Crypto Firm's R13.3 Million Freeze Survives Court Challenge Against Central Bank

R13.3 million frozen. That is the immediate financial reality at the centre of a dispute between Kastelo, a South African crypto arbitrage operator, and the South African Reserve Bank, with the broader allegation pointing to suspected unlawful capital flows of approximately R4 billion.

Kastelo lost its recent High Court challenge to a blocking order the Sarb imposed on its Access Bank account. The Reserve Bank alleges the company contravened exchange control regulations; Kastelo rejects this claim entirely, and the allegation remains untested in court. The company has not yet indicated whether it will appeal.

Additional reference context is available at https://www.moneyweb.co.za/news/south-africa/kastelo-claims-reserve-bank-jumped-the-gun-in-freezing-its-crypto-arbitrage-business/.

The case carries political weight beyond the balance sheet. Two of Kastelo’s founders and indirect shareholders are Nicholas and Mark Burke, with Mark Burke serving as the Democratic Alliance’s finance spokesperson. The Sarb cited the suspected R4 billion in unlawful capital flight in its court papers, a figure that has drawn scrutiny from opposition parties calling for Burke to be relieved of his parliamentary duties. Kastelo countered in its filings that all money returned to South Africa, with no permanent externalisation occurring.

Kastelo’s business model centred on purchasing crypto assets, including bitcoin and stablecoins, overseas and selling them in South Africa for profit. The company reported that 97 percent of its revenue and capital derived from these arbitrage operations. It ceased offering the service in November 2025, though the arbitrage premium has continued to decline, suggesting broader market forces beyond the company’s own exit. The Reserve Bank has made no claim that Kastelo’s roughly 900 clients lost money; its case rests solely on alleged regulatory violations.

The operational mechanics reveal where the dispute sharpens. Thousands of South African investors accessed the market using their R2 million annual special discretionary allowance (SDA), which requires no permissions, and the R10 million foreign investment allowance (FIA), which requires tax clearance from the South African Revenue Service. Kastelo’s supplementary court affidavit broke down a typical 2025 trade: a 0.65 percent gross profit, with 0.44 percent deducted for transaction, banking and exchange costs, leaving 0.21 percent (roughly R2 000 from an R950 000 SDA) for the client. Kastelo earned income separately through rebates negotiated with Access Bank.

The Reserve Bank characterises that R2 000 payment as compensation for using the client’s SDA, not a genuine investment return. Kastelo disputes this, describing it as exactly that: the client’s return on a legitimate trade. The company acknowledges occasionally supplementing shortfalls from its own rebate income to stabilise outcomes and maintain client confidence. The Sarb views this practice as an unlawful inducement.

Meanwhile, the Sarb contends that Kastelo supplied trading capital through loans, meaning the company, not the client, retained effective control of the positions. The regulator also claims clients were recruited with promises of R2 000 payments without requiring capital, time or knowledge, and that some clients were unaware of foreign bank accounts, forex transactions or crypto trading conducted in their names. The Reserve Bank further argues that a treasury outsourcing company may only act as an intermediary, not a principal.

Kastelo holds multiple licences: Category I and II financial services provider status, registration as a crypto asset service provider, authorisation as a treasury outsourcing company, and credit provider registration. Where loans were extended, the company says these were formally documented and subject to National Credit Act assessments. Kastelo argues the Reserve Bank conflated transaction volume with unlawful capital flight, insisting clients used their own FIAs under discretionary mandates, received trade profits, and bore associated risks.

Kastelo’s procedural grievance is pointed. The Reserve Bank imposed the blocking order without prior notice or opportunity for response, arguing that advance warning would undermine the order’s purpose. Kastelo contends the Sarb acted before Access Bank delivered its forensic report, and protests reliance on anonymous whistleblower evidence, allegedly sourced from competitors.

On the R4 billion figure itself, Kastelo argues that transaction volume does not establish illegality and that the Sarb failed to explain how it calculated the number or identify which specific transactions were unlawful. The Sarb responded that Regulation 22C permits blocking funds to preserve amounts potentially available for forfeiture, and that freezing R13.3 million was proportionate given the scale of suspected contraventions. The High Court judgment confirmed the regulator needed only “reasonable grounds for suspicion,” not proof, to act.

The dispute ultimately turns on a single question of economic substance: did Kastelo genuinely invest for clients, or did it use loans, mandates and offshore accounts to control thousands of individual FIAs for its own benefit? The Sarb told Moneyweb that when funds are blocked on reasonable suspicion of regulatory breach, the investigation continues and affected parties receive opportunity to make representations before any forfeiture decision is published in the Government Gazette. The Reserve Bank declined further comment, citing ongoing court proceedings.

The case arrives as South Africans increasingly debate whether exchange controls remain fit for purpose, particularly given the Reserve Bank’s stated aim to protect currency value in service of balanced and sustainable growth. Whether Kastelo pursues further legal action, and what Access Bank’s forensic report ultimately concludes, will determine how much of that R13.3 million moves, and in which direction.