Digital currency investors are reeling from massive losses after the CBEX, an artificial intelligence-powered cryptocurrency trading platform abruptly wiped out their accounts.

The development has raised fresh questions about the security and legitimacy of online trading platforms promising sky-high returns. The little-known but fast-rising crypto and forex trading platform, had aggressively marketed itself across Kenya and parts of West Africa in recent months.

Its pitch was hyped by AI-powered trades, referral bonuses, seamless withdrawals, and guaranteed monthly profits of up to 30 per cent. For many, it was an offer too good to be ignored. But their dreams came crashing down. Dozens of users reported waking up to empty digital wallets, with balances cleared to zero in a matter of hours.

From its outset, CBEX operated in murky waters. The company remains unlicensed in Kenya, and details about its ownership and physical location are scant. Its website offers no verifiable contact information, and user support is funnelled almost entirely through Telegram and WhatsApp groups.

According to CBEX, the mass account wipeouts were a result of what it described as a “targeted hacking campaign” aimed at disrupting its AI trading signals. It sent messages to users through Telegram, claiming the platform had allegedly been attacked by “malicious fraud platforms” using “full-margin” operations to manipulate its system.

However, what has triggered further alarm among users is the company’s demand for upfront verification fees before processing any compensation.

CBEX instructed victims to pay Sh12, 961 ($100) to Sh25, 922 ($200) depending on their previous account balance, an unusual move which experts say bears the hallmark of a classic exit scam.

“This is a textbook case of a Ponzi scheme dressed in tech jargon,” said Newton Mwaura blockchain consultant. “The use of AI as a selling point, coupled with unsustainably high returns and aggressive referral programmes, should have been major red flags.”

 Financial ruin

CBEX now joins a growing list of crypto platforms that have collapsed across Africa, leaving users in financial ruin. From Dunamiscoin in Uganda to the infamous MTI in South Africa, the continent has seen repeated waves of crypto-fuelled fraud, often with little legal recourse for victims.

Central Bank of Kenya (CBK) and Capital Markets Authority are yet to release a formal statement on CBEX or the recent losses, though insiders say investigations may be underway.

Experts say what makes Kenya particularly vulnerable is the rapid growth of crypto adoption in a largely unregulated environment. A 2022 UNCTAD report revealed that nearly 10 per cent of Kenyans own some form of cryptocurrency.

In December 2015, the CBK issued a public notice warning Kenyans against the use of virtual currencies. The notice highlighted the risks associated with cryptocurrencies, including their volatility, potential for fraud, and lack of legal recourse in case of disputes.

But CBK’s position on cryptocurrencies has evolved from initial warnings and prohibitions to a more cautious acceptance of the potential of digital currencies.

While the CBK has historically warned against the use of cryptocurrencies due to their volatile nature and lack of regulation, the government is now actively working on developing a regulatory framework for the crypto sector.

In December 2024, the National Treasury unveiled a Draft National Policy on Virtual Assets and Service Providers, along with a proposed Virtual Asset Service Providers Bill.