Articles Tagged with cryptocurrency fraud

IMG_0382-300x200An investigation by the Financial and Cyber Crime Group lead to allegations that five individuals had defrauded at least 100 investors through a complex cold-call cryptocurrency investment scheme. This case lead to the theft of over $1.83 million and began in 2017.

According to a recent report by Coindesk, the individuals behind the cryptocurrency scheme went to great lengths to appear legitimate. Victims of the scheme were contacted by a firm called Exmount Holdings Group, which employed a sales staff and offered a professional website. The sales team was responsible for cold-calling victims and convincing them to take part in a cryptocurrency investment.

After investing their funds, victims were able to visit the website and use personal login information to view their account and the status of their investment. Investors were led to believe that their funds were growing successfully and could be withdrawn after a trial period. However, once the trial period had ended, the victims were unable to withdraw their funds and contacting the team behind the firm was unsuccessful.

IMG_0296-300x200On July 15th, a drafted bill was leaked by a tech industry lawyer, Varun Sethi, which proposed the banning of all cryptocurrency with the exception of the “Digital Rupee”. This bill would not become official until it is debated in the 2019 Monsoon session of the Indian parliament, but demonstrates India’s resolve to end cryptocurrency related crimes.

The drafted bill is entitled, “Banning of Cryptocurrency & Regulation of Official Digital Currencies”, and defined cryptocurrencies as “any information or code or number or token not being part of any Official Digital Currency, generated through cryptographic means or otherwise, providing a digital representation of value.”

Meanwhile, the proposal states that a “Digital Rupee” is defined as a digitally issued tender from India’s Reserve Bank, which would be approved by the Central Government for use as a legal currency.

IMG_0064-1-300x206Although Bitcoin continuously tries to shed its turbulent reputation, the cryptocurrency platform watched their 17-month high drop by $3,000 in just twenty-four hours.

In 2017, Bitcoin reached its all-time high of about $20,000. However, has been unable to come close to this number over the past two years. Although Bitcoin has increased by 200% in 2019, its reputation has been anything but steady.

In late June, the cryptocurrency platform reached its 17-month high of $13,485.85, but by the next afternoon, the value dropped to $10,823.

IMG_0239-300x199Patrick McDonnell, 46, of New York, admitted to fraudulently obtaining funds from clients using his investment firm, CabbageTech. According to the lawsuit, McDonnell lured investors to his firm by claiming to have traded $50 million worth of bitcoin for his many clients. However, these claims were false and McDonnell used investment funds for his personal expenses.

McDonnell allegedly referred to himself as the “coyote of Wall Street”, despite his falsified investment history. Last week, he pleaded guilty to wire fraud, stating, “I claimed to invest it in virtual currency and spent it on personal expenses.”. According to the report, it is estimated that McDonnell spent nearly $200,000 of the investment funds he acquired. The indictment further explained that McDonnell provided his clients with false balance statements, which showed that the funds were invested and growing.

McDonnell’s investment firm, CabbageTech, has been barred for its fraudulent activities and McDonnell will likely serve a sentence of up to two and a half years in prison.

According to the Tokenist, the United States Commodity Futures Trading Commission (CFTC) has just filed a complaint against cryptocurrency company Control-Finance Limited and its CEO, Benjamin Reynold. The complaint alleges that the firm misappropriated $147M in Bitcoin.

According to the CFTC, Control-Finance and Reynolds were responsible for defrauding around 1,000 people out of around 22.8M BTC. The victims were requested to deposit their funds on the Control-Finance platform. The company promised returns on their investments. They essentially “guaranteed daily trading profits.” They also promoted themselves as veteran, expert cryptocurrency traders.

The CFTC says that Control-Finance was comparable to a ponzi scheme which operated from May 1, 2017 to Oct 31, 2017. The defendants afterwards closed their social media accounts and the company went dark, running away with around $150M.

IMG_0224-300x207Facebook recently announced the launch of its cryptocurrency platform, Libra, which will operate using a distributed ledger rather than the current wired-based model. While Facebook has invested significantly into the security measures featured on its platform, experts of this industry note that as a brand new cryptocurrency outlet Libra will naturally appeal to hackers looking to introduce new scams or reinvent old schemes.

Cryptocurrency platforms are typically infiltrated by international scammers with the goal to develop new strategies to steal funds or find a way to scam senders out of funds. And with every new cryptocurrency platform comes new opportunities, but Libra is different than its competitors.

Libra was designed to allow app developers around the world to enable their users to use cryptocurrency for sending and receiving various types of payments. This means that the use of cryptocurrency will grow substantially as users who are more unfamiliar with the process join the apps and try out its new functions. For scammers, this represents a more vulnerable market of consumers that may be more likely to fall for new and old schemes through the platforms.

IMG_0096-300x200According to the FBI, financial tension caused by United States sanctions sparked an influx of cybercrime in North Korea. Deputy assistant director of the cyber division at the FBI, Tonya Ugoretz, spoke at an event held at The Aspen Institute regarding the issue.

Many of the cyber attacks involving the theft of cryptocurrency from multiple platforms are suspected to originate from Pyongyang. However, Pyongyang is also suspected of facilitating numerous campaigns in support of cryptocurrency theft and ransomware.

The cyberattacks range from complex global attacks to a long list of small-scale scams and fraud. Many of the more complicated cryptocurrency schemes have also targeted specific exchanges in an effort to manipulate securities in other countries.

IMG_0064-300x206Following 2019 Q1 reports that cryptocurrency fraud amounted to well over $1 billion, two companies have joined forces with the goal to put an end to this growing problem. Wirex offers cryptocurrency services through its banking platform, while Elliptic serves as an anti-fraud and security company. Together the companies are developing “solutions for rapidly detecting fraud and other criminal activity”. But, can they really combat this significant issue?

Stories of cryptocurrency fraud, theft, and scams have been in the news more consistently than ever before. The increasing number of fraudulent activities in this sector comes as a surprise to many given that cryptocurrency is no longer as new and misunderstood as it once was. Yet, Binance is one example where cryptocurrency fraud recently amounted to over $40 million in losses and was undetectable until after the theft of the funds was complete. Binance also suffered severe delays involving their online platform, leaving them offline for numerous days.

Several other cryptocurrency companies have been hit with similar acts of fraud, and each of them has one important factor in common. The theft that occurred on the cryptocurrency platforms was completed prior to any knowledge of the wrongdoing. This has lead many security companies to wonder if there is a solution that would allow cryptocurrency companies to spot acts of fraud before they occur.

blockchain hacking In January of 2019, it was discovered that an online attacker had hacked Coinbase and processed over $1.1 million in what the cryptocurrency industry refers to as “double spends”. However, this is not the only incidence of blockchains being hacked since its increasing popularity on the market. In fact, since 2017 it is estimated that over $2 billion worth of cryptocurrency has been stolen by hackers. But, how have blockchains, which were once deemed as unhackable, become the latest source of fraudulent activity?

Two Documented Years of Hacking Activity

Since 2017, authorities have uncovered billions of dollars worth of stolen cryptocurrency due to online attackers. However, it is estimated that even more funds have been taken during this time. Two groups alone are suspected of profiting over $1 billion combined, but the extent of their reach, as well as others, is largely unknown. As the market for blockchain encryptions becomes larger and larger, it appears as though its vulnerability to hackers is also increasing. This could mean that the fraudulent activity associated with blockchain hacking is just beginning.

Bitcoins exchange operator  Jon E. Montroll has been charged by The Securities and Exchange Commission with fraud for running the operation as an “unregistered securities exchange.”   The operator of  the cryptocurrency investment platform was charged with lying to U.S. regulators to hide the fact that hackers stole more than 6,000 of his customers’ Bitcoins.In its lawsuit, the SEC also accused Montroll of  defrauding users and making false and misleading statements. In addition to failing to disclose the cyberattack on BitFunder, he also sold unregistered securities that purported to be investments in the exchange and misappropriated funds from those investors, the SEC said.

Before the cryptocurrency began to develop, Montroll operated two online Bitcoin services,. facilitated the buying and trading of virtual shares of businesses listed on its platform, while WeExchange Australia Pty. Ltd. functioned as a Bitcoin depository and currency exchange. All WeExchange and BitFunder users’ Bitcoins were held in a common account, according to federal investigators. “Platforms that engage in the activity of a national securities exchange, regardless of whether that activity involves digital assets, tokens, or coins, must register with the SEC or operate pursuant to an exemption,” Marc Berger, director of the SEC’s New York Regional Office, said in a statement.

The U.S. Attorney’s Office for the Southern District of New York also filed a complaint against Montroll Wednesday for “perjury and obstruction of justice during the SEC’s investigation,” according to the statement. Obstruction of justice can carry a penalty as high as 20 years in prison.