Category: Scams

Categories
Australia Crypto News Facebook Scams

Australian Consumer Watchdog Investigates Meta (Facebook) for Crypto Scam Ads

The ACCC (Australian Competition and Consumer Commission) is investigating Facebook’s parent company Meta for allowing crypto scammers to advertise on the social network using fake articles or requesting crypto transfers.

Investment scams in Australia increased more than 53 percent in 2021, with Australians losing over A$70 million. Now the ACCC is probing Meta for allowing crypto scammers to advertise on Facebook, defrauding Aussies hundreds of thousands of dollars.

Mining Magnate Sues Meta for Misrepresentation

This follows news last week, reported by Crypto News Australia, of Fortescue Metals chairman Andrew Forrest pursuing legal action against Meta for allowing crypto scammers to post fake articles using his image and name, along with those of other business identities and celebrities.

Forrest is accusing the social media giant of breaching Australia’s AML (anti-money laundering) laws and is also pursuing a related civil case in California.

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. The ACCC will continue to consider whether Meta’s conduct raises concerns under Australian Consumer Law.

ACCC chair Rod Sims, The Australian

Forrest is not the only high-profile Australian whose identity has been co-opted to promote cryptocurrency scams. Others include actor Chris Hemsworth and TV commentators Waleed Aly and David Koch.

Fake Crypto News Australia Website

Notably, a fake Crypto News Australia website on Facebook is promoting “crypto bonuses”, requesting users to send ETH to a specific wallet to receive triple the amount sent. Keep in mind that Crypto News Australia will never ask for crypto or send crypto to readers.

Fake websites, fake wallets or exchanges, impersonation giveaways -there are so many types of cryptocurrency-related scams that it can be hard to keep track of them all. Make sure you stay safe and check out our guide on the Top 10 Bitcoin Scams to Avoid.

Categories
Crime Crypto News Scams

YouTuber ‘Ice Poseidon’ Admits Stealing $500,000 in Blatant Crypto Scam

Ice Poseidon, also known as Paul Denino, a YouTube streamer and internet personality, has admitted to scamming fans out of US$500,000 in a crypto pump-and-dump scheme. When confronted by YouTuber Coffeezilla, he showed little remorse:

Fellow YouTuber Takes Denino to Task

The scheme involved Denino raising the value of new crypto, CXcoin, by getting his many fans to invest. After promising sceptics and doubters that the scheme was a long-term project, he sold all his currency, causing the remainder held by his fans and investors to plummet – classic pump and dump. In July last year, YouTuber Logan Paul was slammed after after Dink Doink, a coin he had been promoting, crashed 95 percent in just two weeks.

In a recent video by Coffeezilla, the YouTuber shared his findings on Ice Poseidon’s CXcoin:

According to Coffeezilla, Denino personally made off with over US$300,000 while using the remaining US$200,000 to pay developers.

During the call between Coffeezilla and Denino, the latter seemed rather remorseless, stating that “part of the responsibility is on them [the fans] as well, for putting too much emotion into it”. Denino added: “Sometimes you have to look out for yourself.”

When asked if he could return the money if he wanted to, Denino replied: “If you want the answer, yeah, I could give the money back, it is within my power, but I am going to look out for myself and not do that.”

In a later Tweet, Coffeezilla said Denino claimed he would be returning US$155,000 after realising the story would be published. However, he has apparently returned only US$40,000 thus far.

Categories
Crime Crypto News DeFi Scams Tokens

TIME Token Collapses 60% Amid Revelation that Co-Founder is a Known Convict

DeFi (Decentralised Finance) project Wonderland has seen its native token TIME collapse 60 percent after it was revealed it had been co-founded by Michael Patryn, also one of the co-founders of the now-defunct Canadian crypto exchange QuadrigaCX.

0xSifu Steps Down as CEO of Wonderland

The co-founder and chief financial officer of the Avalanche-based DeFi protocol Wonderland had been known as OxSifu. A user by the name of zachxbt revealed OxSifu was actually Michael Patryn, who continually changed his identity – to the point of undergoing multiple facial surgeries – to avoid detection by police.

Before he was Michael Patryn, OxSifu went by the name of Omar Dahini, then Omar Patryn. He was part of a criminal organisation called Shadowcrew, whose operations consisted of trafficking stolen credit and identity information using E-gold, a privacy-focused digital currency issued in 1996.

Two faces of Michael Patryn. Source: davidgerard.co.uk

QuadrigaCX was a Canadian crypto exchange owned and operated by Gerald Cotten, who died unexpectedly in 2018, his body cremated before anyone could verify his death. The eerie side is that he took with him more than US$160 million of investors’ money, but Omar (Patryn) and his wife ended up with the majority of the assets.

Everyone ‘Deserves a Second Chance’

Daniele Sesta, the other co-founder of Wonderland, said he knew about Patryn’s criminal past and the numerous Ponzi projects he had led. Despite Patryn’s long criminal record, Sesta decided to keep him on as Wonderland’s treasury manager.

I found out about this one month ago. I am of the opinion of giving second chances, as I have mentioned on Twitter. I’ve seen the community very divided about my choice of maintaining [Patryn] as the treasury manager after finding out who he was and his past.

Daniele Sesta, blog post

This sparked outrage in the Wonderland community, many of whom are accusing Sesta of being Patryn’s accomplice, or even being Patryn himself.

The voting process to remove Patryn from his positions ended on January 29. with the vote 87.56 percent in favour of removing OxSifu against 12.44 percent voting to keep him.

Sesta Swimming in Hot Water

Wonderland members on Twitter, Reddit, Discord, and all other social media channels related to the project, are now questioning Sesta’s legitimacy and his overall financial background.

An example of Reddit users being up in arms. Source: Reddit

Did Cotten Really Die?

Gerald Cotten reportedly died from Chrohn’s disease in 2018. The keys to the digital vault containing a massive fortune in Bitcoin were buried with him.

The event was so controversial that it was covered by worldwide media, even inspiring documentaries and movies. As Crypto News Australia reported last year, a documentary titled Dead Man Switch was screened at the Melbourne Film Festival in August, leaving a handful of questions unanswered – including whether he had faked his own death in an elaborate “exit scam”.

Categories
Crime Crypto News Cryptocurrencies Hackers Scams

Report Shows $33 Billion in Crypto ‘Money Laundering’ by Cybercriminals

New research by blockchain data firm Chainalysis shows there has been an estimated US$33 billion laundered through crypto in the past five years, mainly through centralised exchanges, but as of 2021 there has been a major increase in money laundered through DeFi.

Chainalysis has released a preview of its 2022 Crypto Crime Report detailing how illicit funds have been moved over the blockchain and its various services. The total value of cryptocurrencies laundered by services in 2021 was estimated at US$8.6 billion.

Total crypto laundered. Source: Chainalysis

That figure was up 30 percent on the previous year, which was expected, given the boom in both legal and illegal activities in the crypto space. However, the figure is down 23 percent from 2019, which was the most significant year for laundered crypto.

These numbers only account for funds obtained from “cryptocurrency-native” crime, meaning activities such as darknet market or ransomware attacks in which profits are virtually always denominated in cryptocurrency. In spite of the billions of laundered dollars, money laundering accounted for only 0.05 percent of all cryptocurrency transaction volume in 2021.

Destination of funds leaving illicit addresses by crime type. Source: Chainalysis

One thing that stands out is the difference in laundering strategies between the two highest-grossing forms of cryptocurrency-based crime in 2021: theft and scamming. Researchers think this might be because more cryptocurrency was stolen from DeFi protocols than any other type of platform last year, as well as the technical skills required to launder money. For example, a DeFi hacker would have better technical skills and use different means to launder money than a scammer using a centralised exchange.

Easier to Track Laundering on the Blockchain

It’s considerably more difficult to track illicit funds when they are first converted to crypto from fiat. But due to the inherent transparency of blockchains, analysts can more easily trace how criminals move cryptocurrency between wallets and services in their efforts to convert funds into cash.

Destination of funds leaving illicit addresses between 2016 – 2021. Source: Chainalysis

Since 2018, centralised exchanges have been the main conduit for money laundering, with 58 percent of laundered crypto funnelled into just five trading platforms.

Increase in Laundering Through DeFi

Last year, for the first time since 2018, centralised exchanges did not receive the majority of funds sent by illicit addresses. Instead, DeFi protocols are making up much of the difference. The report states that DeFi protocols received 17 percent of all funds sent from illicit wallets in 2021, up from 2 percent the previous year. 

YoY % growth in value by category. Source: Chainalysis

This phenomenon translates to a 1,964 percent year-on-year increase in total value received by DeFi protocols from illicit addresses, reaching a total of US$900 million in 2021.

North Korea at the Forefront of Money Laundering

Kim Grauer, Chainalysis’ director of research, says that “there are certain types of criminals in particular that lean into technological advancements more quickly”, adding that “North Korea is always the first to use a new kind of tech solution for laundering money. We follow them each year, and this year they’ve used a lot of mixers. Last year, they were using DeFi.”

This year “is already off to a big start for NFT crime”, Grauer says, pointing to the rise in wash trading on NFT platforms. “This is definitely going to continue.”

Categories
Crypto News NFTs Scams Solana

Developers Pull Off Third NFT Rug-Pull for $1.3 Million, ‘Verified’ Project ‘Big Daddy Ape Club’

The Big Daddy Ape Club, a non-fungible token (NFT) project on Solana (SOL), has pulled the rug on investors for 9,136 SOL (an estimated US$1.3 million), even though the project was verified.

One of the largest NFT rug-pulls in Solana’s history occurred on January 11, the scammer getting away with almost US$1.3 million in investor funds. Digital artist and NFT blogger Faith Orr described it as an especially harsh incident since “most rugs do the basic courtesy of leaving their victims with NFTs even if they don’t ever get listed on secondary markets”.

According to some, it might even be the same individual or group of people responsible for multiple rug-pulls that have happened in the past. Shortly after the incident, the project’s Twitter, Discord and website went offline, followed by Solanart verifying there had indeed been a rug-pull:

Verified Project Disappoints

Even though the project had been verified by Civic, the developers were still able to run off with the funds. Does this mean the devs were just extra-shady, or did Civic drop the ball? In its defence, Civic stated that it designed the program as a free service for creators to verify their real-world identities and build trust within their communities:

We are aware of the reported Big Daddy Ape Club rug-pull and that there are victims involved. We take this attack on the NFT community seriously, and are taking steps to offer all the assistance we can.

Chris Hart, Civic CEO

Civic CEO Chris Hart conceded that its solution doesn’t perform due diligence other than identity verification, and that no verification process is 100 percent effective all of the time. Civic’s verification process is mainly designed to protect participants in the case of an incident where identity information can be shared with relevant authorities in the event something happens.

The Civic Pass program works by verifying control of the project’s Twitter handle, oversight of the project’s domain, and identity verification of the project founders through ID document capture. The verification process also includes a 3D face scan of the person.

Civic Takes Steps Toward Recourse

Civic is now taking the next steps in order to solve this case, and in a statement to Decrypt said that “the identity of the individual who held themselves out as the founder of the BDAC project was verified through our program”, adding that “we are cooperating with law enforcement to assist in their investigation, but do not know how long their investigation will take”.

At the start of January, a decentralised P2E game on Solana turned out to be a rug-pull. Hopefully, the BDAC community can pull together after this one, as was the case with the Frosties NFT rug-pull on January 15.

Categories
Australia Crypto News Regulation Scams Superannuation

ASIC Cautions Investors Against Switching to an SMSF to Invest in Crypto

The Australian Securities and Investment Commission (ASIC) has issued a warning to consumers to not rely on people advising to invest in crypto via an SMSF.

SMSFs Are Crypto Scam Targets

There has been an increase in marketing that recommends Australians switch from retail and industry superannuation funds to self-managed super funds (SMSFs) to invest in cryptocurrencies. ASIC cautions investors to be wary of relying on ads and people inciting them to invest in crypto via their SMSF.

Do not rely on social media ads or online contact from someone promoting an ‘investment opportunity’. Be wary of people cold calling, text messaging, or emailing you with a recommendation to transfer your super to an SMSF, or invest in crypto assets via your SMSF.

ASIC

SMSF Association CEO John Maroney told The Australian newspaper that there had been an increase in crypto marketing in recent years, though not specifically relating to SMSFs. Maroney added that according to data from the ATO (Australian Taxation Office), in 2019 crypto represented less than 0.1 percent of SMSF assets. This number had grown significantly since then, Maroney said, consistent with the number of scammers trying to deceive investors through crypto-related ads and marketing.

Before investing in crypto assets, SMSF trustees and members need to consider the level of risk of the investment and ensure [it] is consistent with the fund’s investment strategy and the SMSF’s trust deed.

John Maroney, CEO, SMSF Association

Beware of Unlicensed Crypto Companies and ‘Finfluencers’

The ASIC warning came after it shut down A One Multi Services, an unlicensed financial company in Queensland, in November for buying A$2.4 million worth of cryptocurrency with members’ funds. In August, the regulator had warned investors about investing in unlicensed crypto companies as the number of crypto-related scams had significantly increased in Australia.

Finfluencers have also become a problem for Australians. Finfluencers are celebrities on social media channels such as YouTube, Instagram and TikTok who claim they can help their followers achieve “financial freedom” but without providing any kind of financial advice. This is specially worrisome for young people and newcomers keen to invest in crypto since they tend to be the most vulnerable.

Categories
Crypto News NFTs Scams

NFT Community Comes Together Amid $1.3 Million Frosties NFT RugPull

Another non-fungible token project has pulled the rug on its investors, stealing at least US$1.3 million out of their pockets, in the first NFT scam of 2022.

Developers from Frosties NFT Vanished, Community Tries to Fight Back

As per a report from Business Insider, the developers of an NFT project called Frosties disappeared after investors bought all 8,888 available tokens on OpenSea. The NFTs were sold out just 40 minutes after the drop, and had an average floor price of 0.04 Ether (ETH), or US$121 at the time.

The majority of the funds were transferred out of the developers’ original wallet, as noted in the Etherscan report. As usual, the project erased all traces of them on social media, deleting Twitter, Discord, and the official website. The developers’ wallet was also removed from the collection’s landing page on OpenSea.

Now the Frosties community is coming together to plan a way to recover their funds. Many members are flocking to a recently created Discord channel to help each other out, starting by wrapping their NFTs to stop devs from getting sale royalties:

Always Invest Only What You Can Afford To Lose

After the news emerged, some members of the NFT community were asking for a way to apply KYC (Know Your Customer) procedures to teams behind crypto projects.

But NFT scams will continue in the space as long as people are willing to stake their money. This is why the perennial advice is to only invest money you can afford to lose, and especially do your own research before jumping into a new project.

One of the most recent NFT rugpulls occurred on the Solana network last month when SolGame, a decentralised P2E (Play-2-Earn) NFT project, shut down its Discord channel and official website. Some members are still looking for the creator of the project, but no light has been shed up to now.

Another controversial NFT rugpull from 2021 was presumed to have been performed by a 17-year-old 3D artist. As Crypto News Australia reported in October, the teenage developer stole US$500,000 through Iconic Sol, an NFT project on the Solana blockchain.

Categories
Crypto News Ethereum Investing Scams Social media Tokens

Kardashian and Mayweather in Hot Water Amid Lawsuit over Ethereum Max Promotion

What do Kim Kardashian, Floyd Mayweather and Paul Pierce have in common? They’re all getting sued by an aggrieved investor over an alleged Ethereum Max (EMAX) pump-and-dump scheme.

Another Pump and Dump Endorsed by Celebrities?

In a lawsuit filed in the US District Court of California’s Central District, the plaintiff argues that EMAX co-founders Steve Gentile and Giovanni Perone promoted the currency with the help of celebrities such as reality star Kardashian, professional boxer Mayweather, and former NBA basketballer Pierce. As per the filing:

EthereumMax’s entire business model relies on using constant marketing and promotional activities, often from ‘trusted’ celebrities, to dupe potential investors into trusting the financial opportunities available with EMAX tokens.

On May 31, 2021, EMAX’s price peaked at peaked at a price of US$0.000000597636 following the continuous endorsement of these celebrities via Instagram, Twitter, and other social networks. But it dropped over 80 percent in just 11 days.

After the massive drop, its price experienced a few bullish rallies in June after Kim Kardashian promoted the token on her Instagram, but that didn’t stop the token from falling again. In total, the token has lost 97 percent of its value.

While the plaintiff and the rest of investors were buying EMAX, Kardashian and the other celebrities were already selling for considerable profits.

Price history of the EMAX token. Source: CoinGecko

Be Wary of Coins Promoted by Celebrities

Newcomers to the crypto space should be wary when watching celebrities backing up digital tokens from shady developers. These types of currencies are known as “shitcoins” – worthless tokens with no proper infrastructure behind their design, they are rather made to dupe potential investors out of a lot of money.

The developers behind these shitcoins usually promote their product on popular social media platforms such as TikTok or Instagram. In July 2021, former YouTube star Logan Paul was slammed for promoting a shitcoin called DINK DOINK to his 23 million followers on Twitter.

That same month, Crypto News Australia also reported how TikTok had banned users from promoting all things crypto-related on its video-sharing platform, also banning crypto ads.

Categories
Blockchain Crime Crypto News DeFi Illegal Scams

Report: Crypto Crime Reached New Highs in 2021

In its annual Crypto Crime report, New York-based blockchain analytics firm Chainalysis has reported that although the percentage of illicit crypto transactions fell drastically in 2021, their dollar value surged significantly.

As per the Chainalysis report, the value of crimes involving cryptos surged to a new high of US$14 billion in 2021. This represents an increase of 79 percent from US$7.8 billion reported in 2020, which is mainly due to the upward spiral in crypto prices experienced in 2021.

The cryptocurrency market has expanded to such an extent that Chainalysis has even opened a new office in the Australian capital due to increased mainstream adoption in the Pacific region.

Year-to-year comparison of illicit share of all cryptocurrency transaction volume. Source: Chainalysis

Although the dollar value appears to be astronomical, the activity represents a mere 0.15 percent of the total of US$15.8 trillion in crypto transaction volumes over the year – the lowest percentage ever recorded. To put this in perspective, the illicit share of crypto transaction volume in 2019 was 3.37 percent, and 0.62 percent in 2020.

DeFi Scams and Rug Pulls Main Drivers of Crypto Crime

The Chainalysis report attributes the growth in the volume of scams and legitimate crypto transactions to the boom in decentralised finance (DeFi). While scams accounted for the largest share in 2021, rising 82 percent to US$7.8 billion, nearly US$3 million of the total crime value came from rug pulls.

Last year, Crypto News Australia reported that crypto scams, particularly rug pulls, have become the main trust issue in the crypto space, especially for newcomers.

DeFi protocols have become the primary target for cryptocurrency crimes. Source: Chainalysis

Aside from rug pulls, DeFi platforms were also widely used for money laundering and were targeted by hackers for large-scale theft.

As Chainalysis head of research Kim Grauer noted: “DeFi services were hacked at rates that we’ve never seen before. Not only are people using DeFi to carry out crime, they’re also targeting DeFi for crime.”

Grauer added that DeFi platform protocols were often hacked because it’s a new industry and a lot of the code is open-source, exposing vulnerabilities.

In 2021, US$2.2 billion worth of cryptos was stolen from DeFi protocols, which accounts for two-thirds of all cryptos stolen in 2021 – this figure represents a 516 percent increase on the numbers reported in 2020.

Categories
Australia Crime Crypto News Gold Scams South Africa Tokens

Australian Man Charged by SEC for Fraudulent ICO

Australian cryptocurrency entrepreneur Craig Sproule has been charged by the US Securities and Exchange Commission (SEC) for defrauding investors by diverting millions from a digital coin offering into South African gold mining interests.

Australian crypto entrepreneur Craig Sproule. Source: medium.com

Sproule, currently a resident of California, faces additional charges of making false and misleading statements when selling digital asset securities. Jointly named on the SEC charge sheet are two companies founded by the Lismore-born entrepreneur – Crowd Machine Inc and Metavine Pty Ltd.

‘The Man Behind the Machine’

Self-proclaimed on social media as “the Man behind the Machine”, Sproule has been ordered to pay a US$200,000 (A$280,000) civil penalty while Crowd Machine’s digital tokens will be banned from crypto trading platforms.

Crowd Machine was intended to replace Amazon Web Services, the cloud-based computer infrastructure, with a distributed system. To achieve this, Sproule claimed to have raised US$40.7 million through an initial coin offering of Crowd Machine Compute Tokens (CMCT) in early 2018 that was to fund a decentralised computer network.

Almost $6 Million Siphoned into South African Gold Mines

Instead, Sproule siphoned US$5.8 million into gold mining entities in South Africa, which was not disclosed to Crowd Machine token investors. None of the US$5.8 million has been recovered, and the South African gold mining operations “have returned no revenue”, according to the SEC’s statement of claim.

Along with Sproule and Crowd Machine, another entity registered in Australia, Metavine Pty Ltd, has committed to covering any future civil penalties relating to Crowd Machine. An application for voluntary deregistration of Metavine was filed with the Australian Securities and Investments Commission (ASIC) last month.

Sproule and Crowd Machine have neither admitted nor denied the allegations, although Sproule will be summarily banned from serving as an officer or director of a public company.

Shades of Last Year’s BitConnect Fiasco

The Sproule/Crowd Machine imbroglio echoes the circumstances of an SEC lawsuit filed last May against five individuals linked to BitConnect for promoting and selling unregistered securities. That case also shared a connection down under, with ASIC accusing a former BitConnect promoter of defrauding small investors in Australia in 2017-2018.