Three Kenya P2P Bitcoin agents have been accused of bank fraud in connection with the transactions they have made through the LocalBitcoins exchanging platform.
The case could create a worrying precedent for Kenya merchants.
As Kenya Wall Street reported, 10.2 million KEH approximately 100,000 USD, was stolen from I & M Bank and a Safaricom Pay Bill account. Local police have managed to track stolen funds in several bank accounts, including those owned by Bitcoin merchants Stanley Mumo, Emma Kariuki Stanley Mumo and Timothy Gachehe.
The three people were charged with a conspiracy to commit a crime, though apparently, their only connection to the offense was the sale of jewelry to the individual who was trying to wash the funds.
That person was “BADASS20”, a pseudonym who used stolen funds to buy Bitcoins through the Bitcoin peer-to-peer exchanging platform LocalBitcoins.
Merchants deny that they knew they accidentally helped “BADASS20” clean up the stolen money, and the LocalBitcoins chat history seems to confirm their protests.
However, the Kenya Banking Fraud Investigation Unit (BFIU) froze traders’ bank accounts, and the three people were arrested and released on bail. They will make the first appearance of the court in December, before a full hearing in January.
Strangely, “BADASS20” has not been identified or arrested, even if bank transfers have revealed its bank account. Moreover, LocalBitcoins’ profile was still active at the time of drafting, although he or she did not register for about a week. Recognizing that the account remained active, other users gave negative feedback to the account’s and left reviews warning other users not to trade with this account.
Several questions remain unanswered, which hopefully will be answered at the next meeting, but it is clear that this case could be a worrying precedent for Kenya traders. In 2015, the central bank issued a public notice (PDF) warning residents to stop trading in Bitcoin and other similar products.
Still, peer-to-peer trading platforms flourished in the country. But if this case continues in its current course and the government tracked these traders for bank fraud – even if they were not aware of the theft and their only connection to the perpetrator was via LocalBitcoins, it could have a cooling effect on the private cryptocurrency industry.