Crypto Scams Plague The Industry As Bitcoin Halving Approaches Just like in the previous events,
Bitcoin halving is coming with excitement and volatility in the entire crypto space. Amid the market movements, scammers have also joined in to reap from unsuspecting investors aiming to make a profit. The US Commodity Futures Trading Commission (CFTC) on May 7 charged the Israeli and US companies’ executives with a purported $15 million scam.
The charges involved crypto and binary options investment program fraud. Binary options scams happened between October 2013 and November 2016, while crypto scam occurred between November 2013 and August 2018, according to the CFTC.
Tal Valariola, an Israeli company, and Itay Barak were charged for the same allegations by CFTC. The two Israeli firms operated Digital Platinum Limited, a marketing company.
Israeli Firms Engaged in Crypto Scam
Tal Valariola and Itay Barak, both Israeli companies, allegedly engaged in fraud, according to the US CFTC. They are accused of helping an offshore company, All in Publishing (AIP), which has been involved in illegal binary options in the US.
Additionally, the CFTC said that at least 51,000 new users opened binary options accounts and deposited around $13 million in total as a result of misleading marketing efforts. Another 8,000 users opened a crypto exchange account and deposited over $2 million cumulatively.
The Commission’s complaint also highlights a story about Daniel Fingerhut, a Florida resident, who purportedly designed phony solicitations linked to binary options of All in Publishing (AIP).
Fake Success Stories
Daniel Fingerhut, an executive at All In Publishing, purportedly relied on fictitious customer success stories. These fake stories advertised luxurious lifestyles of investors trading on AIP’s partner platforms. The CFTC also says that DPL agreed to post these false advertisements, although they knew that information presented in the campaigns was false.
AIP had spent $50,000 to create marketing campaigns videos during the binary options scam, according to an email from 2015. The CFTC said that companies were using more than five email auto-responders in the course of the digital asset solicitation campaign. Each of the autoresponders came with a database of about 200,000 emails.
“Fingerhut hired, directed, and/or supervised at least four individuals in Florida and one individual in Israel to write solicitation emails and disseminate them in bulk through autoresponders.”
The CFTC confirmed that it is charging the defendants on four counts. Charges include CTA fraud and options fraud and seeking various injunctions banning both firms from
commodities business-related activities. The Commission has also urged the court to order financial disgorgement.
Belgium investors lost $3.2M to Crypto Scam in 2019
On May 8, Belgium’s economic inspectorate published that investors lost almost $3.2 million to crypto scams in 2019. Crypto scam losses nearly doubled in 2019 compared to 2018. Although authorities are striving to combat crypto criminals, investors continue to suffer huge losses.
The economic inspectorate reported losses of around 2.94 million euros ($3.2 million) to crypto jackers in a May 8 report by Belgian newspaper De Tijd.
Real numbers unknown
In recent years, the number of crypto scams and amounts lost by Belgian investors has significantly increased according to previous surveys. Belgian’s Federal Public Service, FPS Economy, reported losses of $2.5 million arising from crypto scams in 2018.
These numbers are “just the tip of the iceberg” because many of the fraud cases go unreported. Nathalie Muylle, the minister of economy and consumer affairs, estimated that actual losses were way above the reported $3.2 million. He explained:
“The amounts are not always communicated by reporters.”
In that context, Belgian authorities say that the local investors lose at least $150 million to crypto scams yearly.
Belgium has taken many preventive measures to combat crypto scams, according to Muylle. In 2019, the economic inspectorate supposedly sent a query about crypto scams to the public prosecutor’s office. Up to now, prosecution measures remain majorly undecided while still awaiting a decision.
In February 2020, Belgium’s Financial Services and Markets Authority, or FSMA, banned many crypto-related unscrupulous sites. FPS Economy has, in that connection, launched a website to raise awareness of the risks that come with investing in cryptos. But, the crypto industry is majorly unregulated in most countries, including Belgium.
Jean-Paul Servais, the FSMA chairman, encouraged the Senate in February to create a:
“legal framework for the sale, purchase, and use of virtual currencies and all related financial products.”
Servais believes that illegal activities in the market will continue affecting this nascent industry if the industry remains unregulated.
Scammers have increased their activities in Israel and the US and Belgium tighten its regulations aiming to curb the vice.