He hides in certain places in Academia AF 4XX - there's a map with his possible locations in the FAQ section. The first time he will always be in the Headquarters building, close to the door that leads to Hope.
Remember that you cannot see him - he only appears as a shimmering Paradox silhouette at first and the moogle doesn't react to him, so you'll need to keep your eyes open. When you spot him, use the Moogle Magic and bam.
The people may sometimes randomly say that they saw Cryptic either in the Avenue or the old town district. I am never sure which one is which as I confuse left and right...
Cloud and Sephiroth - battling each other since '97 for your amusement Give it a rest already!