CAIRO — Egyptian authorities have succeeded this month in partially unraveling one of the largest cases of online fraud in the country to date by arresting the members of a network that established a fake digital currency platform and deceived thousands of people into readily handing over their life’s savings.
The network was made up of 29 people, including 13 foreign nationals, according to the Egyptian Interior Ministry.
They established the fictitious HoggPool crypto mining platform and lured users by promising them high returns for their investments, stealing 19 million Egyptian pounds ($615,000) from them, the ministry said in a statement released last week.
It noted that the members of the network rented a villa in Cairo and used it in operating the platform, before suddenly shutting it down and disappearing.
The arrest of the members of the network came a short time after hundreds of victims of the platform turned to security directorates in different cities to complain about being hoodwinked and robbed.
The platform, some of them said, convinced them to put their savings into crypto mining operations in return for high profits that were distributed to users on a daily basis.
“My savings had perished in less than a second,” one of the victims of HoggPool said on social media.
Nada Hussein, a mother of two in her mid-30s and another victim of the platform, told Al-Monitor about her case. “Sorry to say, I invested my money into this platform because of the high returns it promised. These returns were very tempting, especially with some of my friends and relatives having tried the platform for months before and earning a lot of money,” she said.
The platform lured people like Hussein into becoming a member of a sprawling fraud network by promising them profits in return for inviting other people to join in.
This was why new users quickly turned from ordinary investors to staunch campaigners for the platform in the hope of collecting more profits.
Hussein and other users did this, but they ended up being cleaned out. Hussein lost 60,000 Egyptian pounds ($1,940), which she borrowed from her husband and several relatives.
Egypt is treading cautiously — and sometimes in a confused manner — toward digital currencies.
In January 2018, the Central Bank of Egypt warned against these currencies, citing the high risks associated with them. Commercial transactions inside Egypt, it said, would be restricted to the paper money issued by it.
This warning came against the background of growth in the number of locals venturing into the digital currency sphere.
Nevertheless, in December of the same year, a central bank official told the Egyptian Masrawy news website that the bank was considering the issuance of its own digital currency.
In a report released in January of this year, the central bank said it was considering applying Central Bank Digital Currency.
This came almost three years after the Egyptian parliament approved in September 2020 Law No. 194, which introduced technological and digital means to aid in the national digital transformation drive, especially in the banking sector, including digital finance, the digital settlement of cheques and digital currencies.
Earlier in 2020, Dar al-Ifta, the main Islamic legislator in Egypt, said in a video posted on its social media pages that digital currencies, including bitcoin, were against the teachings of Islam.
“Egypt treads cautiously toward digital currencies because it is afraid that they can be used in getting huge funds outside the country,” Abdelnabi Abdelmutaleb, a former adviser to the Ministry of Foreign Trade and Industry, told Al-Monitor. “Digital currencies are traded away from oversight by supervisory authorities, making them a good money laundering tool.”
Specialists like Abdelmutaleb cite growing interest in digital currencies among Egyptians, with more people trying to capitalize on the enormous profits these currencies can bring them, despite the risks associated with them.
This interest also comes as inflation keeps rising and dwarfing returns from investment and saving tools introduced by local banks and financial institutions.
To rein in the growing inflation, absorb liquidity from the market and prop up the local currency against foreign currencies, especially the US dollar, local banks introduced savings and investment schemes in the past months with returns as high as 25%.
The Egyptian economy was hit hard by the Russian war on Ukraine, which has put unprecedented pressure on Egypt’s balance of payments, forcing this populous country that is heavily dependent on food imports from other countries to pay more for its imports.
The central bank has depreciated the Egyptian pound several times since early 2022, causing the pound to lose almost 50% of its value against foreign currencies, doing away with the savings of millions of Egyptians and partially contributing to making the prices of commodities tower over the money in people’s hands, regardless of its amount.
To protect their savings, Egyptians are putting their money in anything that seems profitable, from real estate to vehicles and gold. And some put their savings into digital currencies, too, trying to achieve easy and quick profits.
Nevertheless, swindlers are apparently tapping into this growing interest by setting up fake platforms that end up obliterating people’s savings.
A security official spoke to Al-Monitor on condition of anonymity about the crypto mining scams. “We advise people to be very cautious as to where they should put their money,” the official said. “A large number of people fell victim to the latest crypto mining [scam] because they thought they would amass huge amounts of money while sitting in the comfort of their homes.”
The platform appeared only in August 2022 and has since reportedly attracted 600,000 people.
Some estimate the amount of money they robbed from Egyptians at 6 billion Egyptian pounds ($194 million).
Hussein learned about HoggPool from the internet and through some friends. After subscribing, she convinced six of her relatives to put their money into the platform as well.
Her loss has caused a marital dispute as her husband now wants the money back that he lent her.
“I really do not know what to do,” Hussein said. “I stay at my parents’ house until the problem is solved.”
Meanwhile, others are calling for creating a legal framework to regulate digital currencies, including bitcoin.
This has to be done, they say, in a way that protects the savings of the members of the public and allows them to capitalize on the financial prospects of these currencies.
This idea is also backed by some members of the lower chamber of the Egyptian parliament, the House of Representatives. They want Egypt to capitalize on the growing international digital currency market.
Mahmud al-Saeedi, member of the Committee on Economic Affairs in the House of Representatives, told Al-Monitor that legal action is required. “We only need to formulate the laws necessary for regulating digital currency dealings. This will help state authorities to monitor these dealings and also collect taxes on them in a way that benefits the national treasury," said Saeedi.