The China Beijing Equity Exchange (CBEX) pretended to be an AI-powered crypto asset trading platform. Now, it’s been unmasked as a Ponzi scheme that defrauded investors of millions of dollars. The widespread fraudulent enterprise specifically targeted and affected people in Nigeria and Kenya. That should have been a warning sign right there. The promise of 100% monthly returns is a hallmark of a Ponzi scheme. The Director General of Nigeria’s Securities and Exchange Commission (SEC) has publicly acknowledged that CBEX was a fraud. Consequently, most of these victims are now sitting—figuratively speaking—picking up the pieces.

In truth, CBEX enticed unaware investors across the globe with assurance of untenable profits, and after successful scams carried away millions of dollars. The platform’s operations were opaque, unreputable and its business model was unsustainable and fraudulent. The implosion of CBEX serves as a stark reminder of the significant risks associated with unregulated and unlicensed cryptocurrency platforms.

The China Beijing Equity Exchange, the legitimate entity, publicly distanced itself from CBEX a year prior to the scheme's collapse. The pervasive fraud features chief executive officer’s disavowal, underlining the duplicitous nature of the fraudulent platform and its efforts to pretend to be a legitimate national organization. CBEX was not a legitimate trading platform.

CBEX’s operations were not regulated or overseen by any known quality regulatory body. The absence of regulatory oversight allowed the scheme to go unchecked. It preyed on the gullible and unwary people who sought easy riches in the red hot cryptocurrency market. In hindsight, the promised returns of 100% per month should have raised red flags immediately.

As a result, the scheme’s victims—many of them American citizens—mostly Nigerians and Kenyans—now are suffering enormous financial harm. The CBEX saga stands as a glaring reminder of the need for in-depth due diligence before investing in any cryptocurrency exchange. That’s particularly true for online platforms that advertise impossibly high returns. Investors should always use diligence and consult professional, licensed financial advisers to steer clear of lucrative traps like these.

In its fraudulent promotion, CBEX falsely advertised itself as an AI-driven trading software service. This high-tech, technological sleight-of-hand facade is actually meant to manufacture a sense of legitimacy around its business model. It attempts to bring in a wider array of investors. Underneath the surface, CBEX operated as a traditional Ponzi scheme. It relied on an endless supply of new investors to pay returns to those who had invested before them.

These are the classic signs of a Ponzi scheme, and that’s just how CBEX was operating. CBEX took a different approach, eschewing legal trading practices to rake in profits. Rather, it just needed a consistent influx of new money to outpace its obligations. Like all Ponzi schemes, this model proved to be fundamentally brittle and would eventually break.

An example of a clear fraud—CBEX’s guarantee of a 100% monthly return on investments—serves as the cigars-at-the-airport indicator. Any reasonable investment strategy makes such extreme returns nearly impossible to accomplish, especially with considering the volatile nature one of the most volatile assets in the world, cryptocurrency. This implausible guarantee was the main bait used to lure naive investors.

The millions of dollars CBEX absconded with are a crushing loss to its victims. These people all put their life savings into the operation. Now, they are on the brink of financial devastation due to the fraud. The emotional and psychological toll on the victims is incalculable.

Most recently, Nigeria’s SEC Director General has double-downed on calling CBEX a scam. This pronouncement from a leading regulatory authority further solidifies the fraudulent nature of the platform and reinforces the need for increased vigilance in the cryptocurrency space. The SEC’s warning should be a valuable red flag to anyone thinking about investing in these offerings.

In fact, the real China Beijing Equity Exchange took measures to separate itself from CBEX a year ago. This forward-looking step is indicative of the exchange’s continued commitment to safeguarding its reputation. In turn, it protects the exchange’s name from being associated with any nefarious activities. CBEX’s real one disclaimer ought to have been a red flag for any and all soon-to-be investors.

Despite the consequential nature of CBEX’s activities, they were not overseen by any credible regulatory body. The scheme continued to prosper with no regulatory scrutiny whatsoever. Most importantly, it was able to operate in the shadows, avoiding the oversight and accountability that responsible financial institutions are subject to. The lack of regulation played a crucial role in the scheme’s success in duping investors.

We believe the implosion of CBEX further illustrates the dangers that are present across all unlicensed crypto platforms. These platforms are largely not subject to the same financial regulations that govern traditional capital markets, creating a perfect environment for bad actors to perpetrate their scams. This continues to leave investors vulnerable to fraud, and investors need to understand these risks and be extremely cautious when engaging with unregulated entities.

The victims of the CBEX scam, primarily Nigerians and Kenyans, are grappling with the devastating consequences of their investment losses. Countless others have lost out on untold amounts of savings, and many more have seen their faith in the emerging cryptocurrency market completely destroyed. Support and state resources are imperative to get these affected individuals back on their feet, recovering from their resulting financial and emotional distress.

CBEX's activities lacked transparency and trustworthiness. The platform provided little transparency into its trading activity. As a result, investors had a hard time figuring out if its claims were real. This lack of transparency wasn’t an accident, but rather a cynical move used to hide the fraudulent nature of the scheme.

CBEX’s business model was fraudulent and unsustainable on its face. The platform’s business model, based on Ponzi-like dependence on continuous new investments to pay off previous investors, guaranteed its own demise. This Ponzi scheme like construct was explicitly designed to profit the sorcerer’s apprentices while robbing the suckers.