Following a long bear market at the end of 2018, cryptocurrencies started to recover in value during the first quarter of 2019. Bitcoin has seen an 11% rise, and altcoins such as BNB, XTZ, BAT, and ONT have doubled in price.
This renewed interest in cryptocurrency inevitably attracted cybercriminals; as a result, the first three months of 2019 saw many scams and other fraudulent activities which targeted virtual currencies. Below is a list of five high profile cases ranked by the amount stolen.
#5: $18.7M Stolen in a South Korean Ponzi Scheme
Investigators from South Korea have applied AI mechanisms to uncover a multimillion-dollar ponzi scheme that defrauded over 56,000 investors. The victims were mainly new to crypto trading, with the majority being in their 70s. The unlisted M-token was promised to grow 600%, which is what lured investors in.
This case proved the usefulness of machine learning for crypto investigators. The algorithms were trained to detect keywords related to unrealistic promises and members’ incentive schemes, which are typical of multi-level marketing. This technology has the potential for a wider application.
#4: $30M Scammed in a Canadian ICO Fraud
K.P. Hobbs and L.A. Cheng, a couple from Canada, are facing a lawsuit from the B.C. Civil Forfeiture Office in Canada based on the allegation that they raised $30 million through an ICO fraud.
They launched a FUEL token, and they convinced investors that it would be used for future products and grow in utility and value. However, the operation ended with the appropriation of the investors’ funds for personal use, including luxury expenses such as the acquisition of a townhouse in Coal Harbour, the purchase of two Range Rover SUVs, and a multi-million dollar gambling spree.
#3: $51M Scammed in a Taiwanese Ponzi Scheme
In Taipei, seven men were accused of defrauding over 1,000 investors of $51 million. Users entrusted their funds to them based on the promise of 335% in yearly returns. Soon, the investors stopped receiving yields, and they ended up defrauded.
This case will most likely lead to the imprisonment of these men. Additionally, it has inspired the Taiwanese Cabinet to introduce amendments to the Money Laundering Control Act and the Terrorism Financing Prevention Act, with a view to better regulate crypto operations.
#2: $71.6M Scammed in an Indian ICO Fraud
The beginning of 2019 marked the fourth arrest in the Mumbai scam case, which saw the theft of $71.6 million. Amit Lakhanpal, the owner of MTC (Money Trade Coin) is suspected of running a fraudulent ICO. In fact, it had never been listed on any known exchange, yet this did not discourage investors who were promised high returns.
Amit Lakhanpal is suspected of artificially inflating the price of his tokens to attract investors, which resulted in them losing millions. He also misled investors into believing that the royal family of Dubai had endorsed his project.
#1: $114M Scammed in Sofia-Based Illegal Trading Operation
The police of several European states, namely Germany and Austria, have uncovered a criminal group operating illegal binary options and crypto trading platforms in Bulgaria and the Czech Republic. Users of Optionstars, XTraderFX, Cryptopoint, SafeMarkets, OptionstarsGlobal, and Goldenmarkets were lured in by attractive rates and eventually were defrauded of $114 million.
These cybercriminals controlled a number of affiliate companies, including a contact center and software providers. The police raided 21 companies and 4 homes in Sofia before they discovered all of the elements of this crime. As a result of this criminal operation, the alleged mastermind behind the scam was arrested, and six-figure sums, along with terabytes of data, were sequestrated.
The appearance of new cases of crypto fraud proves that there will always be investors tempted by unrealistically high returns. In fact, all of the biggest cases of fraud during the first quarter of 2019 involved either misleading information about the company and its products, or multi-level marketing schemes. However, in some cases, these happenings have helped to improve the current state of crypto security. In Taiwan, the $51 million fraud led to the introduction of amendments to AML and CFT laws. In South Korea, new software was successfully tested for detecting crypto ponzi schemes.
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