July 05, 2020

Three fraud schemes that cost millions for their victims

For the layman, “cryptocurrency” is synonymous with the “fraud scheme”. And that's understandable: circumstances under which digital assets were launched and developed are quite favorable for fraudulent activities.

  • for most people, cryptocurrencies and their principle of operation are too complex and hard to understand.
  • it’s more difficult to track cryptocurrencies in comparison with fiat money and wealth
  • not all countries regulate digital assets to the proper level

All this happened because the crypto boom was pretty rapid and ahead of public consciousness. But people who wanted to make easy money by swindling innocent people, understood the situation quite fast. Today we’ll tell you about the biggest fraud schemes related to digital assets.

AriseBank, PlusToken and others scum

Scum” is a regular term for blockchain project which were created only for embezzling funds. One of the best-known is AriseBank (the USA). The company guaranteed bank accounts insured by the civil service, and Visa-based debit and credit cards. But did not even receive a banking license.

Another example of scum is PlusToken. As developers promised, it should have been a crypto wallet service. The project raised $3 billion in cryptocurrency but turned out to be just a Ponzi scheme.

Since 2017, thousands of similar projects have appeared. Financial Conduct Authority reported that in 2018, losses of investors were £ 27 million, and most cases are associated with cryptocurrency.

Hackers and Bitcoin

All the transactions are clear in Bitcoin and Ethereum systems, and it’s not hard to identify an owner of the wallet. But there are specific services (mixers) that hide token’s transactions.

That's the reason why malware hackers often require bitcoins as a ransom: it’s harder to trace Bitcoin than a bank account operations or marked bills.

One of the high-profile cases was related to The University of California: attackers encrypted the data and demanded a ransom in bitcoins of $ 1.14 million (116.4 BTC). According to the official data, in 2019, dozens of such crimes were committed. The average amount of a ransom was $ 115 123.

The false investments

Scum projects and blackmailers are mostly focused on companies. But for private investors, the main danger is fake asset managers. In June of 2020, the U.S. SEC froze assets of several alleged crypto scams run by two brothers. Sean and Shane Hvizdzaks offered to capital providers invest in a private fund performance and get profit from cryptocurrency but, instead redirecting investor funds to their own accounts.

Lots of nefarious personages use the same scheme and offer hundreds percent of income with cryptocurrency. So you’d better examine the source of profit thoroughly. If you’re offered to buy Bitcoin and capitalize on its volatility, be sure that your “agent” is really good with crypto trading. Analytics and ratings by Equite.io help you to make the right choice.