Fraud

SEC Chair Gensler Discusses How Securities Laws Apply to Crypto Tokens — Won’t Say if Ethereum Is a Security

12/01/2022 by Idelto Editor

The chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, has explained how securities laws apply to cryptocurrency tokens as he outlined the commission’s priorities in regulating the crypto space. “Our role at the SEC is to ensure that the public still gets basic protection,” he stressed.

SEC Chair Gary Gensler on Cryptocurrency Regulation

SEC Chair Gary Gensler discussed cryptocurrency regulation and the agency’s 2022 regulatory agenda on CNBC Monday.

The chairman explained that, in general, “If you are raising money from the public, and the public is in anticipation of profit based upon that promoter, sponsor, that group’s efforts — that’s within the securities laws, and it’s within the securities laws because Congress painted with a broad brush.” He elaborated:

They want to protect you — the investing public — so that you have proper information, or what’s called full and fair information, and protect you against fraud and scammers and the like.

Gensler stressed that investments that call themselves a token “are still probably, possibly a security.”

While acknowledging that new ways to invest, including crypto tokens and Special Purpose Acquisition Companies (SPACs), are “exciting,” the SEC chairman emphasized:

Our role at the SEC is to ensure that the public still gets basic protection.

Gensler further explained: “What is kind of old and really important is this basic idea that if you raise money from the public and the public is thinking about a profit, you have got to give them basic disclosures and everything.”

He was also asked to comment about the increase in crowdfunding using cryptocurrencies. Reiterating that he will not comment on any particular project, the chairman detailed: “Crypto tokens, I will call them, are raising money from the public, and are they sharing with the public the same set of disclosures that helps the public decide and are they complying with our Truth in Advertising? Call it the Securities Act’s anti-fraud provisions.”

“There are thousands of these projects basically trying to raise money from the public so that they can back an entrepreneurial idea,” the SEC chairman described. While emphasizing that he supports innovation, Gensler noted that “it’s about bringing it into the securities laws.” He opined:

Unfortunately, way too many of these are trying to say: ‘Well, we are not a security. We are just something else.’

“I think that the facts and circumstances suggest they are investment contracts, they are securities, and they should register,” Gensler concluded.

He was also asked whether ethereum is a security, citing that the SEC views XRP as a security in an ongoing lawsuit with Ripple Labs and its executives.

However, Gensler declined to comment on whether ether is a security. Reiterating that he is not going to answer about any one crypto, the SEC boss said: “I’m the chair of a five-member Commission that’s also a civil law enforcement agency. So, we don’t get involved in these types of public forums, talking about any one project, one possible circumstance, and give legal advice over the airwaves that way.”

What do you think about SEC Chairman Gary Gensler’s comments on crypto regulation? Let us know in the comments section below.

Pakistanis Lose Millions to Crypto Scam, Pakistan Issues Notice to Binance

08/01/2022 by Idelto Editor

Investors from Pakistan have become victims of a massive fraud using cryptocurrency. The country’s main law enforcement agency has issued a notice to crypto exchange Binance in relation to the scam which resulted in the loss of $100 million dollars for Pakistanis, media reports revealed.

Fraudsters Lure Pakistanis to Invest in Cryptocurrency Through Binance

Pakistan’s Federal Investigation Agency (FIA) has uncovered a crypto investment scam that has allegedly cost Pakistani citizens some 17.7 billion rupees (around $100 million). Providing details on the case, Imran Riaz, director of the FIA cybercrime wing, said on Friday that the organizers used cryptocurrency. Quoted by local media, Riaz announced:

We launched a probe after receiving complaints regarding a fraud involving billions of rupees being committed using nine online applications.

The fraudsters employed mobile apps offering Pakistanis crypto investment opportunities and people sent between $100 and $80,000, or an average of $2,000 per person. Investors were urged to register at Binance, the world’s leading crypto exchange, and transfer the money from the Binance wallet to accounts linked to the applications. On Dec. 20, authorities were contacted by many users who complained that around a dozen apps had suddenly stopped working.

“During the inquiry, it was found that the fraudulent accounts of different applications, namely, MCX, HFC, HTFOX, FXCOPY, OKMINI, BB001, AVG86C, BX66, 91fp, TASKTOK, were linked with Binance wallets,” officials detailed. Each had an average of 5,000 customers. The FIA has issued a notice to Hamza Khan, identified as Binance’s representative for Pakistan, and summoned him to appear in person on Jan. 10.

“The FIA Cyber Crime Sindh has issued order of attendance to Hamza Khan, General Manager/ Growth Analyst at Binance Pakistan (Crypto Currency Exchange) to explain his position on the linkage of fraudulent online investment mobile applications with Binance,” the FIA said, quoted by the Express Tribune and other news outlets. “A relevant questionnaire has also been sent to Binance Headquarters Cayman Islands and Binance US to explain the same,” the agency added in a press release.

Authorities to Keep Close Eye on Pakistani Crypto Transactions

The FIA claims that it has identified 26 wallet addresses at Binance used to transfer the money. “A letter has been written to Binance Holdings Limited to give the details of these blockchain wallet accounts as well as to debit block them,” the agency stated, adding it had also requested supporting documentation and information about the apps’ integration with the coin trading platform.

Noting that Binance is the “largest unregulated virtual currency exchange” where Pakistanis have invested millions of dollars, the FIA warns that in case of non-compliance, its cybercrime unit could recommend the State Bank of Pakistan (SBP) impose financial penalties. It has now started to closely monitor transactions made by Pakistanis on the exchange.

Law enforcement officials are also reaching out to the popular messaging app Telegram as members of the scheme were added to various groups spreading signals on the price fluctuations of bitcoin. The FIA is serving legal notices to social media influencers who have been promoting the apps and taking steps to block all bank accounts linked to the scam.

In December, the Federal Investigation Agency froze over 1,000 bank accounts and cards used by crypto traders from Pakistan. The purchase and sale of cryptocurrencies is still prohibited in the country as per a circular issued by the SBP in April 2018. Despite the ban, a recent report revealed that Pakistanis have invested $20 Billion in crypto assets. Calls have been mounting for the government to regulate related transactions.

Do you expect Pakistan to further restrict crypto investments and trading after this fraud case? Let us know in the comments section below.

Canada Detains Teen for Alleged $36 Million Cryptocurrency Theft

21/11/2021 by Idelto Editor

A teenager has been arrested in Canada after committing what law enforcement officials in Ontario have described as the largest crypto theft by a single person. The Canadian is accused of stealing tens of millions of dollars through a SIM swap targeting a crypto holder in the U.S.

Teen Arrested in Canada for Stealing Crypto Fortune From American

A young Canadian from Hamilton, Ontario province, has been accused of stealing cryptocurrency worth $46 million Canadian dollars (over $36 million). The digital money was allegedly misappropriated in a SIM swapping attack on a victim residing in the United States.

Local police believe this is the largest crypto theft committed by one man, the Toronto Star reported. In March 2020, Canadian law enforcement joined forces with the U.S. Secret Service Electronic Crimes Task Force and the FBI on the investigation which led to the arrest of the teenager, according to a statement by the Hamilton Police Service.

The press release revealed that police officials were able to identify the perpetrator when he used some of the digital coins to buy a rare online gaming username. If it wasn’t for this decision, the newspaper notes, the youngster could have gotten away with the crime.

The teenager now faces a sentence of up to 10 years in prison for the staggering cryptocurrency theft. Canadian authorities also announced they had already conducted multiple seizures of crypto assets at an estimated value exceeding seven million Canadian dollars (over $5.5 million).

In a SIM swap, fraudsters manage to port a victim’s phone number to different SIM card by exploiting security weaknesses at the mobile phone service provider. Scammers often convince or bribe employees of the carrier to conduct the transfer, after which they would receive any messages and calls on a device they control, including those that are intended for authentication purposes.

Crypto-targeting SIM swapping attacks have been on the rise globally as bitcoin prices broke all-time highs this year. In February, Europol detained 10 members of a SIM swapping criminal gang that allegedly stole coins worth $100 million, as Bitcoin.com News reported. The arrests followed an international investigation into a series of cases involving this particular technique in 2020.

Do you expect SIM swapping attacks on cryptocurrency holders to further increase in the future? Share your thoughts on the subject in the comments section below.

Finiko Fugitives Suspected of Moving 750 BTC From Crypto Pyramid’s Wallet

13/11/2021 by Idelto Editor

A large amount of cryptocurrency has reportedly been withdrawn from a wallet previously controlled by the Finiko Ponzi scheme in Russia. The wallet’s unknown operators have transferred coins worth $48 million this month. The digital currency was split into smaller amounts and deposited to different addresses.

750 BTC Removed From Crypto Pyramid Finiko Wallet

A total of 750 BTC, worth around $48 million at the time of writing, has been withdrawn from one of the wallets used by crypto Ponzi scheme Finiko, Forklog reported. Youtube blogger Andrey Alistarov broke the news about the transfer, revealing that it was made in three separate transactions of 250 BTC each since the beginning of November.

The money was initially moved to a single address and subsequently sent to another wallet at the cryptocurrency exchange Huobi, quoted data from blockchain analysis platform Crystal Blockchain shows. The crypto funds were then divided into smaller amounts and transferred to other addresses, the publication details.

Alistarov alleged that these transactions had been ordered by three of Finiko’s high-ranking members who are still at large. Zygmunt Zygmuntovich, Marat Sabirov, and Edward Sabirov, close associates of the pyramid’s founder Kirill Doronin, managed to leave the Russian Federation as the crypto investment scheme collapsed this summer, avoiding detention. In September, a high court in Tatarstan confirmed their international arrest warrants.

The Russian vlogger commented that the Finiko co-founders transferred the money in multiple transactions on purpose. “Why they haven’t been locked up until now is unclear, because they have long been marked as a scam. One thing is clear – money is being cashed out at the moment,” Andrey Alistarov added.

Authorities in Russia are currently working to establish all the facts in the case with Finiko, a phantom entity that lured hundreds of thousands of investors by advertising itself as an “automatic profit generation system” and promising extraordinarily high returns. Due to the large scale of the fraud, the federal Ministry of Internal Affairs took over the investigation.

In early October, Kirill Doronin, an Instagram influencer associated with other Ponzi schemes in the past, two of Finiko’s vice presidents, Ilgiz Shakirov and Dina Gabdullina, as well as Lilia Nurieva, who rose to the rank of a so-called “10th Star,” were transferred to the capital Moscow.

Finiko is arguably Russia’s largest financial pyramid scheme since the notorious MMM in the 1990s. While the officially registered losses to the scam have reached 1 billion rubles (close to $14 million), independent estimates suggest the total is more likely to exceed $4 billion.

According to a report by blockchain forensics firm Chainalysis, the Ponzi scheme received over $1.5 billion worth of bitcoin in 800,000 separate deposits from investors between December 2019 and August 2021. Among its victims are citizens of Russia, Ukraine and other former-Soviet countries, several EU member states, and the U.S.

Do you think fugitive Finiko members are behind the transfer of 750 BTC from a wallet belonging to the crypto pyramid? Tell us in the comments section below.

FBI Public Service Announcement Warns of ‘Increased’ Crypto ATM, QR Code Fraud

05/11/2021 by Idelto Editor

The Federal Bureau of Investigation (FBI), America’s domestic intelligence and security service, has published a public service announcement concerning fraudulent schemes associated with cryptocurrency ATMs and QR codes. The FBI’s warning, published on November 4, highlights the presence of “scammers” directing their energy at unknowing victims.

US Federal Agency Warns of Increase in Crypto ‘Scammers’

On Thursday, the U.S. government entity the FBI published a public service announcement that explains “criminal actors” are maliciously utilizing cryptocurrency automated teller machines (ATMs) in order to compromise victims’ crypto funds. The FBI’s press release stems from the Internet Crime Complaint Center which has seen an “increase in scammers.”

“The FBI warns the public of fraudulent schemes leveraging cryptocurrency ATMs and Quick Response (QR) codes to facilitate payment,” the announcement notes. “The FBI has seen an increase in scammers directing victims to use physical cryptocurrency ATMs and digital QR codes to complete payment transactions.”

FBI Offers Public Tips to Avoid Fraud

It’s not the first time the FBI has issued public warnings in regard to the cryptocurrency ecosystem. During the first week of May, Bitcoin.com News reported on the FBI placing warning signs on crypto ATMs in the U.S., and in mid-July, the federal agency issued an industry-wide warning about possible attacks on exchanges and crypto asset holders.

The latest warning from the FBI’s Internet Crime Complaint Center offers a number of tips to protect the average citizen from malicious criminal actors. “Do not send payment to someone you have only spoken to online, even if you believe you have established a relationship with the individual,” the FBI’s press release says. “Do not follow instructions from someone you have never met to scan a QR code and send payment via a physical cryptocurrency ATM,” the federal agency’s warning adds.

What do you think about the FBI’s public service announcement regarding the increased presence of scammers leveraging crypto ATMs and QR codes? Let us know what you think about this subject in the comments section below.