ReportWire

Tag: Crypto Scams

  • CertiK Exposes the Underbelly of Fraud Targeting its Brand

    CertiK Exposes the Underbelly of Fraud Targeting its Brand

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    In the face of a rising tide of scams and exploits, even CertiK, a security firm that specializes in comprehensive security for blockchains, smart contracts, and Web3, is not immune. Scammers are targeting users by fraudulently latching on the company’s brand, which is dedicated to ensuring the security of digital assets and decentralized technologies.

    In the latest blog post, CertiK revealed that it is facing a myriad of challenges beyond its primary focus on auditing. Among these challenges are scams that exploit the CertiK brand to spread misinformation and defraud users.

    CertiK’s Struggle Against Brand Exploitation

    One prevalent scam involves phishing sites falsely claiming to have undergone CertiK audits. These fraudulent certifications are used to deceive users into investing in schemes like Wixpool, a fraudulent crypto-mining site. CertiK said it actively reports such sites to hosting providers for takedown, safeguarding users from financial losses.

    Scammers perpetrate exit scams by falsely claiming to be audited by CertiK. The Lymex scam is a notable example, resulting in approximately $300,000 in losses. In its new report, CertiK emphasized the importance of verifying audit claims, as in the Lymex case, where no services were rendered due to failed KYC verification.

    The rise of social media also gave scammers a platform to create fake profiles impersonating CertiK employees. Platforms like LinkedIn witness scammers brokering fake deals, presenting fraudulent investment opportunities, and even offering fake job positions. CertiK warns users to verify the legitimacy of interactions, citing an incident where a scammer on Telegram duped a project owner into transferring funds.

    Bad actors target victims of investment fraud with recovery scams, offering to retrieve lost funds for an upfront fee. CertiK cautions users to be wary of such frauds, emphasizing that its genuine communication is through certik.com. The recovery service, while not guaranteed, involves engaging with relevant parties to retrieve assets potentially.

    Bots on X

    Misinformation and bot activity on Twitter have wreaked havoc for several years, including until Elon Musk took over in October 2022. The subsequent rebranding to ‘X’ has done little to curb the scam bot activity that continues to be a major pain point.

    CertiK also revealed observing instances of brand misuse on X, ranging from harmless inquiries to outright scams. The report highlighted the use of bots interacting with posts related to CertiK’s services, clarifying that the project is not affiliated with these posts and does not endorse them.

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  • Manta Network Faces Allegations of Money Laundering Following Bithumb Listing

    Manta Network Faces Allegations of Money Laundering Following Bithumb Listing

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    Manta Network (MANTA), a blockchain project aiming to expand its reach in the Asian market, has found itself entangled in a controversy surrounding allegations of money laundering following its recent listing on the South Korean exchange Bithumb.

    The controversy emerged when DeFi enthusiast Definalist took to Twitter, suggesting potential misconduct by Manta Network on the day of its Bithumb listing.

    Money Laundering Allegations

    Definalist’s tweet highlighted several suspicious transactions, pointing to a series of concerning events.

    Two million MANTA tokens were transferred to the personal wallet of Manta’s Korean Business Development (BD) representative. They were then deposited into Bithumb’s wallet, representing over 75% of the total circulation volume on the exchange.

    Within five minutes of being listed on Bithumb, MANTA’s price soared to $230, over 100 times its initial price of $2.26. The controversy deepened as the BD representative reportedly engaged in token dumping, swiftly liquidating all two million MANTA tokens at values ranging from 50 to 100 times the initial listing price.

    The proceeds from this rapid sale were then allegedly converted into Ethereum, with a substantial sum of 2,094.7 ETH, equivalent to approximately $5,162,112, transferred to the BD representative’s personal wallet, according to data from Etherscan.

    The severity of the allegations is heightened by South Korea’s reputation for strict regulations on money laundering and real-name financial transactions. If these allegations are proven true, Manta Network could face serious consequences.

    Manta Network’s Response

    In response to the allegations, Manta Network released a statement asserting that part of the Ecosystem/Community funds had been allocated to the Korean BD representative based on the token economic model.

    The project also emphasized its commitment to expanding in the Asian market, particularly in South Korea and Hong Kong. According to a local news outlet, the team is taking concrete measures to establish a branch in South Korea.

    This branch aims to build stronger connections with local projects, understand the unique needs of the Korean market, and seamlessly integrate Manta products into the local Web3 ecosystem.

    Additionally, Manta Network has set up branches in Hong Kong to facilitate collaboration with local developers, entrepreneurs, and other groups.

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  • Michael Saylor Takes Down 80 AI-Generated Deepfake Videos of Himself Every Day

    Michael Saylor Takes Down 80 AI-Generated Deepfake Videos of Himself Every Day

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    Michael Saylor revealed an alarming trend involving the proliferation of artificial intelligence (AI) generated deepfake videos featuring him.

    Saylor disclosed that his team is tirelessly working to remove approximately 80 such fake videos daily, most aimed at promoting various Bitcoin scams.

    Deepfake Videos Promoting Bitcoin Scams

    Saylor reiterated his warning, urging the community, “Don’t trust, verify.”  stating that “the scammers keep launching more.”

    This revelation follows a surge in reports from X users who encountered fake AI-generated videos featuring Saylor promising to double viewers’ money.

    These videos prompt unsuspecting viewers to scan QR codes, directing their Bitcoin to scammer-controlled addresses.

    Amid these recent advancements, it has been reported that Michael Saylor sold a portion of MicroStrategy stock, totaling between 3,882 and 5,000 shares, from January 2 to 10. This move potentially resulted in a profit of nearly $20 million.

    Saylor had initially planned to sell a maximum of 5,000 shares daily from January 2, 2024, until April 26, 2024, totaling 400,000 shares valued at nearly $200 million.

    Deepfake Threat Escalates

    This incident is reminiscent of a similar situation in 2022 when fake videos of Elon Musk surfaced on various platforms, promoting cryptocurrency platforms with enticing returns. The rise in deepfake content has become a cause for concern in crypto. Solana co-founder Anatoly Yakovenko also fell victim to such manipulative videos earlier this year.

    In an interview with The Verge, Austin Federa, head of strategy at the Solana Foundation, expressed concern over the substantial increase in deepfakes and other AI-generated content.

    Jerry Peng, a researcher at 0xScope, added that AI could play a crucial role in creating more realistic deepfakes, posing a significant threat to unsuspecting crypto users.

    U.S. law enforcement officials issued a warning on January 9, stating that advances in AI may facilitate hacking, scams, and money laundering by lowering the technical know-how required for such crimes.

    However, Rob Joyce, director of cybersecurity at the National Security Agency, argued that AI could also aid authorities in tracking down and combating illegal activities more efficiently.

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  • Crypto Hacking Losses Dropped by 51% in 2023, Here's the Total: CertiK

    Crypto Hacking Losses Dropped by 51% in 2023, Here's the Total: CertiK

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    CertiK’s latest report reveals a noteworthy decline in cryptocurrency security incidents in 2023.

    Total losses came down to $1.84 billion across 751 events, marking a 51% decrease from 2022. Moreover. each incident averaged $2.45 million in losses, with the top ten contributing $1.11 billion. Interestingly, the blockchain security firm found that the median loss per incident was a mere $101,132.

    November claimed the highest amount lost at $363,367,327 from 45 incidents, while Q3 dominated with $686,558,472 losses from 183 hacks, scams, and exploits.

    Private Key: Not So Private

    Private key compromises accounted for nearly 50% of total losses, amounting to $880 million. CertiK’s report found that these numbers stemmed from just 47 incidents, representing only 6.3% of total security incidents throughout the year, yet over half of the losses.

    Notably, six of the ten most costly security incidents throughout 2023 were due to private key compromises.

    The compromise of Multichain in July caused a loss of $125 million. Despite asserting decentralization, it was disclosed that Multichain’s CEO had exclusive control over its multi-party computation servers and private keys. The vulnerability came to light with the CEO’s arrest, rendering $1.5 billion in Total Value Locked (TVL) on the Multichain bridge inaccessible to users.

    As such, CertiK has informed users to implement certain private key management practices, which include:

    • Employing multi-signature wallets to distribute control, reducing the risk of single-point failures.
    • Opting for hardware wallets for secure key storage, preventing exposure in plain text.
    • Storing private key backups offline in secure locations like safety deposit boxes.
    • Defining strict access policies to limit key access to authorized personnel only.
    • Safeguarding private keys with strong encryption in secure formats.
    • Regularly audit and monitor key use to detect unauthorized access.
    • Utilizing cold wallets for extended private key storage, minimizing online threats.
    • Educating relevant staff on key management best practices, emphasizing security and confidentiality.
    • Considering Multi-Party Computation (MPC) for secure key sharing without exposing the entire key to one party.
    • Leveraging professional key management services, especially for enterprise-level operations, to ensure compliance with industry standards.

    Other Highlights

    Meanwhile, Ethereum emerged as the leader in losses, as per CertiK’s findings in terms of blockchains. The report indicates that Ethereum experienced losses totaling $686 million, spanning 224 incidents, averaging around $3 million per occurrence.

    In contrast, BNB Chain, despite encountering 387 security incidents, reported significantly lower losses at $134 million, highlighting a notable contrast with Ethereum’s figures. Moreover, the challenge of cross-chain interoperability continues to be a significant concern within the crypto industry. The blockchain security firm observed that security breaches impacting multiple blockchains resulted in losses of $799 million.

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  • Major Taiwan-Based ACE Exchange Refutes Fraud Allegations

    Major Taiwan-Based ACE Exchange Refutes Fraud Allegations

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    ACE Exchange, one of Taiwan’s largest crypto trading platforms, is reportedly under investigation for alleged fraudulent activities, with local authorities estimating the value of the fraud to be over $32 million.

    However, the company clarified that its employees were not involved in the alleged fraud case.

    ACE Exchange Founder Arrested for Fraud Allegations

    According to local news outlet Liberty Times, Taiwanese police arrested the founder of ACE Exchange, David Pan, and 13 other suspects said to be employees of the firm for reportedly promoting worthless cryptocurrencies to investors for three years.

    Pan, along with Lin Nan, who appear to be the masterminds, told investors through various social media that these tokens will be listed on popular local and foreign crypto exchanges as a way to make them seem credible, according to the report.

    They also allegedly deceived unsuspecting victims into believing that the purchased cryptocurrencies would bring huge returns. However, the promoted tokens either plummeted in value or were no longer in circulation.

    Meanwhile, the police were able to arrest Pan and the 13 suspects following multiple raids and seized NT$ 111.52 million ($3.6 million) from Lin’s residence.

    Authorities also confiscated crypto assets worth NT$ 108 million ($3.4 million), with the total value of asset seizures above NT$200 million ($6.4 million). The report further stated that the police believe the level of fraud by Pan and Lin for three years stood at an estimated NT$ 1 billion ($32 million).

    ACE Exchange Says Arrests Reports Inaccurate

    Following news of the fraud case, ACE Exchange released a statement saying its employees were not arrested by the police while stating that the issue is related to some listed cryptocurrencies in 2019 that “were involved in illegal activities.”

    “Basically, ACE is cooperating with the investigation as a witness. Some media reported that our employees were involved in the case, which is not true. We have sent a letter to the media to correct it.”

    The company also said it would delist the MOCT/TWD trading pair from its platform on Jan. 8, 2024. ACE added that the firm carries out a regular “market review process” for coin listings and will delist tokens that do not meet the requirements.

    ACE Exchange was founded in 2018 and is one of Taiwan’s three biggest crypto platforms.

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  • Uniswap Scare: CertiK's Hacked Account Spreads False Vulnerability Claim

    Uniswap Scare: CertiK's Hacked Account Spreads False Vulnerability Claim

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    Prominent blockchain security firm CertiK’s X account (previously Twitter) was hacked on January 5th. The compromised account, with a follower count of 342,900, stole crypto from users’ wallets through carefully disguised phishing links.

    One of the links posted falsely asserted that a vulnerability had been identified in Uniswap’s router contract. The misleading tweet urged users to visit a fake RevokeCash page, claiming it would enable them to reverse any vulnerable approvals.

    • The legitimate Revoke team has since verified the falsity of the message, confirming that CertiK’s X account was compromised and is sharing a link to a fake Revoke website. It further clarified that the earlier claim of Uniswap being compromised was untrue, as propagated by the phishing attempt.
    • The CertiK team has issued a brief statement regarding the matter, indicating that they are actively investigating the compromise. They have also advised users to avoid engaging with any posts until the security of the account is confirmed.
    • This isn’t the first time that one of CertiK’s social channels was hacked.
    • In fact, its official website briefly included a Discord link in November that redirected users to a deceptive server containing malware. Despite this discovery, CertiK has not made any public statements about the incident.
    • Phishing attacks have wreaked havoc in the digital assets space, with several wallets being drained after clicking on similar fake links through dubious X accounts.
    • Earlier this week, Bill Lou, the CEO and co-founder of Nest Wallet, revealed that he had suffered a phishing attack, resulting in the loss of 52 stETH, valued at $125,000.
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  • US DOJ Indicts Two Men for Perpetrating $25M Crypto Ponzi Scheme

    US DOJ Indicts Two Men for Perpetrating $25M Crypto Ponzi Scheme

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    The United States Department of Justice (DOJ) has indicted two men for perpetrating a crypto Ponzi scheme that defrauded investors of approximately $25 million.

    According to a press release from the Justice Department, 51-year-old David Gilbert Saffron of Australia and 52-year-old Vincent Anthony Mazzotta Jr. of California operated a fraudulent crypto investment scheme that lured victims with false promises of high returns.

    DOJ Charges Two Men for Operating Crypto Scheme

    Per court documents, Saffron and Mazzotta allegedly presented their scheme to investors as programs that used artificial intelligence automated trading bots to trade assets in the crypto market.

    The duo promoted the programs under several names, including Bitcoin Wealth Management, Cloud9Capital, Omicron Trust, Circle Society, and Mind Capital. Saffron and Mazzotta created a false entity called the Federal Crypto Reserve, which purported to recover lost digital assets to make the scheme seem legitimate.

    The alleged fraudsters created a pattern of inducing the victims to put their money in one of the crypto investment programs and turning around to ask the investors to pay the Federal Crypto Reserve to investigate and recover their losses. Saffron masterminded this strategy by approaching victims under multiple aliases, including David Gilbert and Dave Gabe, under online personas like the Blue Wizard and Bitcoin Yoda.

    Destroying and Concealing Evidence

    While Saffron and Mazzotta continued the scheme, they used $25 million worth of investors’ crypto assets to fund their luxurious lifestyles. They paid for a personal chef, luxury hotel accommodations, private mansion rentals, security guards, and chartered jet flights.

    In addition, the duo conspired to destroy evidence by falsifying records and obstructing official proceedings. They also conspired to conceal the sources and location of victims’ investments by using crypto tumblers and mixers and implementing methods like blockchain hopping.

    The Justice Department has charged Saffron and Mazzotta with conspiracy to commit wire fraud, conspiracy to obstruct justice, conspiracy to commit money laundering, and money laundering.

    While they each face maximum penalties of 20, 10, and five years in prison for several counts, Saffron faces an additional 10-year jail term for allegedly committing felonies while on pretrial release. He was previously charged in September 2019 by the Commodity Futures Trading Commission with engaging in a fraudulent scheme.

    Meanwhile, the DOJ has asked victims of the scheme to reach out via a designated contact line and email.

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  • Stargate Snapshot Platform Hit by Phishing Scam

    Stargate Snapshot Platform Hit by Phishing Scam

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    A phishing scam targeting the Stargate Snapshot platform resulted in significant financial losses.

    A Discord Moderator of LayerZero, the underlying network of Stargate, revealed that a scammer effectively carried out a deceptive proposal vote, utilizing a phishing link to manipulate users into staking STG tokens.

    Scammer Misleads Token Holders in Fake Proposal Vote

    The scam unfolded on the Stargate platform, governed by its token holders, who participate in voting on various proposals concerning the protocol. The scammer exploited this process by creating a fake proposal, misleading over 1,000 users into participating in the vote.

    Following the incident, the scammer was able to profit over $43,000. This figure was confirmed by PeckShieldAlert, a security entity, after closely tracking the scammer’s digital activities and wallet transactions.

    PeckShieldAlert is also actively tracing the scammer’s digital footprint with efforts underway to identify links to the scammer’s wallet addresses and related transactions, which could provide vital leads for further investigation.

    The Stargate platform typically involves a process where STG token holders submit proposals. These proposals, which include Core and Protocol Proposals, undergo a voting process by holders of veSTG voting power. Proposals with positive sentiment can then be submitted to Snapshot for governance votes.

    Rising Trend of Discord Scams

    This scam is part of a growing trend of attacks on Discord. Discord has been increasingly targeted by hackers who exploit its open nature to scam users out of cryptocurrencies, NFTs, and money.

    Notable incidents in the past include attacks on the Discord channels of OpenSea and Yuga Labs’s Bored Ape Yacht Club, as well as the compromise of the Mee6 Discord bot, spreading scam messages across various crypto project channels.

    The most common scams on Discord are phishing, where hackers create fake versions of popular websites, and giveaway scams, where fake accounts promise free products or services in exchange for money.

    This is due to the rising popularity of cryptocurrency and NFT projects, which often use Discord for community engagement, making the platform a prime target for such fraudulent activities.

    After the Stargate Snapshot platform incident, Stargate has yet to issue an official statement. The crypto community is advised to avoid clicking links on their discord or snapshot as we await further developments on the story.

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  • Accused Estonian Crypto Fraudsters Might Not Get Extradited to the US

    Accused Estonian Crypto Fraudsters Might Not Get Extradited to the US

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    A circuit court in Estonia overturned a previous ruling allowing the extradition of two Estonian citizens charged with cryptocurrency fraud and money laundering to the United States.

    According to the court, the Estonian government did not consider certain circumstances before agreeing to extradite the individuals involved in the case.

    New Court Ruling Cancels Extradition Approval

    Ivan Turogin and Sergei Potapenko, who ran a virtual currency mining business called HashFlare, saw their appeals to prevent extradition to the United States approved. The Tallinn Circuit Court annulled the extradition because the government did not make investigations nor verify the condition of the US detention facility.

    Turogin and Potapenko were arrested in Estonia in November 2022 for allegedly running a fraudulent crypto service that resulted in the loss of $575 million for users.

    According to the Department of Justice (DOJ), both individuals allegedly made victims purchase equipment mining contracts for HashFlare and also urged them to invest in a crypto bank called Polybius, which promised to pay dividends to investors.

    However, investigations revealed that the mining contracts were fake, while Polybius was not a bank and did not pay any dividends. Instead, the DOJ stated that Turoguin and Potapenko ran a Ponzi scheme defrauding “hundreds of thousands of victims” between 2015 and 2019.

    “The size and scope of the alleged scheme is truly astounding. These defendants capitalized on both the allure of cryptocurrency and the mystery surrounding cryptocurrency mining, to commit an enormous Ponzi Scheme.”

    Also, the duo reportedly laundered the proceeds of their ill-gotten funds through shell companies to buy luxury cars and real estate.

    Suspects to Get $114,000 in Reimbursement

    Following the arrest of the HashFlare co-founders, the US government sought to extradite the Estonian citizens to the United States. However, the latest development may prevent the handover from happening.

    “In summary, the respondent had failed to take into account some important circumstances when assessing the proportionality of the extradition of the appellants. With this, a significant error of judgment was made, which may have led to a fundamentally wrong decision. The referred investigation obligation and consideration of significant circumstances cannot be carried out by the administrative court instead of the administrative authority.”

    Meanwhile, the circuit court fined the Estonian government 46,365.30 euros ($50,809.65) and 50,710 euros ($55,531) to cover Turogin’s and Potapenko’s expenses.

    In addition, Turogin and Potapenko’s families will get reimbursements of 4,080 euros (~$4,500)and 3,000 euros (~$330), respectively. The circuit court’s decision can be appealed by Dec. 11, 2023.

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  • Hong Kong Investors Fall Victims to Alleged $15 Million Crypto Scam

    Hong Kong Investors Fall Victims to Alleged $15 Million Crypto Scam

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    Following the JPEX fiasco, it appears that another crypto trading platform called Hounax reportedly scammed some Hong Kong investors, causing them to lose over $15 million.

    Meanwhile, some of the victims believe that the city-state regulator’s warning about the platform came after they already locked their money in Hounax.

    Hounax Crypto Exchange Allegedly Disappears With Customer Funds

    About 131 supposed investors between 19 and 78 years old fell victim to an alleged crypto scam by Hounax. According to a report by the South China Morning Post, the Hong Kong police received 88 complaints from the victims on Nov. 25, with the Securities and Futures Commission (SFC) getting 15 on Nov. 27 concerning Hounax.

    While the loss is said to be around HK$120 million ($15.4 million), the victim with the supposed biggest loss, as stated in the report, is a 69-year-old retired woman who invested $HK12 million ($1.54 million) or 10% of the total funds.

    According to one of the affected people surnamed Ng, the alleged scammers behind the cryptocurrency exchange built trust with the unsuspecting victims, and had accomplices who claimed (with demonstrations) that they could withdraw their money from the platform.

    Ng and another investor surnamed Wong said they felt relaxed after realizing that Hounax was listed in Canada and the United States as a “money service business,” and they were able to withdraw their funds in September.

    However, trouble started when investors realized that they couldn’t make withdrawals in November. The crypto platform had an investment deal that required investors to lock up their funds until Nov. 12. But the victims claimed that they could not withdraw their funds after the deadline, causing them to report the matter to the police.

    SFC Warning Came Late, Laments Victims

    The Hong Kong Securities and Futures Commission (SFC) on Nov. 1 included Hounax on its alert list as a “suspicious virtual asset trading platform.” According to the remark by the SFC:

    “The company claims to be a cryptocurrency trading platform that is in business cooperation with a financial institution and a venture capital firm when this is not in fact the case. It appears to target Hong Kong investors with pre-populated +852 field in its user log-in page and “Hounax Hong Kong” social media channels on Facebook, X (formerly Twitter), and YouTube.”

    But some of the people who put their money on Hounax lamented that the regulator’s warning was coming late after they already engaged with the firm and locked up their investments, as stated in the report.

    Also, two Hong Kong lawmakers, Doreen Kong Yuk-foon and Johnny Ng Kit-chong, noted that the SFC’s public warning was not enough, with Ng stating that the warning could have come earlier.

    The latest development comes shortly after the JPEX saga, with authorities receiving over 2,000 complaints from victims who claimed to have lost their funds to the company.

    While several arrests have been made in Hong Kong, Taiwanese police also apprehended the chief JPEX partner in Taiwan following complaints from 10 customers.

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  • 3 Individuals Arrested for Alleged $10 Million Theft and Money Laundering Using Crypto

    3 Individuals Arrested for Alleged $10 Million Theft and Money Laundering Using Crypto

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    United States prosecutors arrested three people for allegedly stealing $10 million from financial institutions and laundering the stolen funds using cryptocurrency exchanges.

    The individuals could each get up to over 80 years in prison if found guilty of the allegations.

    Defrauding Banks and Channeling Proceeds to Crypto Exchanges

    A press release by the U.S. Attorney’s Office for the Southern District of New York announced the arrest of Zhong Shi Gao, Naifeng Xu, and Feo Jiang by the Federal Bureau of Investigations (FBI), for their alleged involvement in an elaborate fraud scheme targeting banks and financial institutions in the United States.

    Gao, Xu, and Jiang reportedly hired Chinese and Taiwanese foreign nationals temporarily living in the United States to open bank accounts in the New York City metropolitan area and other places.

    Control of these accounts was handed over to the three men, who would cause funds to be deposited and transferred between them before proceeding to report unauthorized wire transfers, thereby prompting the banks to credit their accounts.

    Following the receipt of the credited money, Gao, Xu, and Jiang either decided to make withdrawals or convert the funds to crypto and transfer the funds to cryptocurrency exchanges overseas before the banks were aware of the fake unauthorized reports.

    The fraudulent act spanned between 2018 and 2022, with the scammers raking in more than $10 million from the illicit activity. As stated in the press release, the theft affected “nearly a dozen banks and financial institutions.”

    Maximum Jail Term of 82 Years if Guilty

    Gao, Xu, and Jiang are each slammed with one count of bank fraud conspiracy, one count of “conspiracy to commit wire fraud affecting a financial institution,” one count of conspiracy to commit money laundering, and one count of aggravated identity theft.

    While the first two counts each carry a maximum prison sentence of 30 years, the third and fourth counts could come with a maximum jail term of 20 years and two years, respectively.

    Commenting on the development, U.S. Attorney Damian Williams said in a statement:

    “These charges should serve as a warning to fraudsters and cybercriminals who think they can turn to cryptocurrency to hide their identities – together with our partner agencies, we will find you and hold you accountable for your crimes.”

     

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  • OneCoin’s Legal Chief Pleads Guilty to Wire Fraud and Money Laundering Charges

    OneCoin’s Legal Chief Pleads Guilty to Wire Fraud and Money Laundering Charges

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    OneCoin’s head of legal and compliance Irina Dilkinska has pleaded guilty this week to wire fraud and money laundering charges in connection to the crypto scam that deceived and resulted in a $4 billion fraud.

    The DOJ said that the US District Judge Edgardo Ramos accepted Dilkinska’s guilty plea.

    • According to the official press release, the 42-year old Bulgarian citizen pled guilty to one count of conspiracy to commit wire fraud and one count of conspiracy to commit laundering. Each charge carries a maximum potential sentence of five years of imprisonment.
    • The scam dates back to 2014, when Ruja Ignatova, known as “the Cryptoqueen,” and Karl Sebastian Greenwood co-founded OneCoin, a Bulgarian-based company that promoted a cryptocurrency bearing the same name.
    • However, it turned out to be a fraudulent pyramid scheme operating as a multi-level marketing (MLM) network.
    • OneCoin attracted over three million investors, generating $4.3 billion in sales revenue and claiming $2.91 billion in profits between Q4 2014 and Q4 2016.
    • Dilkinska, purported Head of Legal and Compliance for OneCoin, instead of ensuring legal compliance, actively participated in its operations and facilitated money laundering, including transferring $110 million in fraudulently obtained proceeds to a Cayman Islands entity.
    • Greenwood was sentenced to 20 years imprisonment for his involvement in September.
    • Meanwhile, Ignatova faced charges related to OneCoin fraud and money laundering in the Southern District of New York in 2017.
    • She disappeared after traveling from Sofia to Athens on October 25, 2017, and was added to the FBI’s Top Ten Most Wanted List in June 2022, with a $100,000 reward for information leading to her arrest.
    • Ignatova has not been seen publicly since her disappearance, but it was speculated by certain Bulgarian sources that she may have been brutally killed in 2018 at the directive of a local drug lord.
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  • You Won’t Believe How Much Crypto Whistleblowers Made From The CFTC | Bitcoinist.com

    You Won’t Believe How Much Crypto Whistleblowers Made From The CFTC | Bitcoinist.com

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    The CFTC has paid a staggering amount of money to crypto whistleblowers for providing sensitive information that led to the successful launch of several enforcement actions. 

    CFTC Whistleblowers Cash In

    This year, the Commodity Futures Trading Commission (CFTC) received an influx of tips from informants on illegal dealings in cryptocurrency and environmental fraud. 

    According to the annual report on the Whistleblower Program, the CFTC has released $16 million in rewards to whistleblowers this year. The agency granted over $15 million to two informants alone who had been actively involved in major enforcement cases, providing crucial information and assistance to the agency. 

    Collectively, the CFTC has awarded close to $350 million to whistleblowers and has ordered $3 billion worth of enforcement sanctions in cases related to the awards. 

    In an X (formerly Twitter) post released on October 31, Official Account Commissioner at the CFTC, Christy Goldsmith Romeo stated her optimism on the progress the agency has continuously achieved in executing enforcement actions due to the information provided by whistleblowers this year.

    Romeo said that she was well aware of the importance of informants in the agency’s investigation processes. She commemorated the bravery and actions of the informers, stating that whistleblowers were crucial to safeguarding customers. 

    “Very proud of these offices and their outsized results. As a former IG, I know firsthand how important whistleblowers are. The CFTC could not fully protect customers and markets w/o them,” Romeo stated. 

    She added, “As a former Inspector General who knows firsthand how important whistleblowers are, I wholeheartedly support whistleblowers and the CFTC’s Whistleblower Program, and am very proud of the Program’s outsized results.”

    Total market cap at $1.24 trillion | Source: Crypto Total Market Cap on Tradingview.com

    CFTC’s Latest Reports On Crypto Scams

    The CFTC Commissioner has disclosed that a significant portion of the information provided by whistleblowers this year has revolved around cryptocurrency illegalities. 

    Romeo commented on the increase in crypto scams, stating that the rapid growth of the crypto industry has attracted reprobate crypto fraudsters and encouraged illegal activities in the digital asset space. 

    “The majority of the tips received this year involved crypto—an area that continues to have pervasive fraud and other illegality,” Romeo stated. 

    Over the years the cryptocurrency industry has experienced many forms of fraud and scams including Ponzi schemes, phishing attacks, rug pulls, and more, and the CFTC has been active in its pursuit of illegal operations in the crypto industry. 

    One of its most recent investigations was focused on Binance, one of the world’s largest crypto exchanges. The CFTC filed a lawsuit against Binance, accusing the exchange of offering illegal commodities trading products to residents in the United States. Responding to the lawsuit, Binance filed a motion to dismiss the complaint. 

    The regulator’s commissioner stated that many retail customers are under the jurisdiction of the CFTC, and as such, more severe efforts have been taken by the CFTC Whistleblower Program to protect customers during this period of elevated cryptocurrency scam activities. 

    Additionally, Romeo commended the CFTC’s Office of Customer Education and Outreach on its efforts towards enlightening customers on crypto scams. She welcomed CFTC’s newly announced initiative, the Environmental Fraud Task Force, and stated that she was looking forward to favorable results from whistleblowers in these areas.

    Featured image from CNBC, chart from Tradingview.com

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    Scott Matherson

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  • Crypto Halloween Nightmare: MEME, MEMEPAD, And TITANX Tokens Collapse, Traders Lose 100%

    Crypto Halloween Nightmare: MEME, MEMEPAD, And TITANX Tokens Collapse, Traders Lose 100%

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    In a chilling development on Halloween Day, the crypto community was hit with disturbing news as PeckShield, a renowned blockchain security company, revealed a series of rug pulls over the past few hours.

    Rug pulls, a form of cryptocurrency scam, involve sudden and deliberate value drops in specific tokens, accompanied by the perpetrators swapping the native tokens for Ethereum (ETH). The meme coins affected by the rug pulls were identified as MEME, MEMEPAD, and TITANX.

    Multiple Rug Pulls Shake Crypto Market On Halloween

    According to PeckShield’s X (formerly Twitter) post, the MEME token on the Ethereum blockchain experienced a jaw-dropping 100% drop in value. The address 0xBd72…5871 was responsible for swapping a staggering 4,854,740,126,240,000 MEME tokens for approximately 43.68 ETH. 

    It is important to note that the rug pull token shared the same name as the legitimate MEME token, adding to the confusion.

    Similarly, the MEMEPAD token on Ethereum suffered an identical 100% value drop. The address 0xBd72…5871 conducted a swap of 4,854,740,126,240,000 MEMEPAD tokens for around 44.84 ETH. 

    MEMEPAD’s rug pull. Source: MEMEPAD on TradingView.com

    Once again, the fraudulent crypto rug pull shared the same name as the genuine MEMEPAD token, compounding the deceitful nature of the scam.

    Additionally, the TITANX token launched two days ago, October 28, on Ethereum experienced a staggering 100% value decline. 

    The address 0xBd72…5871 executed a swap of 4,854,740,126,240,000 TITANX tokens for approximately 46 ETH. Mirroring the previous instances, the rug pull token masqueraded under the same name as the legitimate TITANX crypto token.

    Fantom Foundation Funds Vanish

    In alarming events, the Fantom (FTM) Foundation finds itself entangled in a harrowing tale of fund drains and swift token swaps. PeckShield has reported two significant incidents involving the Fantom Foundation’s finances, leaving the organization with substantial losses.

    The first incident occurred on October 17, 2023, when wallets associated with the Fantom Foundation were drained of approximately $7 million worth of cryptocurrencies, equivalent to around 4,500 ETH.

    Additionally, on October 26, the Fantom Foundation faced another devastating event. An unidentified entity, the “Fantom Foundation Drainer,” executed a bold move by swapping a staggering 8,087,377.97 DAI for 4,560.52 ETH. 

    The gravity of the situation intensified when the Fantom Foundation Drainer swiftly executed another swap on October 30, converting the 4,560.52 ETH back into approximately 8.3 million DAI within a mere 30 minutes. 

    The Fantom Foundation is now faced with the daunting task of investigating the breaches, identifying the culprits, and fortifying its security infrastructure to prevent future incidents. 

    Crypto
    FTM’s token uptrend over the past 30 days on the daily chart. Source: FTMUSDT on TradingView.com

    Despite recent developments, the native token of the Fantom protocol, FTM, is trading at $0.2388, reflecting a 1% increase in the past 24 hours. 

    Notably, the token has experienced a substantial surge across various time frames. Presently, it has maintained an upward trend, with gains of over 6% and 30% in the seven-day and fourteen-day periods, respectively. 

    Over the year-to-date period, the token has recorded a 5% increase. These figures indicate the token’s positive performance and growth trajectory.

    Featured image from Shutterstock, chart from TradingView.com 

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    Ronaldo Marquez

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  • Only 12 Out of 78 Projects Rugpulled in Q3 2023 Were Audited: Report

    Only 12 Out of 78 Projects Rugpulled in Q3 2023 Were Audited: Report

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    Research by blockchain security firm Hacken has found that most of the crypto projects rug-pulled in the third quarter of 2023 had no audit reports.

    According to the Q3 2023 Security Insights report, only 12 out of 78 examined rug pulls conducted and reported audits.

    Most Rugpulled Projects Are Not Audited

    An independent third-party audit offers a detailed review of a token, identifies the project’s vulnerabilities, and alerts investors. Hacken noted that rug pulls are one of the simplest scams to prevent, as investors can understand their anatomy by taking note of certain patterns. One of them is the presence or absence of an audit.

    Although an independent third-party audit may validate a project’s authenticity, it does not guarantee protection from a sudden withdrawal of liquidity. A project can undergo an audit, publish a report, and still make malicious changes to its tokenomics and smart contract, thereby defrauding users.

    Among the projects rug-pulled last quarter, some were audited but had poor scores. Unfortunately, users ignored the audit results as they believed the fact that the projects were audited was enough. Such was the case with Magnate Finance, a lending protocol based on crypto exchange Coinbase’s Base network, which had an audit that stated that the project’s deployer could manipulate the token. However, users did not heed the findings.

    “Token owners continued to participate in the protocol for almost three months after the audit results. And by the end of August, the deployer had removed liquidity from LPs in multiple transactions. As a result, we got the 2nd largest rug pull this quarter with over $5 million stolen,” Hacken said.

    A Common Pattern

    Users of the decentralized crypto staking platform DeFiLabs had a similar experience to those of Magnate Finance. Blockchain security firm CertiK revealed in an audit that the project had a centralization risk within its contracts, but the warnings raised no concern among users. The platform eventually pulled the rug and vanished with $1.4 million worth of users’ assets.

    Meanwhile, Hacken found a common pattern among rug pulls. Developers of malicious projects usually follow the same five steps: create the tokens, aggressively market them, inflate the tokens’ supply when liquidity accumulates, vanish with drained funds, and leave investors with worthless assets.

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    Mandy Williams

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  • London Police Unleash Specialized 40-Member Unit to Hunt Down Crypto Criminals

    London Police Unleash Specialized 40-Member Unit to Hunt Down Crypto Criminals

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    In a decisive move to counter the escalating use of cryptocurrencies in criminal activities, London’s Metropolitan Police established a 40-member team specializing in crypto investigations.

    The move comes as authorities express mounting concerns that digital currencies now play an ‘endemic role’ in organized crime.

    UK Crypto Fraud Cases Skyrocket

    Since its inception in May, the specialized squad has swiftly responded to 74 intelligence referrals, resulting in 19 active criminal investigations. This proactive approach reflects law enforcement’s urgency in addressing the rising tide of crypto-related crimes.

    The allure of cryptocurrencies for criminal networks lies in their capacity to obfuscate assets and enable seamless cross-border transactions. Bitcoin, in particular, has long been favored for its ability to shield illicit wealth transfers, presenting a considerable challenge for law enforcement agencies worldwide.

    Recent statistics from a leading law firm, RPC, reveal a 41% surge in reported UK crypto fraud cases over the past year, amounting to a staggering £306 million. This stark increase underscores the urgent need for targeted efforts to combat crypto-enabled criminal activities.

    Detective Inspector Geoff Donoghue, heading the Met’s crypto investigation team, underscored the paradigm shift in the perception of cryptocurrencies within criminal enterprises. Once regarded as a niche avenue, growing evidence suggests that digital currencies have now permeated various illegal activities, including drug trafficking, weapons transactions, human exploitation, and other nefarious enterprises.

    Israeli police recently blocked cryptocurrency accounts associated with gathering donations for Hamas, highlighting the direct link between digital currencies and funding for terrorist organizations.

    Blockchain researchers at TRM Labs reported that crypto fundraising has witnessed a notable upswing following violent attacks by these groups, with Hamas-controlled crypto addresses receiving over $400,000 (£328,000) after a conflict in May 2021.

    Closer to home, criminal syndicates in the UK have quickly adopted cryptocurrencies for their illicit endeavors. One notable case saw eleven individuals in Cardiff sentenced for converting 40 kilograms of cocaine into an estimated £3 million worth of cryptocurrency. Another group’s audacious £21 million Bitcoin scam led them to distribute £5,000 gift cards on the streets, underscoring the scale and audacity of crypto-enabled crimes.

    UK’s Move to Regulate Crypto

    While the cryptocurrency market has witnessed fluctuations, Mat Stanley, a detective sergeant in the Met’s cyber crime unit, points out that these fluctuations have had minimal impact on criminal operations. In the eyes of those engaged in illegal activities, the value of cryptocurrencies is secondary to the transactions they facilitate.

    The regulatory landscape for cryptocurrency trading in the UK remains largely uncharted, inviting scrutiny for its volatility and potential association with addictive behavior. The government’s February announcement of plans to regulate crypto in alignment with traditional financial assets like stocks and bonds has sparked debate among MPs. Some advocate classifying crypto trading as a form of gambling, aligning with its online betting-like nature.

    Across the pond, US regulators have taken legal action against major industry players, including Coinbase and Binance. Additionally, the ongoing trial of FTX founder Sam Bankman-Fried in New York sheds light on the cryptocurrency sector’s legal challenges.

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    Wayne Jones

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  • Calgary Residents Lose Over $22 Million to Crypto Scams Amid Bear Market

    Calgary Residents Lose Over $22 Million to Crypto Scams Amid Bear Market

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    The Calgary Police Service issued a warning to residents to beware of fraudsters who promise high returns on crypto investments, noting that Calgary victims have lost more than $22 million mostly to investment scams so far in 2023.

    Meanwhile, authorities believe crypto scams are still underreported despite huge losses.

    Calgary Police Receive More Crypto Scam Reports in 2023

    Residents in the city of Calgary, Alberta, Canada, have lost over $22.5 million to crypto-related scams in 2023, a significant increase from around $14 million recorded in 2022, according to a report from the Calgary Police Service (CPS).

    The CPS said there were 321 reported cases of cryptocurrency scams in 2022, followed by an increase to 340 cases so far in 2023. However, the police believe these figures do not represent the total loss suffered by victims, stating that crypto scams are underreported.

    With the steady rise in fraud cases, the CPS has asked Canadian investors to exercise caution, asking them to be wary of the various means that scammers use to steal their money.

    According to the police, investment scams were the most common type of scams suffered by Canadian investors. As outlined by CPS, promises of hyperbolic returns on their crypto investments should be seen as a red flag, stating that it is only fraudsters that would guarantee such high profits.

    Also, authorities noted that government agencies will not demand full payment over the phone, especially in crypto, or offer threats and asked residents to report any suspicious activity.

    The statement by Staff Sergeant Graeme Smiley of the Calgary Police Service Cyber Forensics Unit reads:

    “It is important for citizens to know that while cryptocurrency can be used legitimately, fraudsters often lure victims with promises of a quick way to make money[…]For those who have fallen victim to a cryptocurrency fraud, we now have the Blockchain Investigative Team who are dedicated to investigating these types of scams.”

    Canadian Investors Wary of Crypto Exchanges

    A previous survey published by the Toronto Metropolitan University’s think tank, the Dais, revealed that one-third of crypto holders in Canada, amounting to about 35%, have been victims of crypto fraud. Also, almost half of the Canadian respondents said they had low trust in crypto exchanges.

    Impersonating legitimate companies is another notable tactic employed by scammers to defraud investors. As previously reported by CryptoPotato, on-chain researcher ZachXBT discovered that scammers were setting up fake accounts on X with gold verification checkmarks usually reserved for legitimate business organizations to scam users.

    According to ZachXBT, the $1,000 per month subscription fee for the gold verification badge is not enough to deter fraudsters, considering the amount they would get from their illicit activities.

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    Anthonia Isichei

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