I wrote about Refilwe Nkele, or Ref Wayne as he calls himself, and Pipcoin back in August. Wayne called it “Africa’s first cryptocurrency”, but after my investigation I called it a scam. A true cryptocurrency is decentralised and controlled by no single individual or entity, and has published notes on its mining and verifiable blockchain technology.



Pipcoin was 100% controlled by Wayne in that he was the only one creating and selling the virtual coins (at R100 per coin). Anybody buying a Pipcoin was unable to do anything with it. You couldn’t sell it back into the system nor could it be used to buy anything. It promised vast riches to anybody buying a Pipcoin, but only benefitted Wayne himself.



When I exposed Pipcoin in finweek, I challenged Wayne to make Pipcoin legitimate by publishing notes for its mining and a verifiable blockchain. Instead he threatened to sue and continued to claim Pipcoin was a cryptocurrency – but it wasn’t, and still isn’t.



At the time of writing the original article, Wayne was launching a series of new websites to which users had to transfer their existing Pipcoins in order to trade them. However, the process was anything but smooth, with hundreds of complaints on his Facebook page about Pipcoins going missing. With no support offered by Wayne and Pipcoin, these coins and the money paid for them have seemingly been lost forever.



More recently Wayne launched yet another website, this time one that does enable trading in Pipcoins. He has also published some notes on mining, but as far as I can ascertain these notes are not being publicly promoted, and the mining is only being done by a small group of insiders. Again, this means Pipcoin is not a true cryptocurrency.



The new trading website created even bigger problems. At one point Pipcoins were changing hands on this new site for 0.00008 Bitcoins, about 67c at current exchange rates. That means a massive loss of 99.33% for those who paid R100 each for their Pipcoins. The price has now recovered to around 400c (still a 96% loss for those who paid R100) but this recovery is only because mining was halted (as per a message on the trading website) and no new coins could be added to the website.



This halting was a direct response to the collapse of the Pipcoin price and an attempt to reduce supply and hence boost the price. It did work to a degree, but it totally defeats the theory of a cryptocurrency, which is supposed to be left to trade as per supply and demand and not to be manipulated by insiders.



Also, the halting of mining defeats the concept of being decentralised. A truly decentralised system cannot be halted by one individual or group.



My last issue with the new website is that once again most holders of original Pipcoins are unable to successfully transfer their coins. So if they managed the first migration, they are still at risk of losing their coins this time. In fact, a notice on the website says that if you do not transfer your old Pipcoins to the new website by 5 October, they “no longer will be supported”. In other words, worthless. A later notice said that if the coin balance does not reflect within five to six days, you are to contact them via another website, but that website gives no contact details.



Finally, I discovered yet another Wayne website – by my count his seventh one for Pipcoin, with many of the earlier ones now returning an error or displaying a GoDaddy parking page with adverts. This latest website I only found after I checked an email address that he used to contact me and noticed it contained yet another domain.



The latest website is all about mining, but without actually giving details on how to do so. Instead, it offers to sell you overpriced computers to do your own mining, or they will do contract mining on your behalf. This contract mining is done at more than R100 per Pipcoin, the very same ones that are trading at around 400c on their own trading website where they do not allow any new coins onto the new trading exchange.



The reality is that Wayne has likely pocketed millions of rand as the only Pipcoin seller at R100, and he has flooded the market. Any attempt to enable proper supply and demand trading will result in an oversupply of sellers from existing and newly mined coins, and will send the price down to pretty much zero.



Pipcoin also has a website with details of the number of coins in circulation and who owns what. The total number of coins is claimed to be a fraction below 7m, of which 96.2% are owned by the top 25 wallets. We do not know who these 25 people are as they are only identified by a wallet address (such as PN9L9DqXSJNBUqV LnZUNQesQiJTKb5vwYQ, a wallet that owns 900 000 coins). This anonymous process is indeed in keeping with the theory of a cryptocurrency, but it is concerning that the vast majority of coins is held by so few people, and people we can suspect are insiders.



So while Wayne has seemingly tried to do the right thing by making Pipcoin a cryptocurrency, he has failed. Sure, one can allegedly mine them, but in reality he is trying to sell contract mining services at inflated prices. The exchange on which they trade has effectively stopped new Pipcoins from being entered, and by thus manipulating the price, he has left thousands if not tens of thousands of ordinary South Africans severely out of pocket, and keeps selling them worthless coins at R100.



The only credible thing now left for Wayne to do is to turn over control of Pipcoin to independent outsiders who can manage the cryptocurrency in the same way that Bitcoin is managed. Trading must be allowed to take place regardless of what happens to the price, and Wayne and his associates must remove themselves completely from the entire process.



Lastly, Wayne must return the money to those who paid R100 for their Pipcoins. Those who have lost money should consider their options in terms of the law.





The following questions were sent to Wayne ahead of publication. No response was received:



- On the dc-ex.com website Pipcoins are trading below R1 after people paid R100 for them. What is your message to those who bought them from you for R100? Will you refund them?



- On the same website the administrator states: “Mining Coins and new deposit for PIP not allowed in dc-ex”. Why so, and for how long will this apply? Is this an attempt to stop a flood of sell orders?



- How many Pipcoins did you sell at R100 each?



- A large number of people on your Facebook page report their Pipcoins having disappeared when transferring to new websites. How is this being resolved?



- The sites pipchain.com and pipcoin.co.za were both down at the time of writing this (and have since become parking pages). What are the plans to get these websites back online?



- Why do you keep changing websites?



- In an email you sent me information regarding mining. Is this information being published to a wider audience?



- How many Pipcoins are in circulation?



- How many were mined by third parties and how many sold by yourself at R100?



- Is it possible to transfer Pipcoins out of dc-ex.com?



- On pipchain.info you are now selling coin mining equipment and also contract coin mining. The contract-mined coins are over R100 each, yet they are trading at under R1 on dc-ex.com. Surely this is misleading?

This article originally appeared in the 20 October edition of finweek. Buy and download the magazine here.