Tag: Ponzi Scheme

CEO of IcomTech Pleads Guilty in Cryptocurrency Ponzi Scheme

by Blockchain News

Key Takeaways

* Marco Ruiz Ochoa pleads guilty to conspiracy to commit wire fraud in U.S. District Court.

* IcomTech, founded in 2018, falsely promised guaranteed daily returns on cryptocurrency investments.

* The scheme involved lavish events and promotional tactics to lure victims.

The Guilty Plea

Marco Ruiz Ochoa, the former CEO of IcomTech, pleaded guilty to one count of conspiracy to commit wire fraud on September 27, 2023, before U.S. District Judge Jennifer L. Rochon. The announcement was made by Damian Williams, the United States Attorney for the Southern District of New York. Ochoa’s guilty plea is part of a broader investigation into IcomTech, a large-scale cryptocurrency Ponzi scheme that defrauded investors by promising guaranteed daily returns on cryptocurrency investments.

The Scheme’s Operations

IcomTech was initially founded in 2018 by David Carmona, with Ochoa serving as the CEO until 2019. The company falsely claimed to engage in cryptocurrency mining and trading, promising investors high returns. In reality, the company did not engage in any such activities. Funds from new investors were used to pay older investors and for personal enrichment of the promoters, including Ochoa and his co-defendants David Carmona, Juan Arellano, Moses Valdez, and David Brend.

Promotional Tactics

The promoters of IcomTech, including Ochoa, traveled extensively both within the United States and internationally to host events aimed at attracting more investors. These events often featured luxury cars and clothing to give an impression of legitimate success. Despite the festive atmosphere, most investors were unable to withdraw their so-called profits and ultimately lost their entire investments.

Victim Complaints and Collapse

As early as August 2018, investors faced difficulties in withdrawing funds from their online portal accounts. When complaints arose, IcomTech promoters offered proprietary crypto tokens, known as “Icoms,” claiming they would eventually hold significant value. These tokens turned out to be worthless, leading to further financial loss for the victims. By the end of 2019, IcomTech ceased payments and collapsed.

Legal Consequences

Ochoa, 35, of Nashua, New Hampshire, now faces a maximum term of 20 years in prison for his role in the scheme. The case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit, with assistance from the Securities and Exchange Commission and the Commodity Futures Trading Commission.

Related Event

Just a day before Marco Ruiz Ochoa’s guilty plea in the IcomTech case, Pablo Renato Rodriguez, co-founder of AirBit Club, was sentenced to 12 years in prison for a similar cryptocurrency pyramid scheme. Announced by U.S. Attorney Damian Williams, Rodriguez and his co-defendants have been ordered to forfeit approximately $100 million in assets. The sentencing comes as a reminder of the recurring issue of cryptocurrency scams, with co-defendants awaiting sentencing in early October 2023.

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SafeMoon LP Compromised

by Blockchain News

SafeMoon, a cryptocurrency project that gained traction through endorsements by celebrities and social media influencers, recently announced that its liquidity pool (LP) had been compromised. While the company has not revealed any details about the attack, it confirmed that it is taking steps to address the issue as soon as possible.

The incident is the latest in a series of attacks targeting cryptocurrency projects in recent months. Like many other crypto projects in 2021, SafeMoon was backed by numerous celebrities, including Nick Carter, Soulja Boy, Lil Yachty, and YouTubers Jake Paul and Ben Phillips. However, a lawsuit filed in February 2022 alleged that these endorsements were part of a larger scheme to defraud investors by misleading them to purchase SafeMoon tokens under the pretext of unrealistic profits.

Experts suggest that a recent software upgrade may be to blame for the vulnerability that allowed the attacker to compromise SafeMoon’s LP. According to PeckShield, a blockchain investigation firm, a public burn function introduced in the latest upgrade allowed users to burn tokens from other addresses, potentially creating a security flaw that could be exploited by hackers.

A community member known as “DeFi Mark” provided further details about the attack, explaining that the vulnerability was used to remove SafeMoon tokens, causing an artificial spike in the token’s price. The attacker was then able to sell off the tokens at an inflated price, taking advantage of the situation for personal gain.

The incident has raised questions about the security and legitimacy of SafeMoon, as well as the role of celebrity endorsements in cryptocurrency projects. While the company has not provided any further details about the attack or its response, it is clear that security is a top priority for SafeMoon and other cryptocurrency projects.

Cryptocurrency remains a relatively new and largely unregulated industry, with many investors drawn in by the promise of high returns and the endorsement of celebrities and influencers. However, as the SafeMoon incident and others like it have shown, there are risks involved in investing in this space, and investors should be cautious and do their own research before committing their money to any project.

Despite the challenges and risks, many experts believe that cryptocurrency and blockchain technology have the potential to revolutionize the financial industry and create new opportunities for investors and businesses alike. As the industry continues to mature and evolve, it is likely that we will see more incidents like the SafeMoon attack, but also more innovations and advancements that could transform the way we think about money and finance.

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Forsage Founders Indicted for Alleged $340 Million “Global Ponzi” Scheme on Ethereum Blockchain

by Blockchain News

A federal grand jury in the District of Oregon has handed down indictments against the individuals who are believed to have been the masterminds behind the “global Ponzi” scam known as Forsage, which is said to have generated $340 million.

According to a statement released by the Department of Justice (DOJ) on February 22, the four Russian founders, Vladimir Okhotnikov, Olena Oblamska, Mikhail Sergeev, and Sergey Maslakov, have been formally accused of having key roles in the scheme that raised approximately $340 million from victim-investors. This information comes from the formal accusation.

U.S. Attorney Natalie Wight for the District of Oregon stated that “today’s indictment is the result of a rigorous investigation that spent months piecing together the systematic theft of hundreds of millions of dollars.” She also stated that “bringing charges against foreign actors who used new technology to commit fraud in an emerging financial market is a complicated endeavor only possible with the full and complete coordination of multiple law enforcement agencies.”

Forsage promoted itself as a low-risk, decentralized financial platform that was based on the Ethereum blockchain and offered customers the opportunity to create passive income over the long term. Blockchain analytics, on the other hand, allegedly shown that eighty percent of Forsage “investors” got back less money than they had initially contributed.

Analysis of the smart contracts, as reported by the Department of Justice (DOJ), indicated that monies that were obtained when new investors acquired “slots” in Forsage’s smart contracts were routed to older investors, which is consistent with the definition of a “Ponzi scheme.”

Forsage has an active Twitter account, on which they recently posted a thread saying that community members who take part in “The Ambassador Program” will be able to receive monthly incentives by accomplishing certain activities. The tweet was published on February 22.

The Securities and Exchange Commission filed charges of fraud and selling unregistered securities against the company’s four founders and seven promoters on August 1. At the time, acting chief of the SEC’s Crypto Assets and Cyber Unit Carolyn Welshhans said: “Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”

Back in 2020, the Philippines Securities and Exchange Commission had also raised concerns about Forsage, indicating that it may be a Ponzi scheme. However, one month later, the platform remained the second-most popular decentralized application (DApp) on the Ethereum blockchain.

When a prosecutor brings criminal charges against an individual or group and accuses them of committing an offense, this is referred to as a charge. However, an indictment is filed by a grand jury if prosecutors are successful in persuading a majority of the grand jury members that a formal accusation is warranted following an investigation.

The use of grand juries is widespread practice in the prosecution of significant federal and state criminal crimes.

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Elizabeth Warren Wants SEC to Double Down on Crypto Enforcement

by Blockchain News

Elizabeth Warren, a senator in the United States who is well-known for her scepticism regarding cryptocurrencies, recently issued a call to action for the Securities and Exchange Commission (SEC) to “double down” on its attempts to regulate virtual currencies. She did so by urging the SEC to “double down” on its attempts to regulate virtual currencies. She is drawing attention to the fact that those involved in the bitcoin industry are now doing their business “scared” of what is going to happen by behaving in this way.

The words that Warren made were a part of an interview that took place on January 25 with the American Economic Liberties Projects. The interview was conducted by the American Economic Liberties Projects. It was Elizabeth Warren who first brought up these accusations.

The senator was of the opinion that ever since Gensler was inaugurated in as chairman of the SEC in April 2021, the Commission “has made a decent start” toward repairing some of the issues that were caused by the previous leaders of the SEC during the time that the Trump Administration was in power. This statement was made in reference to the fact that Gensler took over as chairman of the SEC in April 2021. This comment was made in response to the fact that Gensler assumed his position as chairman of the SEC in April of 2021. The senator believed that this was the case and expressed his opinion as such.

Warren stated that the previous administration of the SEC “basically gave the green light” to set up a market for cryptocurrencies that was “full of garbage tokens, unregistered securities, rug pulls, Ponzi schemes, pump and dumps, money launderings, and sanctions evasions.” Warren was referring to the fact that the market for cryptocurrencies was “filled with garbage tokens.” When Warren said that the cryptocurrency market was “packed with trash tokens,” he was alluding to the fact that the market was flooded with worthless tokens. When Warren referred to the market for cryptocurrencies as being “stuffed to the gills with garbage tokens,” he was making a reference to the fact that the market was awash with tokens that had no value.

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SEC Sues 11 Individuals involving Forsage Crypto Ponzi Scheme

by Blockchain News

The United States Securities and Exchange Commission (SEC) has filed charges against 11 alleged masterminds of the popular Forsage crypto pyramid and Ponzi scheme.

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As announced by the commission, the charges were filed in the United States District Court in the Northern District of Illinois, and it involved four of the platform’s founders living outside of the US and 11 residents in America.

The Forsage platform was launched as an investment outfit on Ethereum but later launched on the Tron and BNB Chain. Through the scheme, investors earn money only when they onboard other people into the scheme, and through the aid of smart contracts, the investment protocol also rewards people from overflows through a series of downlines.

According to the SEC, the 4 masterminds, Vladimir Okhotnikov, Jane Doe a/k/a Lola Ferrari, Mikhail Sergeev, and Sergey Maslakov, launched Forsage.io and contracted the other defendants to help in promoting the scheme across the board. The Forsage platform was reportedly marketed and opened access to US residents without regard for the underlying securities laws.

The regulator said the Forsage defendants continued with the promotion of the platform despite warnings from the Securities and Exchange Commission of the Philippines and in March 2021 by the Montana Commissioner of Securities and Insurance.

“As the complaint alleges, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors,” said Carolyn Welshhans, Acting Chief of the SEC’s Crypto Assets and Cyber Unit. “Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”

While the case is now opened, the four masterminds are not yet in court. However, two of the remaining defendants, Samuel D. Ellis of Louisville and Sarah L. Theissen of Hartford, Wisconsin, have agreed to pay civil fines that the judge will determine.

Fraudulent schemes featuring cryptocurrencies have been making the rounds in recent times. In like manner, the founder of OneCoin, Ruja Ignatova, has been placed on the list of the 10 most wanted criminals in the world by the Federal Bureau of Investigation (FBI).

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CFTC Nabs 2 Crypto Fraudsters Involving in a $44M Ponzi Scheme

by Blockchain News

Two suspected cryptocurrency fraudsters Sam Ikkurty of Portland, Oregon, and Ravishankar Avadhanam of Illinois have been charged by the United States Commodity Futures Trading Commission (CFTC) for illegally soliciting as much as $44 million through Ponzi-like scheme.

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According to the Commodity and Futures regulator, both suspects utilized the social video streaming platform, YouTube to solicit funds from investors with the promise of investing the capital pool and paying out profits. The CFTC said the complaints it filed against both men allege that instead of investing the pool funds, the capital was being redistributed amongst signed participants in a scheme that can only be termed Ponzi Scheme.

The CFTC update showed that at least 170 people have fallen victim to the gimmicks from the two and that some of the funds which were intended for circulation were being used for their personal gains. 

While a status hearing is scheduled for May 25, the CFTC said it is charging the duo for the fraud and for operating a community investment pool without appropriately registering such with the commission.

The CFTC now wants restitution for defrauded customers, “disgorgement of ill-gotten gains, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA) and CFTC regulations.”

The majority of the enforcement actions being carried out by the CFTC is largely centered on the cryptocurrency ecosystem. Irrespective of the scale, the CFTC is notably playing a vital role in cracking down on cybercriminals, especially those looking for safe haven in digital or virtual assets.

Amongst the high-profile cases of law enforcement, the CFTC has handled in recent times includes the placement of LedgerX co-founders on leave following deep scrutiny from the commission. BitMEX exchange was also charged for operating an illegal crypto derivatives brokerage in the US for which it later paid $100 million in fines back in August last year.

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Mining Capital Coin CEO Indicted for Masterminding $62M Crypto Ponzi Scheme

by Blockchain News

Mining Capital Coin CEO Luiz Capuci Jr has been indicted on Friday for orchestrating a scam that defrauded investors around the world of about $62 million, according to the U.S. Department of Justice.

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Luiz Capuci Jr used cryptocurrency mining and investment platform Mining Capital Coin, or MCC for short, to defraud investors of their money by selling “mining packs” for a handsome profit.

The company claims to be able to quickly mine sizable cryptocurrencies through its platform’s network of crypto miners. More than 65,000 investors have been victimized since January 2018.

Capuci convinces investors that MCC’s own cryptocurrency, “Capital Coin,” is run at “very high frequency, capable of thousands of transactions per second,” by a “BitConnect trading bot” and provides daily returns

In fact, according to the indictment statement, it was an elaborate textbook Ponzi scheme that also allegedly ran a pyramid scheme, recruiting promoters to sell mining packages and promising gifts of great value, from Apple Watches to Ferrari sports cars and more.

Assistant Attorney General Kenneth A. Polite, Jr of the Department of Justice Criminal Division said;

“Cryptocurrency-based fraud undermines financial markets worldwide as bad actors defraud investors and limits the ability of legitimate entrepreneurs to innovate within this emerging space,”

If convicted, he could face up to 45 years in prison. Crypto Ponzi schemes have been on the rise, even entering the market through traditional financial banking institutions.

A U.S. grand jury also indicted Satish Kumbhani, the founder of BitConnect, for orchestrating a fraud scheme that siphoned approximately $2.4 billion from investors, according to the Department of Justice.

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BitConnect Founder Charged with Orchestrating Global Crypto Ponzi Scheme Worth $2.4B

by Blockchain News

A U.S. grand jury indicted Satish Kumbhani, the founder of BitConnect, orchestrating a fraud scheme that siphoned approximately $2.4 billion from investors, according to the Department of Justice.  

The 36-year-old from Hemal, India, with his co-conspirators, deceived investors’ money to gain substantial profits by taking advantage of the volatility of crypto exchange markets through BitConnect’s “Lending Program.” 

Hemal convinced investors that the program was powered by a cutting-edge technology called the “BitConnect Trading Bot” and “Volatility Software.”

In reality, according to the indictment, it was a well-orchestrated textbook Ponzi scheme where earlier BitConnect investors were paid using money from later investors.

Before going underground in 2018, the cryptocurrency scam had hit a peak market capitalization of $3.4 billion, and this was attained through the manipulation of its digital currency called BitConnect Coin (BCC).

Despite being large, Kumbhani was charged with various counts, such as operating an unlicensed money transmitting business and conspiracy to commit wire fraud and international money laundering. If convicted, he could be incarcerated for a maximum of 70 years. 

Eric Smith, a special agent in charge of the FBI’s Cleveland Field Office, noted:

“Today’s indictment reiterates the FBI’s commitment to identifying and addressing bad actors defrauding investors and sullying the ability of legitimate entrepreneurs to innovate within the emergent cryptocurrency space.” 

Ryan Korner, a special agent in charge of the IRS Criminal Investigation’s office in Los Angeles, added:

“As cryptocurrency gains popularity and attracts investors worldwide, alleged fraudsters like Kumbhani are utilizing increasingly complex schemes to defraud investors, oftentimes stealing millions of dollars.”

Kumbhani’s indictment comes months after crypto worth $57 million was seized from Glenn Arcaro, a top American-based BitConnect promoter. Victims were to benefit from the liquidation of the crypto assets after a court gave the go-ahead. 

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Battle of the bots: WTF token launch drains 58 ETH

by Cointelegraph

Fees.wtf is a simple service that shows Ether (ETH) users their lifetime spend on Ethereum blockchain transactions by measuring gas. You plug in your wallet address on their website and they tell me how much gas you spent. 

The project released their token, WTF, in an airdrop Friday at midnight. Essentially, users would be able to claim WTF tokens as well as a “Rekt” NFT for 0.01 ETH. The Rekt NFT grants lifetime access to the pro version of fees.wtf.

According to their Discord announcement, the initial launch would offer 100 million of WTF and the “circulating supply will be the main attraction in the tokenomics.” However, it didn’t quite go to plan.

Following a series of frantic trading behavior between bots in the opening hours of the airdrop, one bot ran off with a reported 58 ETH, or $180,000. On Etherscan, 58 ETH was drained from the wrapped ETH (WETH) to the WTF liquidity pool.

Social media channels were quick to respond because many airdrop participants lamented losing thousands of dollars in ETH. The WTF team chimed in two hours after the airdrop to calm their ranks:

“Immediately on launch there was only a tiny bit of liquidity and there were ape bots that were chucking in 100s of ETH into a pool with an ETH or two of liquidity. They also had high slippage and ended up being sandwiched by the other bots which essentially drained all their ETH.”

Basically, within five minutes of the token launch, poor liquidity pool management from the WTF devs left the liquidity pool exposed. As there was low liquidity, bots were able to manipulate the price of WTF to then sell for WETH.

The bots would battle it out till one winner would take home the pot. In effect, the bot stole from users who provided liquidity to the pool, trying to claim their WTF tokens and Rekt NFT. The victor managed to send an “ultra-fast transaction at 3,000 Gwei”, making a 6x return on their initial investment.

The WTF team sent out another Discord update two hours after the airdrop, stating that “The core contracts are all fine, this was a war on Uniswap.” The team added, “We hope no one was affected by it.” However, as has become a common occurrence in airdrops of late, lots of users lost a lot of money.

The price graph of the token since launch paints a thousand words. The initial spike shows the bot activity, swiftly followed by a 10x loss in value.

The official WTF Discord group is brimming with users sharing stories of losing money. Some are “shaking” with rage while death threats and lawsuit claims are rife.

One Etherscan transaction points to one user losing 42 ETH, or $135,000, for 0.000044170848308398 WTF, effectively $0.01.

Related: Recounting 2021’s biggest DeFi hacking incidents

As daylight dawns on the project, some Twitter users have called out the project as a Ponzi scheme. The referral element to the project is spurious. Referrers of the WTF project claim a 50% on fees “to make wtf go viral,” while the WTF team earns 4% from each transfer. In total, the WTF team claimed almost half a million in token transfer fees in a little over 8 hours.

Twitter user Lefteris Karapetsas didn’t mince his words:

The WTF project states merely that the supply of tokens is “deflationary”, and that 40 million WTF tokens will go to their treasury. There is not a great deal of detail regarding the token distribution. Meows.ETH concluded their Twitter thread with a zen approach to the controversial project launch: 

“If you were fortunate enough to claim a big amount of $WTF and cash it out for a profit, be happy. Unless you’re attempting to bot the initial liquidity, don’t FOMO into buying a newly launched altcoin with high slippage.”