Category Archives: Scam

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 2017 Bad Year for Aussie Crypto Scams as US Launches ‘Cryptosweep’

The Australian Competition and Consumer Commission (ACCC) announced on Monday that consumers lost more than USD 2.1 million to cryptocurrency scams last year, CoinDesk reported.

Of this figure, the ACCC reported, consumers lost approximately USD 100,000 per month between January and September of 2017. These losses increased in December to USD 200,000 when Bitcoin price rose to nearly USD 20,000, recording losses of more than USD 700,000. The commission noted that these figures showed a correlation between the number of scams and the price of Bitcoin.

The common cause of consumer losses was due to scams involving fake ICOs, cryptocurrency pyramid schemes, and ransomware payments.

Although the figure is high, it was noted that scams overall last year Australians lost more than USD 340 million, with USD 64 million being lost to investment scams specifically last year.

Cryptocurrency fraud is by no means limited to Australia, with fraud occurring in all countries which have a crypto market. In North America, seven scams and hacks last year netted around USD 490 million of consumer funds for the criminals. The Wall Street Journal has reported that of the 1,450 ICOs it reviewed, 271 had “red flags that include plagiarized investor documents, promises of guaranteed returns and missing or fake executive teams”.

The North American Securities Administrators Association (NASAA) has launched its own task force to attempt to clean up the crypto space in the US and Canada, primarily by conducted thorough investigations of ICOs and cryptocurrency related products, according to CoinDesk.

The investigation, labeled ‘Operation Cryptoweep’ according to statements, has involved to date “nearly 70 inquiries and investigations and 35 pending or completed enforcement actions since the beginning of the month”.

The Texas State Securities Board (TSSB) conducted its own survey on cryptocurrency crime recently in an investigation involving 32 cryptocurrency investment plans over four weeks.  The report indicated that almost two-thirds of these promoters did not give investors a physical address and that five out of the 32 promoters did not disclose any investment risks, as well as the risk of cybersecurity threats and hacks, and instead simply promised gains of up to 40% every month.

Joseph Rotunda, the TSSB’s Enforcement Division director, commented that “the market for cryptocurrency investments is saturated with widespread fraud, and our work is only revealing the tip of the iceberg”.

 

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Founders of Tea-Backed Cryptocurrency Arrested in China For Fraud

The founders of Puercoin, a cryptocurrency that claims to be backed by Pu’er Tibetan tea, have been arrested by Chinese authorities. They have been charged with defrauding 3,000 Chinese investors out of $47 million.

Shenzhen Pu Yin Blockchain Group Company Ltd. claimed to have billions of dollars of tea in stock to back Puercoin. Chinese police raided their offices and found very little tea and barely anyone working there, the boss and most of the employees had abandoned ship.

Roughly one month ago the State Market Supervision Administration announced that the company was engaging in illegal advertising by seducing investors with false promises. 1.2 million yuan of fines were imposed by the Shenzhen Market Inspection Bureau in 2017 when it was discovered that the company was making false claims in its advertising that its cryptocurrency was backed by tea.

Each Puercoin was supposed to represent a contract giving ownership of a certain amount of Pu’er Tibetan tea. If this were true it would provide an easy way for investors to buy and sell the tea with a digital asset, which has potential to enhance the marketplace by streamlining the trading process.

It is possible to tie a digital asset to physical goods, perhaps by labeling each unit of tea and storing the hash of that label in a blockchain, but this requires fully trusting the company that is storing physical goods. There is no way to guarantee that a company is telling the truth in this situation, it is easy to mislead investors that the physical goods are in storage and that they can redeem their digital assets for the physical asset. In this case the company was found to have a relatively small amount of tea, and was lying about their massive reserves.

Puercoin could be traded on the exchange jubi.com. According to police the founders of the company massively manipulated the price of their coin by using funds invested to drive the price up 2000%, from 0.5 to 10 yuan. This manipulation of the market attracted more investors and is considered illegal in China.

Investors also had the option of locking up their Puercoin for up to 12 months in exchange for a return of 1% per month. While it is feasible that a 1% return could be made per month, especially since cryptocurrency markets have been rising long term, it is illegal in China to make claims of guaranteed returns like this. It is considered false advertising.

The actions against Puercoin are part of a broader effort by Chinese law enforcement to bring fraudulent cryptocurrency activity to an end.

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Centra Tech Founders Indicted by Grand Jury

The Attorney General of the Southern District of New York has announced that the founders of the cryptocurrency-based company Centra Tech Raymond Trapani, Sohrab Sharma, and Robert Farkas, have been indicted by a grand jury. This essentially means that charges against the founders have been formalized and the case will proceed to trial.

Centra Tech was developing a credit card which streamlined the process of spending cryptocurrency. Users could deposit their coins in an account linked to the credit card, and then when they want to make a purchase it works like a normal credit card by converting the cryptocurrency to USD.

Famous heavyweight boxer Floyd Mayweather had endorsed Centra Tech and put some posts on Instagram and Twitter showing how he was going around town buying things with the Centra Tech card, but these posts have since been deleted.

In order to raise money, Centra Tech released their own cryptocurrency in an initial coin offering (ICO) that raised over USD 30 million. ICOs are quite typical in the cryptocurrency world and usually occur without anyone being arrested, but where Centra Tech went wrong is they claimed to have partnerships with Visa, MasterCard, and Bancorp. This claim resulted in substantial investment, especially since Centra Tech used celebrity endorsements and glossy marketing materials to make themselves seem legitimate.

This attracted the attention of the Securities and Exchange Commission (SEC), which discovered that Centra Tech had no partnership with Visa, MasterCard, or Bancorp. The SEC halted the ICO and charged the founders with orchestrating a fraudulent ICO. They also charged Centra Tech with selling unregistered securities.

It is up for debate whether a cryptocurrency ICO counts as selling securities, but in this case, the SEC has decided the Centra Tech token does. The definition of a security is a financial instrument that holds monetary value, which is quite broad and could theoretically mean that any given cryptocurrency is a security. It is illegal in the United States to sell securities without registering with the SEC.

The Justice Department issued its own charges against the founders for conspiring to commit, and the commission of securities and wire fraud in connection with a scheme to induce victims to invest more than USD 25 million in investments through material misrepresentations and omissions.

The founders of Centra Tech were arrested prior to the Grand Jury Indictment and are sitting in jail until the trial is complete. Approximately USD 60 million of the founders’ money has been seized by authorities.

 

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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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$700K in Bitcoin Sequestered by London Police in Hacking Inquest

In a recent case involving fraudulent online activity, the London Metropolitan police conducted Scotland Yard’s first cryptocurrency seizure, a confiscation totaling USD 700,000 in Bitcoin.

As reported by USA Today, the perpetrator, 25-year-old Grant West, pleaded guilty in court December last year to conducting cyber attacks on fast-food outlets, gambling shops, supermarkets, and mobile phone companies. Investigators working on the case claim that he was responsible for cyber attacks on over 100 companies between July and December 2015.

Often, West’s criminal activities played out via phishing emails that lured suspects into sharing their personal and banking information with him.

West, who went by the online pseudonym ‘Courvoisier‘,’ reportedly used the dark web to sell passwords and credit card numbers that he acquired through the hacks. His proceeds from the illegal sales were converted into Bitcoin.

The arrest of West was made on a train by British police. Law enforcement was able to access his online cryptocurrency wallets through discovering their passwords on the unlocked laptop he was using at the time of his arrest. The funds were successfully sequestered.

A British court said Wednesday that West’s sentence would be given on 25 May. The trial also found his girlfriend, Rachael Brooke, an accomplice to the crimes. While she was sentenced to just two years of community service, it is expected West’s sentence to be far more severe.

Criminal activity and crypto

Speaking out on incidents involving online fraud, police investigator Mick Gallagher noted what he found a critical element to West’s arrest: ”These people generally feel they can operate with impunity, that they can’t be touched. We have now debunked that.”

Some criminals believe that Bitcoin can offer them full anonymity, but investigators are frequently able to track the movement of cryptocurrencies. Even if they cannot identify the owner through the transactions themselves, tracking a publicly available trail of transactions on the blockchain may eventually lead them to the perpetrator.

While it may seem like this incident is more bad press for cryptocurrencies, less than 1% of Bitcoin transactions actually involve illicit activities. Indeed, it is valuable for cryptocurrency traders to know that should any fraudulent activity be pursued against them, the police are becoming more equipped to deal with these situations and protect peoples’ online funds.

 

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Texas Securities Board Issues Cease-And-Desist Orders for Two Exchanges

The Texas State Securities Board (TSSB) has served emergency cease-and-desist orders to two cryptocurrency companies that it believes are likely to be operating scams, BTCRUSH and Forex EA & Bitcoin Investment LLC.

BTCRUSH is a website based in the United Kingdom purportedly run by Jaylon Cross, Bruce Rodgerson, Robin Lozinski, and Thomas Johnson, likely to be aliases. They offer cryptocurrency mining investments that pay 4.1% daily on whatever amount a user deposits, with profits paid out every minute.

Such fast profits are not possible from cryptocurrency mining, indicating that BTCRUSH is not a real cloud mining site. It has all the indications of being a classic Ponzi scheme where users are being paid profits from deposits of other users, which inevitably ends in a panic where lots of users try to withdraw their cryptocurrency but cannot since the money isn’t really there.

Forex EA & Bitcoin Investment LLC is a company based in New York City that claims to be run by likely aliases James Butcher and Richard Dunn. This cryptocurrency company offers 1,000% returns in 21 days, supposedly through profits made via the forex and cryptocurrency markets. While it is theoretically possible to make such profits trading cryptocurrency, it is impossible to do that consistently. The company goes as far as promising money will be refunded if there is any loss.

BTCRUSH and Forex EA & Bitcoin Investment LLC must immediately stop offering investment services to the citizens of Texas after receiving the cease-and-desist order. Violating this order can result in a USD 5,000 fine and two years in the Texas State prison. The companies can request a hearing within 31 days to set aside or modify the order.

 

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Richard Branson Says Bitcoin Scams Impersonating Him ‘Worrying Trend’

Virgin Group founder and renowned investor Richard Branson has expressed his concern at the growing number of scams involving Bitcoin that steal his likeness to promote fraudulent activities.

In a post written by Branson on Virgin’s official blog on Thursday, he condemned the scammers for taking advantage of his praise of Bitcoin, and its potential to shake up the international financial system.

Branson wrote: “Some of the most regular and worrying fake stories currently spreading online are false endorsements of Bitcoin trading schemes. While I have often commented on the potential benefits of genuine Bitcoin developments, I absolutely do not endorse these fake Bitcoin stories.”

The scams in question will frequently involve fake news stories that erroneously claim Branson has either endorsed or invested in a specific cryptocurrency, product, or company.

 

richard branson

Such as the above example spotted by CCN, where the article indicates the publishing source as Yahoo. Upon closer look, however, the domain that it directs users to is entirely unrelated.

Similar scams include BitcoinTrader, an example singled out by Branson in the blog post. As reported by CoinDesk, one particular advertisement of this scam poses as a CNN Tech article, complete with a replication of the outlet’s logo and formatting.

While the BitcoinTrader scam is certainly more sophisticated than the above example shared on Twitter, these scams tend to target prospective investors that are less tech-savvy, utilizing the language of ‘get rich quick’ schemes.

Branson noted Virgin’s legal team has been required to deal with hundreds of such fraudulent impersonations online. The company has pressured social media platforms to be more vigilant in recognizing and removing fake stories.

The blog post reads: ”We also contact the social networks where the fake stories are being spread and urge them to take the stories down and do more to proactively stop them appearing in the first place.”

 

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Legal Pathway for ICOs Sought by US Regulators

According to Robert Jackson, a commissioner at the Securities and Exchange Commission (SEC), a solution is needed to facilitate the launching of ICOs within current US securities law.

Speaking to CNBC’s Squawk Box on Monday, Jackson voiced current SEC concerns regarding the need to address ICO fraud, but suggested a legal method for raising cryptocurrency funds might be possible:

“Investors are having a hard time telling the difference between investments and fraud. Down the road, I think we will be thinking about ways to make those investments work consistent with our securities laws.”

There have been other positive voices coming from the SEC in the last few weeks. Recently, Republican Minnesota Representative Tom Emmer at an SEC Division of Corporation Finance meeting suggested that much of the furor over crypto fraud was exaggerated. He argued that regulators assumptions that decentralized networks were only used for fraud and crime, bore parallels to early explorers’ assumptions about Earth.

The US has no desire to follow in China’s footsteps by banning ICOs, but among regulatory bodies such as the SEC, there are clearly ongoing concerns over the protection of consumers, given events of the past few years.

“If you want to know what our markets would look like with no securities regulation, what it would look like if the SEC didn’t do its job? The answer is the ICO market,” Jackson said.

Although the SEC considers most ICOs as securities, and despite several warnings being issued to crypto startups for non-compliance with current rules, there is more than a suggestion of pragmatism in dealing with the issue.

Last month, SEC division head William Hinman suggested that the SEC was “meeting with participants that have these ideas of a token that shouldn’t be regulated as a security” and said that he was working with them on how they should be structured. He pointed out that the US wanted to be pragmatic in support of new technology.

In March, the SEC announced that crypto exchanges which provide ICO token trading solutions had to register with the regulator.

image source https://pixabay.com/en/startup-wall-painter-house-painter-2850272/  geralt

 

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Finance Journo Martin Lewis Targets Facebook for Fake Bitcoin Ads

British financial journalist and TV personality Martin Lewis has announced that he will sue social media giant Facebook over a series of cryptocurrency ads featuring his image and his name.

Lewis, who is taking his case the UK High Court on Monday, claims that at least 50 ads have been released on Facebook endorsing financial products to which he has no connection and has not authorized. Lewis, who has made his name on British TV and in the media for advising consumers how to spend money wisely, ironically is not a cryptocurrency enthusiast, once saying,”Bitcoin is a highly speculative investment. You need to be prepared and think about your attitude to risk before you consider investing.”

The presenter has said that he is “disgusted beyond endurance” with the crypto ads and maintains that Facebook has made no attempt to address the problem:

“It is facilitating scams on a constant basis in a morally repugnant way. If [it] wants to be the champion of moral causes, then he needs to stop its [sic] company doing this.”

According to Facebook, this isn’t the case, arguing,”We do not allow adverts which are misleading or false on Facebook and have explained to Martin Lewis that he should report any adverts that infringe his rights, and they will be removed.”

The statement continued to point out that Facebook was in direct contact with the Lewis team, and was investigating their requests and had recently removed other ads which violated the new company advertising policy.

Facebook has recently introduced a ban on cryptocurrency advertising, but scammers are able to avoid filters that have been put in place. The scammers promote advertising that fools investors into schemes that tap into the burgeoning popularity of cryptocurrency.

The social media giant’s fortunes continue to take a downturn after the recent Cambridge Analytica scandal earlier this month. Lewis has said that should he win the case against Facebook, awarded damages will be donated to charities that fight against scams of this nature.

image source: https://pixabay.com/en/mobile-phone-smartphone-keyboard-1917737/ – geralt

 

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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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