, thus tripling his investment.
The platform's biggest and final offering was a new "deposit funds" feature, with which users were told they could earn up to five times the value of their existing investment in just five days. Abd El-Barr was once again skeptical, but since it had worked so far, he went ahead and took a chance, investing all of his savings in the app.
On February 27, when he tried to withdraw his money, it didn't work. Two days later, on March 1, the app completely stopped working and the website disappeared.
โA lot of people took loans from banks to invest in it. I used the money from my car payments. Now I have missed two installments and the bank is calling me, โshe said.
Dozens of videos of people sharing their stories and asking for help quickly flooded the internet.
Ministry of the Interior of Egypt
On Saturday, Egyptian authorities announced the arrest of 29 suspects, including 13 foreign nationals, in connection with the scam. Police seized 95 phones, 3,367 SIM cards and around $194,000 in Egyptian and foreign currency while making the arrests, the Interior Ministry said in a statement. It said the culprits used 88 digital currency wallets to collect the money, then divided it into 9,965 electronic wallets and converted it into bitcoin before transferring it to accounts around the world.
The statement said the suspects had defrauded unsuspecting investors out of at least 19 million pounds, or about $615,000, but many in Egypt believe the actual total was likely much higher.
Lawyer Abdulaziz Hussein told CBS News he was representing more than 1,000 victims of the scam in Cairo alone, but as many as 800,000 people across the country could have fallen victim to the scheme, losing up to ยฃ6bn in total, the equivalent of about 194 million dollars.
Trading cryptocurrency is illegal in Egypt, and another lawyer representing some of the victims said that likely prevented many from reporting the crime.
"Some of the victims could become suspects if investigations prove that they knew what they were doing was illegal," Mahmoud El-Semri said.
It's hard to know how many of the victims might have continued to invest and recruit others, knowing that the scheme involved banned cryptocurrencies, especially since most appear to have joined through recommendations from friends or family, people they trusted and who, in many cases. cases, probably with good intentions.
"Most people didn't investigate the details of how this works, we just understood that they would put the money into the programming," Hussein El-Faham, a lawyer who got caught up in the scam, told CBS News.
He said it was an elaborate scam that looked and sounded legitimate, complete with forged documentation.
Courtesy of Hussein El-Faham
El-Faham said he and others heard warnings that it was a scam, but since the app initially kept paying out the promised money, it was easy to dismiss those reports. The people behind the app even used the fraud warnings as a marketing tool, he said.
El-Faham shared a screenshot with CBS News that showed scammers warning users of "fake" apps and asking them, in poorly written Arabic, to "be careful, those scammers are low tech and strong enough." stupid to copy our system design. Keep your eyes open."
El-Faham lost around $6,000 in the scheme.
Dr. Sarah Zain, a physical therapist, told CBS News that she had doubts about the app even while using it, as it seemed to be an unsustainable business model, but thought it would take longer to unravel. She didn't get the money out of it in time and ended up losing more than $7,000, which she said she needed for an upcoming surgery.
"A friend of mine and her family invested two million pounds (about $65,000), now she doesn't talk to anyone," she said. "I can't believe we were so stupid! We were brainwashed."
Zain also blamed the government for allowing scammers to operate in the open for months.
