A Cryptocurrency scam was uprooted by the Securities and Exchange Commission (SEC), resulting in 11 arrests from several countries around the globe, the commission announced on August 5th.
This scam is part of an increasingly complex trends in the cryptocurrency sphere. The wildly fluctuating currency is a target for many scammers and hackers as it is unregulated to the point that its price can change by the second. In 2021 according to the FTC, reported losses to crypto-currency fraud totaled over $680 million. About $575 Million of this came from bogus investment opportunities, such as the pyramid scheme and other phishing opportunities.(1)
The Crime in question
According to the filings, the scheme began in earnest in January 2020 with the defendants creating a website called Forsage.io. This website was created with the idea of allowing real estate investors to conduct transactions using several blockchains, such as Ethereum, Tron and Binance.
However, the SEC alleges that this was merely a front for a much larger scheme. Using a pyramid scheme, they continuously recruited people to help add more to this illegal enterprise. In addition, the SEC had uncovered that their scheme also included a Ponzi scheme, where they were taking money from other investors and paying the original investors. This resulted in cease and desist letters being sent out that were ignored. The company, rather than back down, used Youtubers and other social media influencers to buy into this scheme. Eventually, the SEC, with the FBIs help, was able to arrest eleven suspects from around the world including the countries Georgia, Malaysia, and Russia. Three have agreed to settle the matter in civil court while others are still pending their trials.(2)
Recent Crypto currency Trends
The recent SEC arrests is part of a larger trend in cryptocurrency. According to the FTC, over $1Billion has been lost to scams since the start of 2021. In 2022, there are many scams that involve cryptocurrency, which is common for something as lucrative as this industry. Among the scams noted:
- Ponzi Schemes: Ponzi schemes pay older investors with the proceeds from new ones. To get fresh investors, cryptocurrency scammers will lure new investors with bitcoin. It's a scheme that runs in circles, since there are no legitimate investments; it is all about targeting new investors for money. The main lure of a Ponzi scheme is the promise of huge profits with little risk. There are always risks with these investments, however, and there are no guaranteed returns.
- In bitcoin investment schemes, scammers contact investors claiming to be seasoned "investment managers." As part of the scheme, the so-called investment managers claim to have made millions investing in cryptocurrency and promise their victims that they will make money with investments. To get started, the scammers request an upfront fee. Then, instead of making money, the thieves simply steal the upfront fees. The scammers may also request personal identification information, claiming it's for transferring or depositing funds, and thus gain access to a person's cryptocurrency. Another type of investment scam involves using fake celebrity endorsements. Scammers take real photos and impose them on fake accounts, ads or articles to make it appear as though the celebrity is promoting a large financial gain from the investment. The sources for these claims appear to be legitimate, using reputable company names such as ABC or CBS with a professional-looking website and logos. However, the endorsement is fake.
- Phishingscams have been around for some time but are still popular. Scammers send emails with malicious links to a fake website to gather personal details, such as cryptocurrency wallet key information Unlike passwords, users only get one unique private key to digital wallets. But if a private key is stolen, it is troublesome to change this key. Each key is unique to a wallet; so, to update this key, the person needs to create a new wallet. To avoid phishing scams, never enter secure information from an email link. Always go directly to the site, no matter how legitimate the website or link appears. (3)
While Cryptocurrency is a popular new currency, it is also a valuable target for hackers. And they can use these same techniques to catch anyone off guard. Consult your insurance provider about the steps you should take to protect your data or learn the sign to watch for.