CBEX promised 100% returns—now Nigerians and Kenyans are counting their losses

Nigerians and Kenyans have raised alarm on social media over the sudden crash of CBEX, a supposed cryptocurrency investment platform accused of withholding millions in customer funds.

Despite promising investors a 100% return on investment each month, CBEX has reportedly failed to process multiple withdrawals, raising serious concerns about its legitimacy and fueling suspicions of a Ponzi scheme.

The details 

• Reports in both countries say CBEX paraded itself as a digital asset trading platform that leveraged artificial intelligence (AI) to generate accurate trading signals. 
• It asked its users to deposit funds into crypto wallet addresses and promised to pay out double their investments as returns within 30 days. 
• However, suspicion arose when users could no longer withdraw both the promised returns and their deposits last week, a development the entity attributed to a hack. 
• It has now asked users to make further deposits ranging from $100 to $200 to unlock their existing funds, a tactic commonly used by pyramid schemes when they are folding up. 

Ponzi signs 

• The scheme, however, had the markings of a Ponzi/pyramid scam where victims are deceived into depositing funds with the promise of huge and often unrealistic ROIs. 
• They are incentivized via referral bonuses to bring friends and associates as new recruits on the platform, broadening the scam’s reach. 
• While it made promises to trade victims’ funds using AI-provided signals, no trading activity took place in reality. Instead, it pays ROI to old customers using the deposits of new ones, as is commonly associated with these scams. 
• In addition, CBEX, like other Ponzi schemes, attempted to gain legitimacy by using the acronym of a real company — the China Beijing Equity Exchange. 
• A year ago, the China Beijing Equity Exchange distanced itself from CBEX in Nigeria and Kenya, adding that it has never traded cryptocurrencies. 

How it worked 

• When users register, CBEX generates a wallet address for them to deposit into. Once these deposits are made, the figures are reflected on their individual dashboards. 
• According to reports, on the back end, the firm instantly moves these deposits to other wallets via the TRON blockchain. 
• From these first receiving wallets, the assets are routed again through several wallets and smart contracts before they are swapped into ether (ETH) and sent to centralized exchanges for withdrawal. 
• Alternatively, some of the ETH is bridged back into TRON via new wallets and the rest is swapped to the decentralized stablecoin, USDD. 

Zoom in 

• There are indications that CBEX is part of a larger global network of crypto scams and money laundering crimes operating out of Southeast Asia.  
• One of the wallets used to withdraw the funds links directly to the darknet marketplace Huione Guarantee. 
• Blockchain analytics firm Chainalysis, in its Crypto Crime Report 2024, flagged Huione Guarantee as a platform that enables the sophistication of crypto crime. 
• It offers infrastructure such as AI face swaps to enable the sale of scam-enabling technology and helps to launder the profits from these criminal ventures. 
• While there is currently no official figure for how much money CBEX made away with, initial estimates put the figure in multiple millions of dollars. 

Zoom out 

• Two days ago, the director general of Nigeria’s Securities and Exchange Commission (SEC) warned users that Ponzi schemes such as CBEX, which are not registered with the SEC, are scams. 
• He added that under new regulations, operators of these entities risk up to ten years in prison and a ₦40M naira fine and asked popular figures to stop promoting these schemes.