Category Archives: fraud

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US Department of Justice Opens Criminal Case into Bitcoin Price Manipulations

The US Department of Justice (DOJ) has opened a criminal investigation into whether traders are manipulating the price of Bitcoin and other cryptocurrencies, according to a report published Thursday by Bloomberg.

The most notable concern coming from the DOJ relates to a suspected potential that the volatility of the market creates an opportunity for investors to push price valuations in a way to favor themselves.

Additionally, authorities feel cryptocurrencies are particularly susceptible to fraud due to a concern over the lack of regulations, as well as skepticism that every exchange actively pursues those deceiving the rules of the platform.

Spoofing and wash trading

People familiar with the situation told Bloomberg that the DOJ is specifically looking into spoofing and wash trading from colluding traders. These two illicit tactics are forms of market cheating that have been combated by regulators in the futures and equity markets for years.

Spoofing involves a trader submitting a number of orders, then cancelling them once they are satisfied they have affected the prices enough in the desired direction.

Wash trading involves a cheater creating trades with themselves to create a false impression of market movements, which influences others to move in a specific way.

It was reported that both Bitcoin and Ether are being investigated for this, but the DOJ declined to comment on the case at Bloomberg’s request.

Protecting investors

After a Bitcoin price surge last year spanning between USD 1,000 and USD 20,000, the cryptocurrency industry has found a host of new supporters and investors. The number of ICOs has also skyrocketed, with a growing number of people aware and involved with altcoins.

Regulators across the globe are now seeing the industry as a growing concern, as investors enter the market without a clear understanding of what cryptocurrencies are, and the risks involved.

Cryptocurrency exchange platforms operate internationally, with many remaining unregistered with any government agencies, leading to a heightened fear of fraudulent activities in general.

Of course, the vast majority of platforms maintain there own strict security measures to protect users and are willing to pursue fraudsters, if not only to protect their own reputation.

 

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First Large-Scale Crypto Jacking Strike in India Targets Conglomerate

The third largest conglomerate in India, Aditya Birla Group, was targeted in what is believed to be the first large-scale crypto jacking attack of its kind in India.

 Over 2,000 computers affected

Hackers were able to gain access to over 2,000 computer systems belonging to various companies governed by the Aditya Birla Group, taking over the computers’ terminals and processing power to illegally mine cryptocurrency.

While the attack was first detected last month, reporting from the Economic Times notes that it took just a few days for the malware to infect areas of the manufacturing and additional services belonging to the Aditya Birla Group.

A person familiar with the attack spoke to the Economic Times, describing the attack as one in which ”the primary intention of the hackers is not to steal information and cause business disruption. Rather, they hijack the target’s computers and tap the power supply to the organization to mine crypto coins”.

Addressing reporters, a Birla Group spokesperson said: ”Recently, the advanced threat detection systems of our Group alerted us of suspicious activity on some desktop systems. Based on this, our internal team immediately carried out an investigation and deployed countermeasures to isolate and eliminate the cause of this activity.”

Bigger enterprises mean bigger gains for hackers

The Birla Group spokesperson was able to assure the public that with the comprehensive investigation nearly being complete, the hack was not subject to any data loss. Hackers were instead able to mine what has been described as a substantial amount of Monero.
It is common for hackers to target larger establishments, as they are able to provide the potentially largest gains. Universities are known to be another target rich environment hit by hackers.
It is important to note, however, less than 1% of Bitcoin transactions involve illicit activities. While in this case, Monero was the cryptocurrency mined in the illegal process, there is no specific data indicating how frequently it is involved with fraudulent activities.

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12 Japanese Arrested in Fake Cash for Bitcoin Fraud

An alleged scam in Japan has resulted in the arrests of 12 individuals accused of defrauding a Tokyo-based businessman of 190 million Japanese yen (JPY) in Bitcoin (approximately USD 1.8 million).

An investigation between Tokyo and Hyogo police revealed that in July 2017, a Tokyo-based marketing executive was approached by a group of “traders” who offered him JPY 200 million for the equivalent of JPY 190 million yen in Bitcoin. After the deal was carried out between the conmen and the businessman’s agent in a Tokyo hotel, the victim suggested that he wanted to trade covertly to avoid paying commission fees while swapping crypto-to-fiat at an exchange.

The seller then transferred his cryptocurrency to an exchange wallet account in Yokohama, although the fraudsters argued that they didn’t receive the Bitcoin. It turned out that the suitcase exchanged mainly contained false banknotes. Two days later they attempted to convert the stolen Bitcoin into JPY 174.2 million yen through the Yokohama exchange.

Seven men, all in their 20s, were arrested by police last week including the alleged mastermind, 24-year-old Kenta Higashi.

Japan has warmed to Bitcoin in a big way in recent years and legislation now acknowledges it as a legal payment method, despite the Bank of Japan’s ‘Let’s think about cryptocurrencies‘ statement where the bank warned about the likelihood of Bitcoin theft. Despite some notable thefts in recent years, this hasn’t deterred traders. Individual cryptocurrency traders in Japan now exceed three million according to the country’s Financial Services Agency (FSA) figures just released.

Despite frequent incidents of investor fraud and the USD 500 million hacking of a Japanese crypto exchange earlier this year, the country still emerges as a Bitcoin haven due to recent supportive regulatory legislation introduced by the government.

Japan has previously suspended operations of several crypto exchanges on security concerns, although individual groups such as the “Tokyo 12” preying on the vulnerability of a single victim are harder to control.

 

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Briton Extradited from Morocco over Alleged $36 Million Bitcoin Fraud

British national Renwick Haddow, 49, has been charged with two counts of wire fraud and extradited from Morocco to the US.

The US Department of Justice charges are connected to two fraudulent startups allegedly defrauding investors of more than USD 36 million.

Haddow was originally charged in the US in June 2017 and arrested in Morroco the following month. Geoffrey Berman, the US Attorney for the Southern District of New York, and William Sweeney Jr, assistant director-in-charge of the FBI’s New York office, reported that Haddow had been extradited from Morocco and is scheduled to appear in a New York court on Friday.

According to Attorney Berman, “Haddow made material misrepresentations… about the management, operations and historical performances of the companies.”

One of the startups under investigation, the ‘Bitcoin Store’, was supposedly led by CEO ‘Gordon Phillips’, who was said to have received a master of science degree in finance from Yale and to have previously been head of global currency and options at HSBC. The FBI investigation showed that neither Yale nor HSBC had any records for Phillips.

According to Haddow, the Bitcoin Store had generated sales of USD 7.6 million whereas the firm’s bank account showed a balance of only USD 500, according to the investigation.

The US Securities and Exchange Commission (SEC) originally filed charges against Haddow last year for misleading investors. It reported that the Briton had claimed to have had an “experienced team of leading investment professionals” behind the company. The Department of Justice confirmed that “he alone was the brains behind the bitcoins store” and that the “experienced team” was Haddow’s own fabrication.

The Moroccan ministry of justice originally held Haddow to investigate the Bitcoin Shop, Bar Works, and a third startup, In Crowd Equity. He faces jail of up to 20 years for each of the charges.

Morocco’s foreign exchange authority has stated that the use of cryptocurrencies within the country can lead to penalties under existing rules, although the Moroccan exchange regulator, along with the Central Bank of Morocco, state that they will continue to regularly monitor the development of cryptocurrencies around the world.

 

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