Prior to May 2018, Zimbabwe-based bitcoin exchange Golix was bullish about its future prospects. The startup claimed it had raised $32 million from a token sale and had plans to set up operations in several other African countries. However, more than a year later, the digital asset exchange has had a reversal of fortunes and, after its forced shutdown in Zimbabwe, some of Golix’s former clients are struggling to get their funds reimbursed despite promises and frantic efforts to recover these.

Embezzlement Allegations

Former Golix users now point to possible embezzlement of funds by Golix executives while one investor in the startup blames the hostile operating environment as the reason for the company’s general failure.

Tawanda Kembo was the chief executive officer (CEO) of Golix when it was shut down in Zimbabwe. Bitcoin Africa reached out to him to get his side of the story but he had not responded to our questions at the time of publishing.

However, Bitcoin Africa still managed to contact Taurai Chinyamakubvu, an individual who says he was an investor in the company. Chinyamakubvu claimed he is not aware if client funds had been reimbursed or not since he was not involved in the day to day affairs of the crypto startup.

“On funds, you can check with the CEO, he was doing the day to day stuff. I was just an investor,” Chinyamakubvu pushed back when asked if they had recovered client funds that were reportedly locked in banks.

In May 2018, Zimbabwe’s central bank issued a directive that forbade financial institutions from dealing with crypto exchanges. According to Golix, this led to banks blocking access to client funds and the company from using the financial system.

Central Bank Defiance And Crypto Adoption

When asked why Golix had not resumed operations following a High Court ruling that set aside the central bank order, Chinyamakubvu suggested that Golix’s Zimbabwe operations remain hamstrung by the central bank’s reluctance to lift the order.

“They (Reserve Bank of Zimbabwe) did not lift the order they sent to banks. So no bank wants to defy a regulator. But that said, you muddy the water once, that’s enough to change its colour for a while,” he stated.

Chinyamakubvu is convinced that the central bank’s apparent defiance of a court ruling continues to hinder the growth of the crypto space in a country that should be embracing privately-issued cryptocurrencies.

Zimbabwe has been plagued by hyperinflation for the past two decades, which is spurred on by a volatile fiat currency. Critics point to the central bank’s penchant for unrestrained printing of money as the main cause of the country’s currency troubles.

The Golix investor called the central bank’s decision to shut down the crypto exchange ‘retrogressive’.

Ironically, the Reserve Bank of Zimbabwe recently announced the setting up of a committee to study financial technologies such as bitcoin. The regulator now says it wants to come up with what it calls a “National Fintech Strategy.”

Disappeared Client Funds

Bitcoin Africa also reached out to former Golix clients as it tried to establish what happened with their funds. Some did not respond but a few did – although they requested anonymity. One lady, in particular, expressed exasperation with the way Golix has been handling the issue.

“I do not know about others but I still have not been reimbursed. Tawanda (CEO of Golix) has made several promises to settle but nothing has happened,” claimed the lady who preferred to remain anonymous.

She further explained that currently there is nothing noteworthy happening but promised to reveal more details as and when they become known.

Kembo on the Run?

Following the central bank decision to stifle cryptocurrency trading, some crypto traders have gone on to create informal trading platforms using social media networks like Whatsapp, Telegram, and Facebook.

Bitcoin Africa was also able to get access to one such Whatsapp chat group feed wherein clients are discussing strategies of recovering funds from Golix. In a discussion that occurred in July 2019, one member of the group asks fellow members to furnish her with information that includes Kembo’s personal identification number or even a vehicle registration number. This could then be used to help a hired tracing agent to locate him.

It is apparent from the discussions that Kembo has made several promises – including re-payment plans – to reimburse but nothing has happened to date. Adding intrigue to the controversy, this client claims Tawanda told them he had lost the key to the cold storage wallet. Thus, he could not access the bitcoin.

Keys to a crypto wallet are essentially a passcode that grants access to funds and without them, the funds are lost and cannot be recovered.

In the meantime, another post on the same thread suggests that Chinyamakubvu was being disingenuous when he expressed ignorance about the status of client funds. In the post, another member insists that prior to the central bank order, Golix was asked to remove all funds before accounts were closed.

The anonymous member was referring to a part of the central bank circular to banks which states the following:

“Exit any existing relationships with virtual currency exchanges within sixty days of the date of this Circular and proceed to liquidate and restitute existing account balances.”

This central bank circular was issued on May 11, 2018, and Golix seemingly had enough time to exit from banks as well as to reimburse clients.

No Consumer Protection

The anonymous member suggests that since this did not happen, the issue should now be treated as a criminal case.

It is apparent from the rest of the discussion that members were aware of the risks involved with crypto businesses. The central bank had warned the public of risks of dealing with cryptocurrencies and associated businesses prior to Golix’s demise.

Zimbabwe does not have consumer protection laws that specifically deal cryptocurrencies and those dealing with such digital currencies do so at own risk, a point clearly articulated by the central bank circular. Perhaps it is with this in mind that some Golix clients are now pursuing fraud charges against Golix executives.

Lack of legal protection is another factor inhibiting the widespread adoption of cryptocurrencies but that may yet change as the central bank is now having a change of heart.

Bitcoin Africa will continue to follow the events surrounding the alleged exit scam of Golix and update our readers when new information surfaces.