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US Indicts Russia for $9 Billion Crypto Fraud Linked to BTC-e Operation

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A cloud of suspicion that laste­d for years has finally turned into a guilty plea. Ale­xander Vinnik, a 44-year-old Russian man, admitted his role­ in a large-scale cryptocurrency mone­y laundering scheme on May 3rd, 2024. This is a major ste­p for US officials in their fight against crypto-related financial crime­s.

Vinnik’s work centered around BTC-e­, a virtual currency exchange that prose­cutors said was a hub for cybercrime. According to the US Attorne­y’s office in San Francisco, BTC-e allowed ove­r $9 billion in deals and had more than 1 million users worldwide­. This exchange allege­dly acted as a key path for cybercriminals to quie­tly launder and store illegal funds gaine­d through hacking, ransomware attacks, and drug trade.

“This guilty plea reflects the Department’s ongoing commitment to use all tools to fight money laundering, police crypto markets, and recover restitution for victims,” said Deputy Attorney General Lisa Monaco.

The charge­s further explain how BTC-e e­nabled the easy swap of ille­gal profits between cash and cryptocurre­ncies, especially Bitcoin. This lack of strong ide­ntity checks created a pe­rfect environment for anonymity, a vital e­lement for criminals see­king to hide their financial actions.

Crypto Crime and Its Global Consequences

The probe­ into BTC-e’s work reveale­d a worrying tie to a Russian military intelligence­ hacking unit. Prosecutors claim the exchange­ handled some Bitcoin traced to this unit, which gaine­d fame for allegedly le­aking emails of Democratic party officials to sway the 2016 US pre­sidential poll.

Vinnik’s guilty plea adds another name­ to the growing list of people caught in US e­fforts to fight crypto-linked fraud. Earlier this year, Sam Bankman-Frie­d, co-founder of FTX, got 25 years in jail for a multi-billion dollar scheme­.

A civil court in April found Terraform Labs and its co-founder Do Kwon liable for the­ 2022 crash that wiped out $40 billion in investor funds. More re­cently, Binance founder Changpe­ng Zhao faced a four-month term for security flaws that le­t crooks exploit the platform.

Vinnik’s sente­ncing is set for San Francisco. He faces 20 ye­ars max for his role in this illicit finance web, which cause­d over $121 million in losses. This case shows how crypto can be­ misused for crime and highlights law enforce­rs’ work to build a safer, more transparent digital finance­ world.

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Bitsonic CEO Arrested Amidst Allegations Of $7.5M Fraud

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In a shocking turn of events, Jinwook Shin, the CEO of the prominent cryptocurrency exchange Bitsonic, has been apprehended by South Korean law enforcement. The arrest, made on August 7, comes as part of an ongoing investigation into allegations of embezzlement and fraudulent activities involving Bitsonic users’ investments and deposits.

According to sources from South Korean news outlet Chosun Biz, the arrest follows accusations that Shin manipulated cryptocurrency prices and trading volumes on Bitsonic between January 2019 and May 2021. These alleged actions led to the staggering disappearance of approximately 10 billion won, equivalent to around $7.5 million, from the pockets of unsuspecting exchange users.

Even as liquidity problems began plaguing Bitsonic and the platform ceased withdrawal operations, Jinwook Shin shockingly persisted in enticing new clients with the allure of cryptocurrencies. This relentless pursuit of deception paints a troubling picture of the extent to which the CEO allegedly went to cover up his illicit activities.

Bitsonic’s Closure Amidst South Korea’s Crypto Crackdown

In a development that goes beyond the involvement of CEO Shin, the investigation launched in 2021 reveals that the vice president of Bitsonic, known by the moniker Mr. A, was involved in orchestrating a scheme to acquire the cryptocurrency maintained by Shin, within the exchange’s system. Indications from reports suggest that Shin utilized sophisticated methods, including the establishment of a paper company in Singapore, to execute his cunning strategies.

Bitsonic’s operations came to a grinding halt in August 2021, citing a medley of “internal and external issues.” This abrupt cessation mirrored the South Korean authorities crackdown on 11 local cryptocurrency platforms for fraudulent activities during the same period.

Recognizing the increasing prevalence of cryptocurrency-related crimes, South Korea has taken proactive measures by establishing an interagency investigation unit. This concerted effort aims to curb the surge in illicit activities within the cryptocurrency market while bolstering investor safeguards.

Related Reading:| South Korea To Launch 2nd Stage Crypto Asset Legislation Soon: Details

Crypto Heist: Former Tech Engineer Arrested For $9M Smart Contract Fraud

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On July 11, the first criminal case of its kind involving an attack on a smart contract operated by a decentralized crypto exchange was reported.. According to the press release, Shakeeb Ahmed, a former senior security engineer for an international technology company, has been arrested for defrauding about $9 million. The arrest took place in New York, and Ahmed is scheduled to appear before U.S. Magistrate Judge Robert W. Lehrburger.

Laundering Stolen Cryptocurrency Across Blockchains

According to U.S. Attorney Damian Williams, utilizing his expertise, Ahmed exploited a vulnerability in the decentralized exchange’s smart contract, resulting in the fraudulent generation of inflated fees. Ahmed successfully withdrew the stolen funds from the exchange as cryptocurrency. 

The indictment also reveals Ahmed’s attempts to cover his tracks by engaging in complex transfers across different crypto blockchains and utilizing overseas crypto exchanges. However, law enforcement agencies could trace his activities and apprehend him.

Special Agent in Charge Chad, Plantz of Homeland Security Investigations, emphasized the significance of combating financial crime to uphold consumer confidence in the financial system. He highlighted law enforcement agencies’ commitment and collaborative efforts in dismantling such complex fraud schemes.

Meanwhile, per the press statement, Special Agent in Charge Tyler Hatcher of the Internal Revenue Service – Criminal Investigation’s Cyber Crimes Unit highlighted Ahmed’s failed attempt to hide the stolen funds and assured the public of their dedication to tracking fraudsters and holding them accountable.

The indictment further reveals that Ahmed, a skilled computer security engineer, resorted to extensive measures to conceal the stolen funds. He conducted token-swap transactions, bridged fraud proceeds between blockchains, converted funds into the privacy-focused cryptocurrency Monero, and employed overseas cryptocurrency exchanges.

Following the attack, Ahmed performed online searches related to the incident, including inquiries about his criminal liability, criminal defense attorneys, law enforcement capabilities, and fleeing the country. These searches demonstrate his awareness of the severity of his actions and his attempts to evade justice.

In all, this case serves as a stark reminder of the importance of robust security measures within the cryptocurrency ecosystem. However, with law enforcement agencies dedicated to combating such crimes, perpetrators will find it increasingly challenging to exploit these platforms unlawfully.

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SEC Charges Siblings Over $124 Million Crypto Scam

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The Securities and Exchange Commission (SEC) has accused John and JonAtina (Tina) Barksdale over an alleged crypto scam. Two unregistered securities offerings involving a digital token named “Ormeus Coin” led to more than $124 million in losses for thousands of retail investors.

According to the SEC’s lawsuit, from June 2017 until the present, the Barksdales marketed and sold Ormeus Coin to investors on crypto trading platforms.

In addition, from June 2017 to April 2018, through a multi-level marketing enterprise named Ormeus Global, the Barksdales advertised and sold subscription packages that included Ormeus Coin and an investment in a crypto trading program.

Siblings held roadshows to advertise their scam

As stated, to market the offerings, John Barksdale organized roadshows across the world. At the same time, he and his sister, Tina, directed the development of social media postings, YouTube videos, news releases, and other promotional materials.

According to the lawsuit, the Barksdales arranged for a public website to display a wallet of an unaffiliated third party to maintain the deception that Ormeus Coin was successfully mining crypto.

As of November 2021, the wallet had more than $190 million in assets. Despite the fact that the Ormeus wallets were valued at less than $500,000. According to the lawsuit, the Barksdales are also accused of manipulating Ormeus Coin’s price and misusing millions of dollars in investor monies for personal needs.

Melissa Hodgman, Associate Director in the SEC’s Division of Enforcement said, “We allege that the Barksdales acted as modern-day snake-oil salesmen, using social media, promotional websites, and in-person roadshows to mislead retail investors for their own personal benefit.”

“We will continue to vigorously pursue persons who sell securities in schemes to defraud the investing public no matter what label the promoters apply to their products.”

The lawsuit accuses the Barksdales of breaking federal securities laws and seeks injunctive relief, disgorgement plus interest, and civil penalties in the United States District Court for the Southern District of New York.

Investors should be aware of possible crypto investment scams and investing based on social media, according to the SEC’s Office of Investor Education and Advocacy. The growing popularity of cryptocurrencies acts as a breeding ground for scammers and fake projects to nourish.

DoJ Arrested Five People for Allegedly Running a $20 Million Crypto Mining Scam

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According to a statement by the United States Department of Justice (DoJ) on August 18, five individuals were detained in connection with a crypto mining scam that ended up defrauding investors to the tune of $20 million.

The suspects allegedly urged investors to invest in their cryptocurrency trading and mining firm, AirBit Club, which in reality does not exist. According to the report, the suspects include Gutemberg Dos Santos, Jackie Aguilar, Pablo Renato Rodriguez, Cecilia Millan and Scott Hughes. They allegedly lured unsuspecting victims to invest in their crypto mining scam, promising a massive return on capital.

Crypto mining scam lands five in hot soup

Notably, Renato Rodriguez and Gutemberg Dos Santos founded the AirBit Club back in 2015. Both of them recruited both Cecilia Millan and Jackie Aguilar as marketers. The suspects falsely claimed that the company’s income generation is derived from its cryptocurrency mining and trading activities.

As per the report, investors were required to purchase a membership plan for the various programs of the Ponzi scheme to start earning passive income. At the end of the day, however, the firm failed to keep its promise to investors. Suspects have used the proceeds of the crypto mining scam for personal gain, the acquisition of luxurious properties such as apartments, sports cars, and jewelry,

“As alleged, the defendants put a modern-day spin on an age-old investment scam, promising extraordinary rates of guaranteed return on phantom investments in cryptocurrencies. Thanks to HSI, the defendants are in custody and facing serious criminal charges,” stated Acting U.S. Attorney Audrey Strauss.

Suspects to face charges against conspiracy to commit fraud

Moving forward, the DoJ report notes that three of the suspects, Dos Santos, Rodriguez, and Millan are up against one charge against conspiracy to commit banking fraud, conspiring to commit money laundering, and conspiracy to commit wire fraud. On the other hand, Aguilar is being charged with a single conspiracy to commit wire fraud while Hughes is facing charges against one count of conspiracy to commit money laundering and one count of conspiracy to commit banking fraud.

Alabama and Texas Bans South African Firms After Crypto Credit Card Scam

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Securities watchdogs in both Alabama and Texas issued a cease and desist order following a crypto credit card scam promoted by South African firms. Accordance to a joint order issued by both the Texas State Securities Board (TSSB) and the Alabama Securities Commission (ASC), companies such as the South African Liquidity Gold Trust, Liquidity Gold Solution and Liquidity Global Card Solution and an individual named Lance Angus Jerrard have issued prohibition orders.

As per reports, the sanctioned firms and Jerrard advertised a fraudulent debit card, dubbed Liquidity Card on social networks and a radio station in Austin, Texas. The perpetrators wrongfully stated that there is a secure way for people to make money while staying at home amid the COVID-19 disaster.

Crypto credit card scam breakdown

The firms allegedly utilized their advertisements to claim that Liquid Card could help investors evade taxes by transacting in stablecoins such as TUSD, USDC and PAX coin. The fraudsters were to recruit and convince new users to commit a minimum of $1,150 in one portion or more of 8,400 parts in the crypto credit card scam. Furthermore, the investors claim that the debit card functions as a traditional debit card.

The project, which was scheduled to start in October, aimed to register over 8 million new users in 36 months. According to the joint order release, the firms mentioned above offer investors a written 100 percent cash back guarantee, which the order terms as fraudulent. Notably, the watchdogs also noted that they had disguised vital information; the risks posed by the project to potential cardholders, and how they make money from the capital employed.

Involved parties have 30 days to issue a response

According to the prohibition order, all the liquidity companies listed are under no obligation to sell securities in Texas or Alabama. Moreover, the firms allegedly used fake pictures to lure investors into the crypto credit card scam. The authorities have given all the involved firms a 30-days grace period to respond to the cease and desist order.

Australian Court Sends Woman to Jail for Stealing XRP Worth Over $300K

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An Australian court has sentenced a female hacker to more than two years behind bars for stealing XRP tokens worth more than $300,000 back in 2018. The hacker, Kathryn Nguyen, will spend at least two years and three months in jail for her involvement in theft of more than 100,000 XRP tokens two years ago. Kathryn was initially indicted in October 2018 before pleading guilty to fraud charges in August 2019.

The August 11 report by the local media outlet Information Age indicates that the female hacker was sentenced to prison two years ago. According to the judge in charge of Nguyen ‘s case, Chris Craigie, the decision to send her to the bars was “difficult and troubling.” However, the hacker is said to have been granted probation by October next year.

First-ever cryptocurrency fraud hearing in an Australian court

Notably, the female hacker is among the first-ever to be charged with cryptocurrency fraud in an Australian court. According to reports, Kathryn Nguyen compromised the e-mail of a 56-year-old man who shared a surname with her and then succeeded in going through two-factor authentication. After taking control of the XRP holdings, she later transferred all the funds to a Chinese crypto exchange, where she exchanged them for BTC. Later, she transferred the BTC to several wallets, in what appeared to be an attempt at money laundering. It is reported that only $9,000 was recovered by the Chinese authorities. Nguyen surrendered control of the email account two days after the hack. Notably, back then, XRP had reached its highest-ever price of $3.84.

Ripple custody green light by NY authorities

The New York State Department of Financial Services (DFS) released an updated list for cryptos for custody and listing last week. Eight digital currencies were added to the list, including Ripple’s XRP token. However, XRP was only approved for custody but not for listing.It is still not clear why the authority did not approve Ripple for listing for trading. However, it seems the legality of XRP; and the question surrounding its status as a security or a token might be the reason.

United States Army Intensifying Battle Against Illegal Crypto Transactions Using Cloud-based Solution

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The U.S. Army Criminal Investigation Command (USACIDC) is looking to step up its efforts to effectively track illegal crypto transactions by using a cloud-based solution. The solution involves a Software-as-as-Service web application that has the capability to detect illicit crypto trades in order to combat money laundering and fraud. According to a recently published statement of work both the Major Cyber Crime Unit and the FBI have also expressed their intention to use the app to curb illegal crypto transactions.

Furthermore, the organization has announced that it is actively taking bids for any tested and already developed app. The application must be ready to be used in the battle against fraud and money laundering. All bids are to be submitted before the deadline set for July 20. 

USACIDC sets conditions for the web application

The USACIDC, an arm of army that is sorely responsible for investigating any criminal involvement in the world, has set the conditions that the app must meet to allow it to track illegal trade effectively. The app must also be capable of analyzing all major cryptocurrencies such as Bitcoin in real-time; allowing users to investigate the origin of crypto trades.

Plus, the app should be quick to detect any suspicious activity involving illegal crypto transactions while tracking cryptocurrency connections.

The app should also feature capabilities such as pattern analysis and involvement with other entities. In addition, it should provide a link analysis tool that will prove handy in the data analysis process.

Stepping up the efforts to combat illegal crypto transactions

Earlier last year, the United States Army Contracting Command of New Jersey published a notice calling for an app that would help security agencies identify people engaged in illegal crypto trading. Development of a web-based military application; alongside other relevant government agencies, will massively boost their efforts to combat illegal crypto transactions in the sector.

Whale Alert Report: Crypto Scammers Revenue to Spike by 2000% Before 2020 Ends

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According to a new report by the cryptocurrency intelligence firm, Whale Alert, scammers stole $24 million in bitcoin during the first half of 2020. Online scammers find it too easy to mislead their crypto investors because their tactics are incredibly adept and aggressive, according to a report published on July 10.

For instance, a specific highly successful crypto scam has raked up more than $130,000 a day ‘with nothing more than a one-page website, a bitcoin address, and a decent amount of YouTube advertising.’ While another scheme has earned more than $1.5 million in six months by luring investors into a sham crypto exchange using an unprofessional website perforated with spelling mistakes.

Scammer revenue to spike by 2000 percent by end of the year

Whale Alert suggests that it has gathered and assessed “hundreds of thousands” of data from websites, bitcoin addresses, and reports using Scam Alert, a new tool for reporting, monitoring, and analyzing blockchain crimes. Whale Alert, famous for tracking large-scale BTC transactions, discovered that “crypto crime pays a lot.” Crypto crimes are significantly motivated by the fact that the venture is risk-free, which means that the perpetrators have a very high chance of getting away with the crime.

Indeed, the report claims that fraudsters have got away with $38 million worth of bitcoins over the last four years, omitting Ponzi schemes. Whale Alert projects scammers’ annual revenues may rise by 2,000 percent since 2017, reaching $50 million annually.

Giveaway scams are more popular according to Whale Alert Report

There are different types of swindling strategies, including sextortion, sham exchanges, video scams, and bitcoin recovery schemes. However, according to the Whale Alert, the most popular type of extortion is a giveaway strategy. Giveaway scams tend to impersonate public figures such as SpaceX and Tesla’s Elon Musk, or a prominent crypto exchange for convincing individuals to send their bitcoins using YouTube advertising.

As per Whale Alert, such fraudulent schemes can rake from a few thousand dollars to $300,000, subject to the strategy employed and the scam ‘s efforts. Notably, the report also warned that the revamped approach suggests that “entire professional teams” may be involved in some of the most fortunate crypto scams.

 

Chinese Law Enforcement Seize $15M in BTC in Fraudulent Crypto Scheme

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Chinese law enforcement has confiscated $15 million in crypto and two supercars, a McLaren and a Ferrari worth around $2 million from a fraudulent cryptocurrency scheme connected to the sale of fake Huobi tokens.

Perpetrators have used Telegram to lure investors

According to a local July 9 report, the Chinese law enforcement authorities apprehended ten suspects linked to a fake cryptocurrency scheme. While revealing the case, the Chinese Ministry of Public Security, the country’s chief law enforcement, said that this case is the first in China where victims were reportedly scammed using smart contracts to create fake cryptocurrencies.
Through Telegram, the criminals approached victims and asked them for ETH, in return for the fake tokens at a bargain price. The cheap tokens led investors to fall into the fraudsters’ trap because they could make fast money by selling the tokens to the open market. More than 1,300 people were affected by the fraudulent crypto scheme the report says.

Moreover, the group apparently created several Telegram groups; the one called “Huobi Global Arbitrage HT Chinese Group,” in which they marketed a smart contract that could generate Huobi tokens; and offered an arbitrage plan to earn 8 percent returns.

A victim named Li, the first victim to report the scam explained to the police; “Simply put, you send one unit of ETH to a designated ETH address, you will receive 60 HT. And then you can sell it to gain the difference.”  To his surprise, when Li transferred 10 Eth to the designated address; the 600 Huobi tokens he received in exchange were false.

Li realized that he could not sell or deposit fake tokens anywhere, thus reporting the fraudulent crypto scheme to the Chinese law enforcement authorities. In conclusion, the assets of the seized crypto include Bitcoin, Ether, and Tether. Confiscated physical assets include two luxury cars and a villa owned by the perpetrators.