The US government seems to be concerned about cryptocurrency scams. On Thursday, the Commodity Futures Trading Commission (CFTC), the Federal Bureau of Investigation and the Department of Justice all announced they were taking action against people accused of carrying out multi-million or billion-dollar schemes . One of the cases involves counterfeit monkeys, one is the “largest fraudulent scheme involving Bitcoin accused in a CFTC case”, and the other involves someone nicknamed “the Cryptoqueen”. The app surge comes amid falling crypto prices.
Let’s start with the CFTC – the regulator sued a company called Mirror Trading International (MTI), which was run by a South African man named Cornelius Johannes Steynberg. The commission says MTI introduced potential investors by saying it had a bot that invested a pool of Bitcoin in opportunities that individual investors may not have access to. Apparently, people ended up contributing 29,000 Bitcoins to the fund, hoping to get a return on their investment. MTI collapsed in 2020, but the CFTC claims these Bitcoins were at one point worth more than $1.7 billion.
What really happened, according to the CFTC, is that Steynberg and MTI “diverted, directly or indirectly, all of the Bitcoin they accepted from pool participants.” Basically, the commission says it was a multi-level marketing, or MLM, program. While the agency says it is trying to recover the money for the alleged victims (as well as barring Steynberg from future trades and violations), it warns that it won’t necessarily be able to do so because ” the wrongdoers may not have enough funds or assets”. The CFTC notes that Steynberg was recently detained in Brazil.
The FBI is trying to make sure something similar happens to longtime fugitive Ruja Ignatova, aka the Cryptoqueen. This week, the bureau added his name to its most wanted fugitives list for his alleged role in the OneCoin scam, which the FBI says defrauded victims out of $4 billion. You can read more about OneCoin in our 2019 story about Ignatova’s brother, who was arrested on charges related to the scheme, but the TL; DR is that Ruja Ignatova allegedly helped people invest in a OneCoin cryptocurrency that didn’t actually exist.
Federal Prosecutor Calls OneCoin “One of the Biggest Ponzi Schemes in History,” Says Reuters. The FBI is offering $100,000 for any information leading to Ignatova’s arrest.
One final note on this story before we move on to the final one: I would say “Cryptoqueen” is a bit of a misnomer for Ignatova, as there is no evidence that a real blockchain was involved. If we’re looking to crown someone allegedly involved in billion-dollar schemes as Queen of Crypto, I can think of someone better suited for the throne.
Razzlekhan’s erasure aside, let’s end this roundup with a series of DOJ stories. On Thursday, the department announced charges in four separate cases that it says “serve as a crucial reminder that some scam artists hide behind buzzwords, but ultimately just seek to separate people from their money. “. One such case involves an NFT collection originally called “Baller Ape Club,” which the DOJ alleges to raffle investors after raising about $2.6 million. (Yes, the press release actually uses the phrase “pull mat,” alleging that the people behind the monkeys shut down the project, took down the website, and attempted to launder the funds by moving them through a series of chainmails. blocks and via services intended to mix parts together.)
The other cases — an alleged Ponzi scheme that generated nearly $100 million, an “alleged cryptocurrency investment platform” that the DOJ says “manufactured alleged business relationships” with companies like Apple and Disney, and a trading pool that said they used an investment bot to make money – have some similarities to MTI, OneCoin, and other cases we’ve covered. While scammers may be putting crypto paint on their schemes, this is just covering up the same old tricks.
The only potential silver lining is that these scams could become less attractive (or at least less profitable) as major coins such as Bitcoin and Ethereum lose value as they have over the past few months. Of course, the crash comes at the expense of companies that also operate within the law. Major exchanges have laid off much of their workforce, some coins have fallen almost to zero, and some investors have been, at times, unable to withdraw their funds. (In one case, allegedly thanks to someone nicknamed “Bitcoin Jesus”.)
To give you an idea of the fall of Bitcoin, those $1.7 billion in Bitcoin that people invested in MTI? Cointelegraph says he is now worth around $564 million. (Although given the number of coins and the volatility of Bitcoin’s price, this could change at any moment.)