Tag: Crypto Fraud

SEC Freezes Assets of DEBT Box in $50 Million Crypto Fraud Case

by Blockchain News

The U.S. Securities and Exchange Commission (SEC) has obtained a temporary asset freeze, restraining order, and other emergency relief against Digital Licensing Inc., a Utah-based entity operating as “DEBT Box,” along with its four principals and 13 other defendants. The action is in connection with an alleged fraudulent scheme involving the sale of crypto asset securities, as announced in a press release dated July 28, 2023.

According to the SEC’s complaint, unsealed in the U.S. District Court for the District of Utah, the defendants have been engaged in an ongoing scheme since March 2021 to sell unregistered securities referred to as “node licenses.” Through various online videos, social media posts, and investor events, DEBT Box and its principals claimed that these licenses would generate crypto asset tokens via crypto mining activity, and that revenue-generating businesses in different sectors would drive the value of the tokens, resulting in significant gains for investors.

The SEC alleges that the “node licenses” were a sham, created by DEBT Box instantaneously using code on a blockchain, and that the company and its principals lied about virtually every material aspect of their unregistered offering. The complaint states, “We allege that DEBT Box and its principals lied to investors about virtually every material aspect of their unregistered offering of securities, including by falsely stating that they were engaged in crypto asset mining,” as per Tracy S. Combs, Director of the SEC’s Salt Lake Regional Office.

The fraudulent scheme reportedly raised approximately $50 million, along with unspecified amounts of Bitcoin and Ether. In total, 18 defendants have been charged with engaging in unregistered securities offerings, with additional charges for violations of the antifraud provisions of the federal securities laws against some of the defendants.

The Honorable Judge Robert J. Shelby, U.S. District Judge for the District of Utah, entered an order on July 28, 2023, imposing a temporary restraining order, asset freeze, and other relief. Josias N. Dewey of the law firm Holland & Knight LLP has been appointed as a temporary receiver over DEBT Box to marshal assets for the benefit of investors.

Investors who believe they were affected by the DEBT Box offering may seek further information at the receiver’s website or by calling a designated phone number.

The SEC’s action against DEBT Box highlights the regulatory body’s continued focus on ensuring compliance within the crypto asset space and protecting investors from fraudulent schemes. The investigation is ongoing, and the SEC has provided educational resources to help investors recognize the risks associated with crypto asset securities and unregistered offerings.

Image source: Shutterstock

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Seoul Prosecutors Probe Crypto Fraud at Delio, Haru, Pica, and WeMade

by Blockchain News

The Seoul Southern District Prosecutor’s Office has launched an investigation into three cases of alleged cryptocurrency fraud, according to a report by Hankyung on July 27, 2023. The newly formed joint investigation team for cryptocurrency crimes, which was established on July 26, 2023, is spearheading the investigation.

The cases under investigation involve Delio and Haru Invest, Pica Project, and WeMade, all of which are suspected of fraudulent activities related to their management. The joint investigation team has taken over these cases from the Financial Investigation 1 Department of the Southern District Prosecutor’s Office.

WeMade, the issuer of the virtual asset WEMIX, has been under scrutiny since 2021 due to various controversies. The company had previously faced criticism for liquidating KRW 225.5 billion worth of WEMIX without notifying users between November 2020 and January 2022. This led to a significant controversy and highlighted the importance of regulatory disclosure in the virtual asset market.

Haru Invest, a Singapore-based crypto investment manager, faced a crisis when CEO Hugo Lee had to apologize to its members for concerns arising from a recent incident. The company had to halt interest payments to all users and cooperate fully with authorities in response to legal actions initiated against it. The company had previously suspended withdrawals and deposits on the platform due to increased market volatility.

Delio, one of South Korea’s largest cryptocurrency lending companies, also faced a crisis when it had to halt interest payments to users. The company’s operations were in doubt after prosecutors raided the company following a fraud lawsuit filed by Delio clients. The company had previously suspended withdrawals and deposits on the platform, and it was reported that Delio withdrew KRW 9.24 billion (US$7.2 million) worth of its crypto holdings to three anonymous external wallets not disclosed by the company or the executives.

The investigation team, which includes most of the prosecutors from the Financial Investigation 1 Department, including Deputy Chief Prosecutor Gino Sung, who previously led the investigation into cryptocurrency malpractices, is expected to expedite the processing of these cases.

In addition, the case involving independent lawmaker Kim Nam-guk’s alleged large-scale coin holdings continues to be investigated by the Criminal 6 Department. However, as some of Kim’s allegations are linked to WeMade’s suspected illegal market-making, a joint investigation with the joint investigation team seems inevitable.

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Aussie competition watchdog investigating Meta over crypto scam ads

by Cointelegraph

Australia’s consumer and competition (ACCC) watchdog is investigating Facebook’s parent company Meta for a long running series of fraudulent cryptocurrency advertisements of the platform.

The news comes just a day after Cointelegraph reported that billionaire businessman Andrew “Twiggy” Forrest was pursuing criminal action against the social media giant for allegedly serving users crypto scam ads and fake articles which used his name and likeness.

Numerous other high profile celebrities from Hugh Jackman to Nicole Kidman have been fraudulently employed to draw users into investment scams.

The ACCC alleges that Meta allowed the crypto scammers to breach Australian consumer law, defrauding victims hundreds of thousands of dollars.

In Feb 3 comments to The Australian, ACCC chair Rod Sims said that although their investigation shares similarities with Forrest’s case, the “ACCC’s investigation is separate and concerns different questions of law.”

While Forrest’s case concerns potential breaches of Australia’s Commonwealth Criminal Code, the ACCC will be examining whether Meta has “raised concerns” under the Australia Consumer Law.

“Like Dr Forrest, we consider that Meta should be doing more to detect, prevent and remove false or misleading advertisements from the Facebook platform so that consumers are not misled and scammers are prevented from reaching potential victims.”

Forrest claims that by failing to take sufficient steps to eliminate the scam from being shared on its platform, Meta is not only in breach of Australia’s money-laundering laws, but also behaved in a “criminally reckless” manner.

He will initially bring his case to the West Australia Magistrates Court on March 28, with a committal hearing expected later in the year.

He also launched a simultaneous civil proceeding with the Superior Court of California last September, seeking injunctive relief. The case is still pending, with the date of the civil case yet to be set.

In 2020, the Australian Securities and Investments Commission (ASIC) issued a warning on fake celebrity-endorsed crypto ads, including Jackman, Kidman and even Waleed Aly.

Other celebrities including Elon Musk, Bill Gates and Richard Branson have also had their images stolen to front crypto scams.

Australian Facebook users have reported losing hundreds of thousands to the scam, including one alleged victim who told The Australian that they thought the scam was legitimate because it featured Forrest.

“Andrew Forrest is an icon for millions of Australians and you hold him in high regard, anything involving him you‘d think is legitimate because it’s coming out in public through Facebook,” they said.

Related: Aussie billionaire sues Facebook over crypto scams with AG’s consent

In 2019, Forrest was among several Australian celebrities, including Kate Winslet, who were falsely quoted as giving testimony for a fraudulent cryptocurrency.

One version of the scam quoted the celebs in fake mainstream news articles advertising a fake Bitcoin investment platform.

As reported by Cointelegraph in Aug 2021, investment scams cost Australian investors more than $50.5 million in the first six months of 2021, with crypto scams contributing to more than 50% of the losses.

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Data Shows Crypto Hacks And Fraud In 2021 Are On Track For A New Record

by NEWSBTC

Crypto hacks and scams are nothing new in the crypto space, but every time they happen, they still come as a shock to investors. Most especially the victims of these attacks.  Bull markets always seem to come with an increased number of attacks. So with a bull market that has raged on for the better part of a year, 2021 has definitely had its fair share of attacks, despite just entering its ninth month of the year.

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These attacks have accelerated with the recent crypto surge. Prices have been up across the board and it seems like this has been a cue for the attackers to ramp up their operations. This could be due in part to the high prices of the cryptocurrencies bringing much higher returns on their attacks. Whatever the case may be, attacks in 2021 have increased and data shows that the number this year will most likely surpass the record for last year.

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Accelerated Crypto Attacks In 2021

Crypto hacks and scams had previously reached a record number in 2020. At a total of 32 identified cases in 2020, it was the year with the highest number of hacking and fraud incidents in the crypto market. In just eight months, there have been 32 identified cases of hacking and fraud in 2021. With six months to go and the bull rally raging on, more of these attacks can be expected to happen before the year runs out.

Related Reading | Data Shows Nearly 90% of Bitcoin Has Been Mined, Here’s How Long It Will Take To Mine The Rest

Since 2017, the number of breaches has consistently increased each year, according to an analysis from Crypto Head. 2017 marks the beginning of one of the most memorable bull runs in the crypto space. So it is no surprise that there was a jump in the number of attacks from the previous year. In 2016, there were only 5 identified cases of crypto hacking and fraud. But this number jumped to 21 the following year in 2017.

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With four months left to go and DeFi exploits still on the rise, the number of attacks in 2021 may very well beat 38. These hacks and breaches are becoming even more sophisticated. Attackers are now developing tools that make their attacks harder to catch and trace.

2017 Attacks Carted Away The Biggest Loots

On average, just in 2017, attackers made away with $223.5 million on average. The total number of 21 attacks for the year came out to a balance of $4.7 billion stolen in crypto hacks and fraud. Setting the record for the highest amount stolen in a single year.

Related Reading | New To Bitcoin? Learn To Trade Crypto With The NewsBTC Trading Course

Despite having a higher number of attacks, 2020’s 38 identified cases came out to about $1.8 billion total. This amount already surpassed in 2021 by at least a billion. So far, the 32 combined attacks of 2021 have come out to a value of $2.9. The Poly Network attack that took place this year amounted to $610 million. Making it the biggest DeFi heist in history.

These attacks have mostly focused on the top coins in the crypto market, which, incidentally, also provide the most liquidity. About a third of these breaches have been targeted at the leading cryptocurrency, bitcoin. Ethereum comes in as second most targeted with 12.8%. Unknown coins make up about 9.2%, while ERC-20 tokens were targeted 7.4% of the time.

Crypto total market cap chart from TradingView.com

Crypto total market cap chart from TradingView.com


Total crypto market cap now trading at $2.29 trillion | Source: Crypto Total Market Cap on TradingView.com
Featured image from iStock, chart from TradingView.com

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Sen. Warren queries SEC chair on lack of crypto investor protection

by Cointelegraph

Democratic Senator and former U.S. presidential aspirant Elizabeth Warren has once again raised alarms about the current regulatory climate for crypto in the country.

According to Reuters, Senator Warren has written to Gary Gensler, chairman of the U.S. Securities and Exchange Commission (SEC), demanding answers about the scope of the SEC’s crypto oversight in the area of consumer protection.

In a statement issued by Senator Warren, the chair of the Subcommittee on Economic Policy bemoaned the lack of protection for crypto investors against the activities of rogue actors, adding:

“These regulatory gaps endanger consumers and investors and undermine the safety of our financial markets. The SEC must use its full authority to address these risks, and Congress must also step up to close these regulatory gaps.”

According to Reuters, Senator Warren’s letter to Gensler asked the SEC chairman to determine whether crypto exchanges are undermining the commission’s goal of ensuring a fair investment market environment.

SEC chairman Gensler reportedly has until July 28 to respond to Senator Warren’s query.

As previously reported by Cointelegraph, Senator Warren is a noted crypto critic who has described virtual currencies as “bogus private money.”

Several administration officials including Janet Yellen, Secretary of the U.S. Treasury Department, are also outspoken critics of cryptocurrencies.