TronWeekly

Crypto World News

You are here: Home / Archives for Ponzi Scheme

Ponzi Scheme

Australian Man Pleads Guilty to $3.6B Crypto Ponzi Scheme, Faces Sentencing in July

by

John Bigatton, a Sydney man, has admitte­d guilt to promoting a cryptocurrency Ponzi scheme that swindle­d investors out of a staggering $3.6 billion. Bigatton, from Carss Park in New South Wale­s, pleaded guilty in Sydney District Court to acting as an unlice­nsed financial advisor while spruiking BitConnect’s Le­nding Platform in late 2017 and early 2018.

BitConnect, ope­rational from 2016 to 2018, offered a see­mingly lucrative investment opportunity through its Le­nding Platform. Investors were e­nticed to buy BitConnect’s cryptocurrency BCC with the­ promise of high-interest rate­s in exchange for “loaning” their BCC for fixe­d terms. The company claimed its proprie­tary technology generate­d guaranteed returns through cryptocurre­ncy exchange markets, boasting an ave­rage daily compounding interest of 1%.

Howe­ver, this was a house of cards. Investors had no control ove­r their loaned BCC and couldn’t withdraw their funds until the­ lending period ende­d. The truth was far more sinister: BitConne­ct employed a classic Ponzi scheme­, using funds from new investors to pay out earlie­r ones.

Crypto Scam Involving BitConnect Promoter

BitConne­ct’s strategy relied he­avily on high-profile figures promoting its “lucrative” inve­stment opportunities. Bigatton, who serve­d as the Australian national represe­ntative for BitConnect from August 2017 to January 2018, played a ke­y role in this scheme.

According to the­ Australian Securities and Investme­nts Commission (ASIC), Bigatton actively promoted the Le­nding Platform through social media posts, seminars across Australia, and eve­n in face-to-face mee­tings with potential investors.

Bigatton’s actions constituted providing financial advice­ without a valid Australian Financial Services (AFS) license­. While a related charge­ of operating an unregistere­d managed investment sche­me was dropped after his guilty ple­a, the consequence­s for Bigatton are significant. The Commonwealth Dire­ctor of Public Prosecutions, following ASIC’s investigation and refe­rral, will sentence Bigatton on July 5, 2024.

The­ Aftermath of BitConnect

Bigatton’s story serve­s as a stark reminder of the dange­rs associated with unregulated cryptocurre­ncy investments and the allure­ of Ponzi schemes. In 2020, ASIC banned Bigatton from providing financial se­rvices for seven ye­ars due to his involvement in the­ BitConnect scheme.

BitConne­ct itself collapsed in January 2018 after its cryptocurre­ncy plummeted by 92%. This downfall came amidst le­gal actions from the Texas State Se­curities Board, which labeled BitConne­ct a Ponzi scheme for its lack of transparency and misle­ading information.

The fallout from BitConnect continues. The­ scheme’s founder, Satish Kumbhani, was indicte­d in San Diego in 2022. While a US court awarded $25 million in compe­nsation to 800 victims in 2023, thousands more will likely neve­r see their mone­y again.

Glenn Arcaro, a US promoter of BitConnect, also ple­aded guilty to wire fraud conspiracy charges in 2021 and was orde­red to repay $36 million to scammed inve­stors, along with a 38-month prison sentence.

Related Reading | BlockDAG Earns a 30,000x ROI Prediction as DOGE Rises, ETC Approaches a Halving

SEC Exposes $191M Cattle Ponzi Scheme And Seeks Justice For Investors

by

The U.S. Securities and Exchange Commission (SEC) has taken swift action to stop a massive cattle fraud scheme that defrauded investors of more than $191 million. The SEC se­cured a short-term hold order and froze­ assets. The company’s owners, Arizona’s Josh Link and Je­d Wood from Fort Worth, were appointed a truste­e to handle the ongoing fake­ operations by the Agridime.

The SEC file­d a complaint on December 11, 2023, stating that Agridime­ falsely claimed to be e­xperts in meat sales, distribution, and animal supply chain manage­ment. They managed to convince more than 2,100 investors in 15 states by promising annual re­turns of 15-32 percent.

However, the regulatory body alleges that instead of investing the funds as promised, the defendants used the­m to pay previous investors in a Ponzi scheme­ and also for undisclosed sales commissions. They re­lied on new investors’ mone­y to repay earlier inve­stors.

The defendants enticed investors with guarantees that they could ‘make money raising cattle without having to do all the work,’ but as we allege in our complaint, their promises of annual returns of 15‑32 percent were, in the defendants’ own words, ‘too good to be true,’ said Eric Werner, Director of the SEC’s Fort Worth Regional Office.

The SEC’s investigation indicates that Agridime fell short of its commitment to using funds for cattle-related activities, and the defendants failed to generate sufficient revenues from cattle operations to fulfill promised returns.

Deceptive Tactics Unveiled By SEC

The SEC’s complaint alleges that Link and Wood used various methods to conceal their fraudulent activities from investors and regulators. They created fake invoices and bank statements to show that they sold cattle at inflated prices. They also used shell companies and offshore accounts to launder money from their scheme.

The regulatory body also claims that Link and Wood manipulated the market for cattle futures contracts by creating artificial demand and supply through fraudulent transactions. They allegedly used their own funds or borrowed money from other sources to buy low-quality cattle futures contracts and sell them at high prices before they expired.

The SEC’s action against Agridime is part of its ongoing efforts to protect investors’ assets from fraudsters who exploit their trust. The regulatory seeks preliminary and permanent injunctions against Link and Wood. A court date for the SEC’s reque­st for a temporary order is set for De­cember 20, 2023.

Related Reading | S&P Global Ratings Launches Stablecoin Stability Assessment

Crypto Ponzi Scheme: Ohio Man Arrested For $10 Million Worth Of Scam

by

An Ohio man was arrested for allegedly running a Crypto Ponzi scheme, from which he raised at least $10 million from investors, according to a press release by the Department of Justice published on November 18th.

As the allegations state, Rathnakishore Giri has been accused of deceiving investors by lying to them about his experience in trading Bitcoin derivatives. As asserted by the indictment, he falsely promised them profitable returns without putting their principal investment at risk.

In fact, Giri is alleged to have used money from new investors to repay old ones, which is typical of a Ponzi scheme. He also misled his investors by making them believe that there were delays when they wanted to cash out or receive their promised principal.

According to the press release:

Giri is charged by indictment with five counts of wire fraud. If convicted, he faces a maximum penalty of 20 years in prison on each count. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Crypto Crime Trends For 2022

A blockchain analysis firm, Chainalysis, previously reported that the amount of cryptocurrency-related crimes reached a new all-time high in 2021, with illegal addresses collecting $14 billion during the year.

The utilization of cryptocurrencies is increasing more quickly than before. In 2021, the total amount of transactions across all cryptocurrencies recorded by Chainalysis increased to $15.8 trillion, an increase of 567% over the total in 2020.

Screenshot 20221120 121122
Source: Chainalysis

The biggest surprise of all, though, could be that the growth in illegal transaction volume was only by 79%, or by a factor of almost an order of magnitude less than total adoption. 

In addition, the value of crypto stolen from victims increased by 82% in 2021 to $7.8 billion. More than $2.8 billion, or almost as much as the rise over 2020’s total, came from rug pulls.

Moreover, by transaction volume, scams continued to be the most common cryptocurrency-based crime, stealing over $7.7 billion in cryptocurrency from victims all around the world.

That is an increase of 81% from 2020, a year in which scam activity dramatically decreased compared to 2019, mainly due to the lack of big Ponzi schemes. That changed in 2021 when Finiko, an Eastern European Ponzi scam primarily preyed on Russian-speaking individuals, collected more than $1.1 billion from its victims.

Screenshot 2022 11 20 001454
Source: Chainalysis

Related Reading | Crypto Miners In Russia To Get The Green Light To Sell On Global Markets

Over an Alleged $1M NFT Scheme, the Department of Justice Sued Two 20-Year-Olds

by

For their roles in a $1.1 million NFT scam, the Department of Justice charged two 20-year-olds with fraud and money laundering. It is one of the first steps taken by federal authorities to rein in the burgeoning asset class.

The project was dubbed “Frosties” by Ethan Nguyen and Andrew Llacuna, both of Los Angeles, and promised investors future giveaways, more tokens, and a metaverse game based on the brand.

Prosecutors claim the duo engaged in a “rug pull” in January, in which they advertised Frosties on social media and then vanished with the money they earned.

“Wherever there’s money to be earned, fraudsters will find a way to get it,” said Damian Williams, a US attorney in New York.

Frosties- the cute NFT scam

Ethan Nguyen and Andre Llacuna are accused of making $1.1 million selling non-fungible tokens (or NFTs) based on the cartoon character “Frosties.”

They shut down the initiative and shifted its cash to a variety of different crypto wallets after selling the NFTs, leaving Frosties owners without the promised benefits.

The Internal Revenue Service, Criminal Investigation (IRS-CI), and Homeland Security Investigations (HSI), according to the criminal complaint, began investigating Frosties in January, immediately after receiving complaints about the fraud.

Frosties was a popular initiative, with 8,888 NFTs (equal to $130 in Ethereum) selling out within an hour of its public introduction.

It was quickly abandoned by the creators. When buyers sought to resell their NFTs, they only received a few bucks, and they gave up all prospects of seeing future promised benefits, such as 3D copies of their avatars and a Frosties video game.

(However, some con artists in the community sought to resuscitate the Frosties as a different NFT lineup.) Frosties’ two perpetrators have since been apprehended in Los Angeles, California.

“Hello, Garry. This project is coming to a close, which I realize is startling. I had no intention of continuing the project, and I have no plans for the future. As a result, the project is drawing to a close. You were a fantastic moderator with a big heart” – An alleged message from Ethan Nguyen to a Frosties community moderator.

BitConnect founder accused of Ponzi scheme has vanished

by

Satish Kumbhani, the founder of BitConnect, has gone missing a week after being charged in a $2.4 billion Ponzi scheme that allegedly deceived investors in the United States.

The US Department of Justice (DoJ) indicted Kumbhani, an Indian citizen, with criminal charges last week. In September 2021, the Securities and Exchange Commission (SEC) filed a separate lawsuit against Kumbhani, alleging that he fraudulently obtained more than $2 billion for BitConnect. The issue currently is that Kumbhani is no where to be found.

SEC

Officials stated in a legal filing on Monday that Kumbhani has most likely left India and that his whereabouts are uncertain. This comes after the SEC learned in October 2021 that Kumbhani had likely moved from India to an unfamiliar address in another country.

Extension plea in BitConnect’s founder missing case

Richard G. Primoff, senior trial counsel in the filing has requested an extension until May 30 from U.S. District Judge John Koeltl.

Primoff also stated that the Commission has been in contact with the country’s banking regulatory agencies since November in an effort to track out Kumbhani’s address. At this time, however, Kumbhani’s whereabouts are unclear, and the Commission is unable to say when, if ever, its attempts to identify him will be successful. He further stated,

“The Commission did not know the whereabouts of Kumbhani, an Indian citizen, at the time it filed this action, and BitConnect is an unincorporated entity the Commission must serve through its manager, Kumbhani.”

BitConnect, which was founded in 2016, was one of the biggest and most popular projects in the mid-2017 initial coin offering (ICO) craze, raising billions of dollars from international investors for a protocol that allegedly paid out 10% in interest earnings via its BCC token to investors, with users who “referred” other investors receiving even more benefits.

However, platform administrators closed BitConnect’s earning platform on January 16, 2018, when the company’s product came under growing scrutiny from legislators and investors. In the days following the platform’s collapse, BCC prices plunged to below $1 from a prior peak of about $500.

Such circumstances sparked a legal struggle in the United States to bring BitConnect’s founders to justice, with Kumbhani and American citizen Glenn Arcaro at the heart of the plan. On 1 September 2021, Arcaro pleaded guilty to criminal counts, comprising conspiracy to commit wire fraud and criminal forfeiture.

Bitcoin Compared To ‘Ponzi’ By Black Swan Author

by

The world’s first and largest cryptocurrency, Bitcoin [BTC] has garnered several fans across many industries from all around the world. Just as the price of the king coin shot up, the craze with regard to it also witnessed a massive surge. BTC hasn’t lost a lot of fans, however, prominent author, Nassim Taleb went on to recently announce that he no more supported the king coin.

Appearing in a recent interview with CNBC’s Squawk Box, the Black Swan author revealed the reason behind his sudden aversion towards BTC.

Bitcoin Has No Connection With Inflation, Taleb Asserts

Taleb made rounds in the crypto community after he suggested that the world’s largest cryptocurrency could have been an insurance policy. However, during February 2021 Taleb decided to dump all of his BTC, citing volatility as a major reason.

More recently, in the Squawk Box interview, Taleb pointed out that the king coin entailed the “characteristics of an open Ponzi”. While several have time and again suggested that Bitcoin, similar to gold has been a hedge against inflation, the Black Swan author suggested otherwise. He believed that there was no “connection between inflation and Bitcoin.”

Elaborating on the same, he added,

“If you want a hedge against inflation, buy a piece of land, grow—I don’t know—olives on it. You’ll have olive oil if the price collapses. With Bitcoin, there’s no connection.”

Bitcoin [BTC], over the last couple of days, witnessed a massive downfall. The king coin plummeted from a high of $64K all the way down to $48K. During press time, BTC was trading for $49,704. The king coin once again proved to be extremely volatile.

Furthermore, Taleb asserted,

“These gimmicks, of course, you have Bitcoin today, you may have another one tomorrow they come and go, and there’s no systematic link between them and the claims they make.”

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

by

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.

Dutch blockchain gaming company CEO on the run as fraudulent activities come to light

by

New companies are being built on the blockchain daily, and one of the most significant contributors to that are gaming firms. In between the cutthroat crypto world, some companies have taken steps to gain unfair advantages, which have now been called out. One example of such a company is Komodore64, a Dutch blockchain organization that has filed for bankruptcy after the founder defrauded its investors.

The founder has been on the run after raising millions of dollars in investment rounds but failing to pay employee salaries or even deliver a product. As per the Dutch Newspaper, The Sprout, the company wanted to use blockchain technology to keep track of transactions that occur within the game.

The idea generated so much buzz that it received funds from multiple quarters with an Italian investor, even transferring 600,000 to the company.

Sam Narain, the alleged perpetrator, took drastic steps as the CEO to ensure that the company received investments no matter what. The information has come to light that he had even asked some of his people to pose as Goldman Sachs employees to fool investors into thinking he had a deal with them.

The company allegedly tanked all its savings by thrown extravagant parties and events with one launch party at the Fokker Terminal in Hague amounted to thousands of euros.

What made matters worse is that the company had not paid the supplier at that event either, bringing up the fraudulent nature of the case. It has not been fully confirmed as of yet, but the latest reports now show that the founder has been arrested in The Hague. The local newspaper also informed:

“Whether the arrest actually took place at that hotel is not yet clear. In the meantime it has been established that the entrepreneur was recently arrested and will be questioned on Tuesday, the curator of Komodore64 John Dullaart confirms to Sprout. According to him, it is not yet 100 percent certain that the arrest has to do with the bankruptcy of Komodore64, but it obviously has the appearance of that.”

The development still has its tendrils spread out as there is also speculation that the real co-founder was Max Theyse, who was not able to fulfill the role that was then taken up Narain. Police are still looking into more evidence to pin down Narain as the actual culprit and to ensure the disgruntled employees are helped out.

Disclaimer: The presented information is subjected to market conditions and may include the very own opinion of the author. Please do your ‘very own’ market research before making any investment in cryptocurrencies. Neither the writer nor the publication (TronWeekly.com) holds any responsibility for your financial loss.

Never miss our daily cryptocurrency news, price analysis, tips, and stories. Join us on Telegram | Twitter or subscribe to our weekly Newsletter.

Top Singapore authority issues warning on Bitcoin investment fraud website

by

As Singapore is becoming the major hub for crypto, it’s gaining increasing attention from across the worldwide people. But the case isn’t as cool as it appears, scammers are using the names of authorities to solicit Bitcoin investment from the general public.

MAS Warning on Fraud website Soliciting Bitcoin Investment

The latest press by Singaporean financial watchdog, the MAS (Monetary Authority of Singapore) claims that a website “Bitcoin Loophole” uses fake comments supposedly made by Goh Chok Tong, former Singapore’s Prime Minister. By adding such comments, the site is soliciting bitcoin investment. More specifically, it asks the community to make a deposit of USD 250, which would then be traded on its platform.

As soon as MAS was informed about this act, MAS issues warning letter, asking the public to avoid such comments and fake websites. The quote provided on its site is either simply fake or used from earlier reports to convince investors. MAS said in a report;

“The site asks readers to make a minimum initial deposit of $250 into a purported trading platform, Bitcoin Loophole, which would automatically initiate trades on one’s behalf,”

Besides asking for the deposit from investors, scammers also attempted to receive sensitive information of users – including credit card details and bank information. This appears to have a fake scheme to persuade investors, which MAS warned public ‘to be extremely careful’ while dealing with schemes that promise higher ROI or represent the name of authorities.

This isn’t the first time, MAS cautioning public, earlier it had issued several warnings on similar topics and asked to practice due diligence before putting their money into such schemes.

“In the past year, there have been websites fraudulently using the names and photographs of Ministers and other prominent public personalities to solicit Bitcoin investments,” the MAS concluded.

Bitcoin’s rising growth and awareness has become an essential topic of attention in terms of investment, profit, and involvement in global innovation. As Singapore is becoming the hub for crypto and blockchain companies, bad players are at their best to leverage the benefits from the rising crypto prices and increasing interest from the public. The release further explains that;

Members of the public are advised to exercise extreme caution and avoid providing any financial or personal information on the forms linked from the website. Anyone who suspects that an investment could be fraudulent or misused for other unlawful activities should report such cases to the Police.

Disclaimer: The presented information is subjected to market condition and may include the very own opinion of the author. Please do your ‘very own’ market research before making any investment in cryptocurrencies. Neither the writer nor the publication (TronWeekly.com) holds any responsibility for your financial loss.

Never miss our daily cryptocurrency news, price analysis, tips, and stories. Join us on Telegram | Twitter or subscribe to our weekly Newsletter.

Crypto scammers pretend as FCA in Emails to capture investors attention

by

The latest report states that crypto scammers are misleading investors by sending emails, impersonating UK’s FCA (Financial Conduct Authority). These emails are intending to amass investor’s interest by promising “guaranteed chance to earn” on crypto-related investment.

Scammers Guaranteeing Huge Earning Using FCA’s name

As scammers are quite smarter, these impersonated emails were featuring the FCA’s branding and Prudential Regulation Authority’s logo with a subject line, entitling “Guaranteed chance to earn.”

The emails quickly want investors to believe in the brighter future of Bitcoin in terms of value and specifically mentioned the price could hit over $20k by 2020. With that, recipients were encouraged to click on a “Click here” button.

“Bitcoin is still a long way off its peak price of $20,000, which it reached in 2017, but some cryptocurrency experts believe it could hit an even higher value by 2020.”

While FCA had confirmed their specific team is scrutinizing the matter, they have advised having due diligence ahead of clicking such buttons or act upon such emails. FCA always quickly cautioned investors on such matters and this time too, it warned that;

“The correspondence is likely to be linked to organized fraud and we strongly advise you not to respond to the criminals in any way,”

Nevertheless, this caught the attention of few more users when Dominic Thomas, founder of Solomon’s Independent Financial Advisers, took to Twitter and opened up about such scam emails. He said that he received the email five times over the weekend and stated that

“Email reveals the extent of the problem with cheap and easy new media ‘advertising'”.

Following other such queries on scam email, FCA ensured that they would never contact members of the public for money or any other bank details. It further warned recipients and the general public that this might be associated with the fraud and requested not to respond to the criminals in any way. It read that;

“Look for signs that the email, letter or phone call may not be from us, such as it listing a mobile or overseas contact phone number, an email address from a Hotmail or Gmail account, or a foreign PO Box number. “Scam emails or letters often contain spelling mistakes and poor grammar.”, It continued.

Disclaimer: The presented information is subjected to market condition and may include the very own opinion of the author. Please do your ‘very own’ market research before making any investment in cryptocurrencies. Neither the writer nor the publication (TronWeekly.com) holds any responsibility for your financial loss.

Never miss our daily cryptocurrency news, price analysis, tips, and stories. Join us on Telegram | Twitter or subscribe to our weekly Newsletter.