Founder of My Big Coin convicted of $6 million crypto fraud
Randall Crater, founder of the cryptocurrency company My Big Coin, was convicted of multiple charges including wire fraud for a crypto scheme in which he stole more than $6 million from investors. Crater falsely marketed his business, which he operated between 2014 and 2017, as operating "a fully functioning cryptocurrency backed by $300 million in gold, oil and other valuable assets", which he fraudulently stated was partnered with MasterCard. According to the U.S. Attorney's Office, Crater used the $6 million in stolen funds "for his own personal gain and spending on goods, including hundreds of thousands of dollars' worth of expenses on antiques, artwork and jewelry".
- "My Big Coin Founder Convicted of Cryptocurrency Fraud Scheme", U.S. Attorney's Office of the District of Massachusetts
Former Coinbase product manager charged with tipping off co-conspirators about tokens that were about to be listed on the exchange
Ishan Wahi, a former product manager for Coinbase, was indicted on two charges of wire fraud and two charges of wire fraud conspiracy for allegedly tipping off his brother and friend to make trades based on his insider knowledge.
Wahi allegedly used his access to highly confidential information around which cryptocurrency tokens would be listed and when the news would be announced to tip off his brother and friend, who would then use multiple anonymous Ethereum wallets to purchase large quantities of the token before the prices spiked on the news. According to the press release, the two took positions in at least six tokens before Coinbase announced in April 2022 that they would be listing them on the exchange. The DoJ said that the scheme had generated approximately $1.5 million in gains. The DoJ acknowledged a "Twitter account that is well known in the crypto community", likely referring to Cobie, who identified the suspicious activity.
The DoJ also reported that when Coinbase's director of security operations contacted Wahi in May asking him to attend a meeting regarding the suspicious activity, Wahi purchased a one-way flight to India in an attempt to flee the country. He was stopped by law enforcement.
The U.S. Attorney for the Southern District of New York stated in the press release, "Today's charges are a further reminder that Web3 is not a law-free zone... fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street."
Each of the charges (four against Wahi, two each against his brother and friend) carried a maximum sentence of 20 years. In May 2023, Ishan Wahi was sentenced to two years in prison; Nikhil was sentenced to ten months in prison.
- "Three Charged In First Ever Cryptocurrency Insider Trading Tipping Scheme", U.S. Department of Justice
- Indictment
Korean authorities raid seven cryptocurrency exchanges in relation to Terra investigation
Prosecutors working on the fraud case around the May Terra/Luna collapse raided seven cryptocurrency exchanges in South Korea including Bithumb, Upbit, and Coinone. They also raided eight other offices and residences in connection to the investigation. The investigators are reportedly looking for evidence to determine whether Terra founder and CEO Do Kwon may have intentionally spurred the collapse of the ecosystem.
FBI warns of fraudulent crypto apps that have stolen an estimated $42.7 million
The FBI's Cyber Division issued a notification about fraudulent cryptocurrency investment apps that are successfully being used to defraud American investors. The scammers typically claim to offer cryptocurrency investment services to their targets, then convince them to download mobile apps that resemble genuine crypto trading apps (sometimes mimicking actual exchanges). The apps typically show the users' accounts increasing in value, but when users try to withdraw funds they find they're unable. Sometimes the apps defraud their victims even further by claiming they need to pay an additional "tax" before they can withdraw.
The FBI stated they had identified 244 victims, and estimated the total loss associated with these fraudulent apps to be around $42.7 million.
- "Cyber Criminals Create Fraudulent Cryptocurrency Investment Applications to Defraud US Investors", Federal Bureau of Investigation
Binance faces €3.3 million fine for operating in the Netherlands without registering
Binance, the world's largest crypto exchange, was fined €3.3 million ($3.35 million) by De Nederlandsche Bank (DNB) for operating in the Netherlands without the required registration. According to NOS, the fine was higher than most fines imposed for this type of infraction, partly due to Binance's enormous size. The regulators had issued a public warning about Binance operating without registration in August 2021.
The fine was imposed on April 25, 2022, and Binance filed an appeal in June. This is not Binance's first time playing fast and loose with regulatory bodies — in February, Binance halted activities in Israel due to being unlicensed. In December 2021, the Ontario Securities Commission released a statement to say that Binance wasn't registered in the province, but Binance continued to operate there anyway for several more months.
Police shut down the AEX crypto exchange
The AEX crypto exchange paused all withdrawals on June 16, estimating a 36-hour outage "to avoid unnecessary panic withdrawal". Then, instead of re-enabling all withdrawals, they re-enabled them in a piecemeal fashion, with several announcements each day that withdrawals were enabled for some extremely minor altcoins, but never for the more popular cryptocurrencies.
Then, on July 17, the exchange released a new announcement: "Due to cooperation with the police investigation, the platform has suspended related services... Please wait for the police announcement." They also wrote in the post, "AEX reserves the right of final interpretation of this announcement", and below the signature wrote, "The closer you look, the further you see."
John McAfee associate fined $376,000 for pump & dump scheme and undisclosed promotion of ICOs
In October 2020, the SEC filed charges against anti-virus software magnate, two-time Libertarian presidential candidate, and all-around shady character John McAfee, as well as his bodyguard, Jimmy Watson Jr. They alleged that the two had promoted several initial coin offerings (ICOs) without disclosing that they were being paid to do so. The SEC also charged the pair with participating in a pump and dump scheme, where they secretly bought large amounts of a cryptocurrency token before hyping it on Twitter (where McAfee had millions of followers), then selling the tokens as the price increased.
McAfee died by suicide in June 2021 in a Spanish prison, shortly before he was due to be extradited to the United States on tax evasion charges. His death kicked off a tornado of conspiracy theories by QAnon followers.
Now, the SEC has wrapped up the investigation, finding his partner in crime responsible for the undisclosed promotion and pump and dump scheme. In addition to a $376,000 fine, Watson is prohibited from any professional cryptocurrency trading.
Report claims that Binance served Iranian customers in violation of sanctions
The latest Reuters investigation into Binance has alleged that the company processed transactions for Iranian users, despite U.S. sanctions and the company's claim to be compliant with them. Iranian traders interviewed by Reuters stated that they were able to take advantage of Binance's poor KYC checks to use the service despite the sanctions.
The usage of the exchange by residents of sanctioned countries could draw the attention of US regulators. It's also the latest in several investigative reports by Reuters into Binance, in addition to a June report that the exchange facilitated $2.35 billion in illicit transfers from 2017–2021, and an April report that Binance supplied the Putin regime with information about crypto donors to opposition leader Alexei Navalny.
CoinFLEX sues Roger Ver to try to recover claimed $84 million debt
When CoinFLEX suspended withdrawals on June 23, they blamed "continued uncertainty involving a counterparty".
Although they initially dodged naming the counterparty, CEO Mark Lamb eventually publicly stated that this counterparty was Roger "Bitcoin Jesus" Ver, who he said failed to meet a $47 million margin call. However, Ver publicly refuted this claim, stating that CoinFLEX in fact owed him money. Both parties went back and forth, each accusing the other of misrepresenting the situation.
On July 9, the company stated that they would be seeking arbitration to recover $84 million from Ver — an updated figure that they said factored in the "significant loss in liquidating his significant FLEX coin positions".
Three Arrows Capital founders are nowhere to be found
Kyle Davies and Zhu Su, the founders of Three Arrows Capital, have apparently disappeared after the firm entered bankruptcy proceedings. Although lawyers for the duo have said they intend to cooperate with the proceedings, their whereabouts are unknown, and the liquidators' lawyers stated they had "not yet received any meaningful cooperation" from either. Those lawyers have expressed concerns that the pair might make off with the remaining funds — a substantial portion of which are cash, cryptocurrencies, and NFTs, and could be easily transferred.