Initial coin offerings (ICOs) are outright frauds that need to be stopped, according to the U.S. Securities and Exchange Commission (SEC). This is why it has become hard for regulators to monitor ICOs activities in different jurisdiction because often money raised in ICOs comes from investors in America and other parts of the world.
While speaking at Harvard Law School’s Program on International Financial System, SEC Co-Director for Enforcement Division Steven Peikin noted how the ICO market has exploded from a mere concept to a phenomenon within a short period of time. In 2016, ICOs raised $100 million, while in 2018, they raised $22 billion—a 22,000% increase. The novelty of ICOs, accompanied with the excitement surrounding blockchain technology, has been a key attraction that enterprising people have been using to lure investors, according to Peikin.
The hype and growth of the ICOs can obscure the fact that most of these offering are high-risk investments. At times, the issuers may lack established records of accomplishment. They may also not have viable products business model or proper security measures safeguarding the digital assets from hackers. Without considering all these investors are quick, to pour out their money to projects that eventually fraudulently shut down.
Peikin recalled the case of ICO fraud conducted by Canadian Dominic Lacroix, who defrauded many U.S. investors out of some $15 million by promising a 13-fold profit in less than a month. Lacroix turned out to have had a long history of doing similar financial frauds in Quebec and Canada.
Peikin believes in fighting the fraudulent activities in ICOs and the crypto space there should be global cooperation. He acknowledges collaboration between, the United stated and Canada in Operation Crypto Sweep. The operation was launched in May 2018 by the two countries, which is conducting over 70 investigations into cryptocurrency scams and fraud in ICOs. So far, the North American Securities Administrators Association has sent cease letter to operators of fraudulent crypto companies I more than forty jurisdictions in both countries.
According to Peikin, “The sponsors of ICOs are, in many instances, located outside the United States. And international cooperation is critical to our ability to investigate and, where appropriate, recommend that the Commission bring enforcement action.”
Meanwhile, SEC lawyers recently warned celebrities from endorsing ICOs to avoid being charged with fraud. A few celebrities, such as Floyd Mayweather and Dj Khaled, have already fallen victims to such fraudulent ICOs.
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Another scammer targeting the cryptocurrency space has been taken out. In a press release by the U.S. Department of Justice (DOJ) from this past Wednesday, the agency announced that the Federal Bureau of Investigation has arrested the co-founder of a crypto platform following his indictment on charges that resulted in millions of dollars in losses to a number of investors.
30-year-old Jared Rice Sr., co-founder of AriseBank, scammed investors out of more than $4 million, enticing them to invest in the “first decentralized banking platform” in the U.S. He concocted a story that the institution would offer bank accounts insured by the FDIC (Federal Deposit Insurance Corporation), as well as credit and debit cards backed by Visa. He also claimed that he had raised “$600 million within just a few weeks” through an initial coin offering (ICO). Unfortunately, everything he said was a lie.
None of the money he collected was used for its stated purpose. Instead, Rice used it to buy clothes, eat in fancy restaurants and take luxury vacations.
Rice has been charged with three counts of wire fraud and three counts of securities fraud. The U.S. Attorney for the Northern District of Texas, Erin Nealy Cox, asserts, “My office is committed to enforcing the rule of law in the cryptocurrency space. The Northern District of Texas will not tolerate this sort of flagrant deception – online or off.”
This isn’t the first time that regulators have had a run-in with Rice. This past January, he, along with the company’s co-founder, Stanley Ford, was sued by the U.S. Securities and Exchange Commission (SEC) for fraud and unlawfully issuing securities. He was also served with a cease-and-desist order from the Texas Department of Banking in relation to his activities. The SEC has also indicated, in February, that he had been on probation after being indicted in 2015 for charges related to theft and tampering with government records. A separate felony indictment also hangs over the crook in Dallas County, Texas for assault.
His next trip will be to a court to find out if he is to be convicted on all charges. If that happens, he could be sentenced to up to 120 years in federal prison.
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Alexander Vinnik, who allegedly founded the BTC-e cryptocurrency exchange before running off with everyone’s money, just got a brief reprieve. A district court in Cyprus has reportedly dropped a number of charges that had been levied against Vinnik, according to the RIA Novosti news outlet out of Russia.
The news outlet reports that Vinnik’s lawyers have said that the court withdrew its lawsuit against the accused, which included charges of “fraud, money laundering and other crimes.” In addition, Vinnik might also be compensated “for all legal costs incurred by him.”
The lead lawyer for Vinnik, Timofey Musatov, added, “The defense of Alexander Vinnik, while appreciating the decision taken by the Cyprus court, pays special attention to the fact that the case against Alexander collapsed at an early stage and, importantly, at the initiative of the plaintiffs themselves, which clearly indicates the weakness of the accusatory component against Alexander, the vulnerability of the legal position of the plaintiffs and their unwillingness to bring the case to open legal proceedings.”
The withdrawal doesn’t mark the end of the ordeal for the Russian citizen. Vinnik could be extradited to France or the U.S., or even Russia. All three countries have requested extradition, with France also filing a separate petition through a European Arrest Warrant.
First up could be France, which already saw its extradition request approved this past July. He is accused by French authorities of participating in cybercrime from January 2016 to June 2018, as well as “in another period,” as well as in extortion and money laundering. Whether or not he is sent to France could be decided today, when Vinnik makes another court appearance.
Vinnik had been detained in Greece on request of the U.S. Department of Justice over a year ago. He was picked up in July of last year after authorities asserted that he was connected to money-laundering activity on the now-defunct exchange and that he possibly facilities the illicit movement of as much as $4 billion.
The allegedly scammer has routinely argued that his rights have been violated while being locked away. Most recently, he threated to go on a hunger strike over the issue.
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A former cryptocurrency exchange executive accused of using BTC to launder billions of dollars is preparing to go on hunger strike, according to statements issued by his legal team.
Russian citizen Alexander Vinnik was arrested in Greece at the request of U.S. authorities back in 2017, at the outset of what has become an embittered multi-jurisdictional battle for his extradition. After a ruling in the Greek Supreme Court that Vinnik should be extradited to the U.S., separate petitions from France and Russia have been presented, including a European Arrest Warrant issued by France back in June.
The courts are set to review their decision later this week, considering the multiple vying claims to extradition ahead of deciding how to proceed with Vinnik’s case.
Vinnik’s legal team are agitating for his extradition to his home nation of Russia, having labelled the alternatives as “close to a life sentence,” with the inevitable conclusion of eventual extradition to the United States.
Russian news agency TASS quoted the head of Vinnik’s legal representatives, Timofey Musatov, as saying that the man is now preparing a hunger strike in protest at what he alleges will be an unfair hearing. According to the report, “Alexander Vinnik decided to go on a hunger strike because he realized he was stripped of the right for defense in France and, consequently, in Greece…Moreover, it became clear that the European arrest warrant [issued by France] expired.”
“The Greek Supreme Court’s judge completely ignores the work of lawyers who cannot even file a petition. She does not give them an opportunity to speak or do it. After observing this situation, Alexander realized that he would either get a fair trial or die.” Musatov said. “If there is no fair trial, he will inevitably be deported to the United States through France, where he will get something close to a life sentence, which equals death.”
Vinnik is accused of laundering as much as $9 billion through the now defunct crypto exchange, BTC-e, in what has become one of the most high profile of the outstanding BTC fraud cases.
With authorities in France, Greece, the U.S. and laterally Russia apparently interested in bringing criminal convictions, it remains to be seen whether his planned hunger strike will assist Vinnik in getting his desired outcome.
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SIM card scams are becoming a major issue. This past July, a Californian man barely out of his teens was arrested for his involvement in a theft ring that stole over $5 million through the scheme. The subject of SIM card frauds has been a hot issue with regulators over the past couple of weeks as more cases are being seen. Now, another victim of the scam has surfaced, revealing that he lost over $1 million to SIM card thieves.
Robert Ross is an angel investor out of San Francisco whose main focus is on initial coin offering (ICO) presales. According to an article in the New York Post, his cell phone was stolen, resulting in a swap of his SIM card that allowed a thief to steal $500,000 from two accounts he held on the Gemini and Coinbase exchanges. He had been saving the money so he could send his daughters to college.
In a SIM swap scam, a fraudster gains access to personal data of the holder of a particular phone number. The phone number can be found on a business card, social media or one of a number of other sources. Having the phone number and personal data in hand, the thief will then contact the service provider and report a “lost” phone, tracking the provider into assigning the victim’s phone number to a new phone and a new SIM. Then, using two-factor identification that is common today, the fraudster is able to gain access to a variety of accounts.
The thief in Ross’s case was eventually caught and identified as Nicholas Truglia, a 21-year-old con artist out of New York. He was found to have attempted to conduct a number of hacks of other executives, but those attempts were unsuccessful. Truglia now faces 21 different charges, including fraud, embezzlement, identity theft and attempted grand theft auto. However, the problem isn’t going to go away anytime soon.
According to Erin West, Santa Clara Superior Court deputy district attorney, “It’s a new way of doing an old crime. It’s a pervasive problem, and it involves millions of dollars […] You’re sitting in your home, your phone is in front of you, and you suddenly become aware there is no service because the bad guy has taken control of your phone number.”
Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.
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Regulators in Colorado are closing in on as many as 20 initial coin offerings (ICOs) following investigations into the practice, according to a press release issued by the state Division of Securities.
Commissioner Gerald Rome gave the go-ahead for action against 18 new ICOs in addition to two that are still outstanding, after the division’s ICO Task Force identified potential regulatory breaches.
Specifically, the promoters of these ICOs have been ordered to cease and desist from offering unregistered securities in the state of Colorado, in a move that echoes similar steps from regulators and law enforcement across the wider United States.
The task force was established back in May with the remit to investigate sites that were suspected of being involved in fraudulent activity, including issuing tokens and promoting ICOs which were in fact securities, but were not appropriately registered or listed.
These potentially criminal breaches are being flagged by regulators with increasing frequency, as the net continues to close around dubious initial coin offerings.
Commissioner Rome said that their investigations had identified examples of outright fraud and misrepresentation, as he urged investors to be cautious. He explained, “The sheer number of orders entered against ICOs should be a red flag to all investors that there is a real risk that the ICO you are considering is a fraud…Our investigations show that there are fraudsters who will simply create a fake ICO to steal investors’ money, or spoof a legitimate ICO to trick investors into wrongfully paying them.”
The latest four orders were issued to CyberSmart Coin Invest, CrowdShare Mining, Global Pay Net and Credits LLC, each of which the Commissioner said had been engaged in fraudulent conduct.
Global Pay Net is accused of misleading investors by promising “investors receive 80 percent of the company’s profits”, while CrowdShare claimed investors would see returns of 1000% within four years, according to the state regulator.
The volume of enforcement action being undertaken against ICOs is keeping regulators nationwide busy, with securities agencies at state level taking a lead from similar actions being pursued by the U.S. Securities and Exchange Commission (SEC).
Recently, regulators in Italy joined the increasingly international effort to clamp down on fraudulent ICOs, announcing action against three firms who were not registered in compliance with local financial laws.
Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.
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The North Dakota Securities Commissioner has issued a cease and desist order against Union Bank Payment Coin, over suggestions it had been promoting fraudulent securities in the form of its recent initial coin offering (ICO).
The order was issued against the firm’s directors, officers, employees and agents concerning the ICO, with the suggestion that it could constitute a security. As such, failure to register the ICO with the appropriate authorities would constitute a serious and criminal breach of securities laws.
The development follows on from a wider crackdown on illicit ICOs known as Operation Cryptosweep. The investigation brings together regulators across 40 different states in the US and Canada, as part of a wider enforcement drive against unregistered ICOs.
On the Union Bank Payment Coin website, the token is described as the “world’s first security token backed by a fully licensed bank.”
The website shares many similarities with Union Bank AG, a Lichtenstein-based bank. However, the website itself has an IP address that has been traced to an individual in Russia, fuelling suspicions over its legitimacy.
In a press release announcing the enforcement action, North Dakota Securities Commissioner Karen Tyler said that because ICOs are largely sold online, there is a high risk of fraud for investors.
“Because ICOs are sold over the internet and pitched heavily through social media platforms, North Dakotans can be exposed to the offers whether the promoter is down the street or on the other side of the globe,” Tyler said. “Financial criminals continue to cash in on the hype and excitement around blockchain, crypto assets, and ICOs – investors should be exceedingly cautious when considering a related investment.”
While there is some suggestion the Union Bank Payment Coin may be an explicit attempt to fraudulently solicit investments, many other ICOs backed by legitimate companies contravene securities laws—most commonly related to the offer and sale of unregistered securities by unregistered parties.
With an increasing number of ICOs being found to be securities, and therefore falling within the scope of existing securities regulation, it has become increasingly difficult for ICO promoters to operate in the unregulated sphere.
Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.
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The Spanish Ministry of Finance is to inspect some 15,000 individuals who have engaged in cryptocurrency transactions over the last year, Spanish-language news outlet El Pais reported.
The announcement follows on from the introduction of compulsory reporting of cryptocurrency transactions for Spanish taxpayers, and will investigate whether there is any basis for prosecution over tax fraud from those who might have profited from their crypto investments over the period.
The policy is part of a wider crackdown on crypto investors in Spain, with the government keen to recover as much tax liability as possible from those dealing in digital assets.
As part of its annual tax control plan, the Agencia Estatal de Administración Tributaria (AEAT), said it would be monitoring “the fiscal incidence of these new technologies, such as blockchain and, especially, cryptocurrencies,” with a view to preventing tax evasion and fraud.
According to AEAT, “The use of cryptocurrencies, such as [BTC], as payment means, is one of the most demanding challenges today. In order to face this threat, the use by the tax agency’s research units of the new information collection and analysis technologies in all types of networks will be enhanced.”
The move comes after the country’s National Fraud Investigation Office opened investigations into banks, financial companies and other organizations engaged in crypto transactions, before settling on a group of around 15,000 that have been earmarked for further inspection.
Should the investigations prove fruitful for the tax authorities, there is the suggestion that the scope of investigations could be broadened in future, potentially affecting a larger number of individuals with cryptocurrency holdings.
The Spanish authorities introduced measures back in October, requiring investors to declare the extent of their cryptocurrency holdings on an annual basis, in the form of a return to the tax office.
The AEAT has said it will now monitor those that are known to have been involved in cryptocurrency dealings, with a focus on those that have failed to fully declare capital gains or those who may have been involved in money laundering.
Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.
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State regulators in Colorado got tough with for more initial coin offerings (ICOs), putting a cease and desist order on them last week. This brings the total number of ICOs rebuked by the state to a dozen.
On its website, the state’s Division of Securities identified the four ICOs as Bitcoin Investments, Ltd., PInkDate, Prisma, and Clear Shop Vision Ltd. In an interview with CoinDesk, Colorado Securities Commissioner Gerald Rome said the crackdown is part of the agency’s effort “to ensure that the state’s securities market and the investors that operate within it are protected from unscrupulous actors that are taking advantage of the enthusiasm surrounding this field to perpetrate fraud and in some cases outright theft.”
He noted that the enforcement action is meant to advance Colorado as an “innovative leader” in the cryptocurrency space. Though the state’s ICO Task Force has been active since May, the cease-and-desist orders come several days after Colorado elected Jared Polis, a member of the Congressional Blockchain Caucus in the U.S. House of Representatives, as its new governor.
Aside from Colorado, other U.S. states are also taking action against potentially fraudulent token sales. Last week, Texas issued emergency cease and desist orders to crypto mining firms based in Australia and Canada. In October, the North Dakota Securities Department served a similar order to three firms that were discovered to be involved in promoting fraudulent securities and illegal business practices related to ICOs in the state.
A coalition of North American securities regulators, including the Colorado Division of Securities, is conducting more than 200 investigations as part of its “Operation Cryptosweep,” whose goal is to stifle cryptocurrency scams in the region.
Bob Webster of the North American Securities Administrators Association (NASAA), who plays a coordinating role in Operation Cryptosweep, said Colorado is among the more active jurisdictions in the U.S., along with Texas, North Dakota and Massachusetts.
“You’re starting to see now the results of those investigations,” according to Webster.
Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.
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The three siblings arrested in Thailand on allegations of fraudulently tricking a Finnish investor into shelling out over $24 million in cryptocurrency have pleaded not guilty to money laundering charges.
On Wednesday, the Bangkok Post reported that Prinya Jaravijit and his younger siblings, Jiratpisit and Supitcha, appeared before the Criminal Court where they were arraigned on collusion and conspiracy to launder money charges.
Prosecutors told the court the three, along with six other accomplices, lured Finn investor Aamai Otava Saarimaa into investing with them during the June-July period in 2017. According to the report, Saarimaa was tricked into buying 500 million DNA Co. shares, purchasing Expay Software Co. shares., and investing in an NX Chain Inc. project called Dragon Coin.
During that period, Saarimaa sent funds several times to an electronic wallet which belonged to Jaravijit. However, a few months later, the defendants decided to sell the digital assets, worth THB797.41 million ($24 million) at the time, which investigators said they deposited into their own accounts.
Prosecutors said the defendants spent the money—Jiratpisit reportedly bought land in Chatuchak District in Bangkok for THB43 million ($1 million), while his elder brother Prinya spent THB124 million ($4 million) to buy seven blocks of land in Bangkok’s Chatuchak and Din Daeng districts, as well as in Nonthaburi province.
Supitcha, meanwhile, allegedly spent THB8.5 million ($250,000) in December to register six blocks of land in Chatuchak.
Saarimaa eventually filed a complaint with the Thai Crime Suppression Division (CSD) after his efforts to follow up on his cash bore no fruit.
Jiratpisit and Supitcha were arrested in August, but they were released on bail of THB2 million ($61,000) each. Prinya fled to the United States to avoid the charges. When the Thai CSD revoked his passport, it became illegal for him to reside in the United States, leading to his return to Thailand. On arrival, Prinya was arrested by Thai authorities and charged. He is currently being held in the Bangkok Remand Prison.
The three will be back in court on December 24 for the examination of witnesses and evidence lists.
Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.
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