Egyptian authorities have arrested 29 individuals, including 13 foreigners, believed to be behind an allegedly fraudulent cryptocurrency investment scheme.
State media reported that investors lost an estimated $618,000 after the crash of Hogg Community Tech, better known as “HoggPool” by its users.
State media said that HoggPool, which opened last August and abruptly closed on February 28, is accused of operating a Ponzi scheme, in which initial investors are paid with money from new investors. It was reported that the Counter-Cyber Crime department at the Ministry of Interior has been investigating the firm since receiving complaints from members of the public.
The scheme had been running in defiance of Egyptian law, which prohibits trading and investment in cryptocurrency, which is punishable by prison and a fine of up to $325,000.
HoggPool was marketed as offering returns of “more than a hundred times the stake” in just a few months, which helped it attract many small and medium-sized savers.
In the months leading to its closure, the platform used large social media campaigns, saying that an initial investment of $130 was expected to yield its user $10 per day. Profits were promised after 150 days, and the first investors reportedly earned profits as early as December. Hogg Pool created a mobile phone application which allowed investors to invest in cryptocurrencies using their mobile money account.
Egyptian MP Hisham El-Gahe has called on the government to ban adverts from unauthorised platforms and demanded a wider investigation. The Interior Ministry said that they are working with Interpol to track stolen funds which have been transferred abroad, and warned the public to be cautious about similar investment schemes that promise unrealistic returns.
Egypt’s ongoing economic crisis has attracted investors to unregulated schemes. The 40% devaluation of the Egyptian Pound since October, and the rise of inflation to over 25% last December fuelled the popularity of alternative investments, as investors sought to protect their savings from the eroding value of the currency.