BitConnect, Binance, And OneCoin: Crypto Scammers Are On The Rise In May
By ORS CryptoHound on ALTCOIN MAGAZINE
Crypto has gained in reputation and financial strength in the decade since it started, but there is one illness for which the industry can’t seem to find the antidote: crypto scams. Scammers, taking the window of opportunity provided by new financial technology, have been able to target individuals for tens of millions of dollars, raking in a profit and then disappearing without a word.
In the first three months of 2019 alone, crypto hackers and scammers made off with more than $1.2 billion worth of coins.
May was a no less exciting month for the crypto community (irony intended). Here, we’ll take a look at the top six crypto crimes of the month, and finish with some tips on how to avoid becoming the victim of one yourself.
#1 — OneCoin For $4 billion
OneCoin has been making headlines since early spring — and the coverage is not so pretty. According to US investigators, One Coin is a hybrid pyramid-Ponzi scheme under which brother and sister Konstantin Ignatov and Ruja Ignatova defrauded investors around the world of nearly $4 billion in less than five years.
In addition to US authorities, 14 other countries have opened criminal investigations into Ignatov and OneCoin, including the UK, Belgium, Germany, Italy, Uganda, and India.
Ignatov, arrested in March 2019 and awaiting trial, now faces a lawsuit in addition to criminal charges. In May, ex-investor Christine Grablis sued Ignatov, Ignatova, and two others involved in running OneCoin. Grablis says she invested $130,000 in non-existent coins that OneCoin leadership sold her, according to her lawyer, “fraudulently” and in violation of federal securities laws. Grablis is suing the individuals for compensation of funds and further damages.
Ignatov continues to deny all allegations; meanwhile, his sister, who is also wanted, remains at large. If convicted, Ignatov faces 20 years in prison; his sister, twenty-five.
#2 — $40 Million Binance Hack
On May 7, Binance — one of the world’s largest crypto exchanges — also became the site of the world’s 6th largest crypto hack. Hackers targeted the platform’s hot wallets, making off with $40 million in coins. Cold storage was untouched.
Binance has been open about the attack and the steps they have taken to repair the damage. CEO Zhao Changpeng says that the hackers used methods including phishing to breach the security measures in place.
Yet although $40 million is a significant sum, the silver lining is that it’s just a fraction of the company’s total holdings — 2%, to be exact. Binance restored secure operations within just two days of the hack, although skeptics warn that with user credentials compromised, Binance — and their customers — aren’t out of the clear yet.
#3 — BitConnect $2.5 Billion Scam Back
Trading platform Bitconnect made headlines in January 2018 when it abruptly shut down, leaving investors with empty pockets. Now, it’s sent shock waves through the crypto community again by announcing that in July it will open for trading once again.
The company opened in 2016, offering would-be investors returns of 3% per day. Its initial coin offering was one of the most successful to date, and by 2018, BitConnect had an estimated total value of $2.5 billion.
All that glitters is not gold, however, and some in the industry, by this point, had begun raising concerns that BitConnect’s business model resembled a Ponzi scheme. Eventually, authorities from several countries — including the United States, India, and Australia — opened investigations into BitConnect’s finances. BitConnect’s run finally ended when the company, facing multiple criminal probes, closed down its trading and loan platform.
Now the company stands poised to resurrect if it can convince investors to turn a blind eye to the FBI case currently against it. In May of this year, BitConnect posted on Twitter that it will reopen on July 1st. With two of its leaders in jail and previous investors still reeling from their losses, pulling off a second run would be a truly astounding feat.
#4 — $75 Million SIM-Card Swap
It may not have been a Friday, but it was an unlucky May 13th nonetheless for Nicholas Truglia, who was found guilty of a $75 million “SIM-swap”.
The California Supreme Court ruled that the 21-year old California resident had stolen over $20 million in cryptocurrency from plaintiff Michael Terpin, after gaining access to the plaintiff’s crypto wallets via SIM card. In early 2018, Truglia had managed to convince Terpin’s mobile operator that he was the owner of Terpin’s number. He was then able to access and drain Terpin’s crypto funds, for a total of $23.8 million. Since the theft, the value of the stolen coins had increased to $75 million.
The silver lining of this case for the crypto community is that the court sided with Terpin’s demand that Truglia reimburses Terpin for the current value of the loss, not the value of the coins at the time of the theft. This ruling is significant because it recognizes the market value of crypto as legitimate and sets a precedent for such cases in the future.
Truglia is currently being investigated for six similar crimes.
#5 — Argyle Coin For $30 Million
Argyle Coin was shut down in May by American authorities, who say the company is a Ponzi scheme. Founder Jose Angel Aman had defrauded hundreds of would-be investors of over $30 million by convincing them to invest in a coin supposedly tied to “fancy colored diamonds.”
In reality, the so-called “Argyle” was a non-existent cryptocurrency. Aman used investor money, which he took in the form of securities and investment contracts, to operate a web of fraudulent business, diverting the rest into his own pockets.
The United States Securities and Exchange Commission (SEC) has frozen Aman’s assets and charges Aman and his companies with violation of US antifraud law.
#6 — Dutch Scammer For $2.2
Dutch entrepreneur Barry van Mourik was arrested in the Netherlands for posing as a crypto miner while using investor funds to purchase luxury items for himself. He allegedly took in $2.2 million for the non-existent project.
Mourik hooked investors by guaranteeing returns of 0.3 BTC (roughly $2,300) a month. Prior to this project, he had also been operating a similar scam known as Koinz Trading, which he closed once investors began filing lawsuits against him.
Chronic Illness Or Passing Bug?
While the crypto market offers many legitimate investments and trading opportunities with strong returns, scams and hacks remain a danger. The industry is not quite the Wild West it once was, but investors would be wise to exercise caution before committing funds to any project. As with any emerging technology, there are plenty of people eager to take advantage of users’ naivete to make some quick money.
The most important thing anyone can do to protect their money is to thoroughly research all the individuals involved in the project and to do a bit of critical thinking. If a miner says his coin is backed by “fancy colored diamonds”, that could be a red flag. Lastly, remember that every investment project builds itself from a community of people. Before making any investment, reach out to others who have put their money in it and ask what kind of returns they’ve received.
By taking these kinds of steps, you can avoid becoming a victim of crypto fraud and save your money for projects that are actually profitable.
