Who Scams The Scammers? Meet the Scambaiters

Police struggle to catch online fraudsters, often operating from overseas, but now a new breed of amateurs are taking matters into their own hands.

Three to four days a week, for one or two hours at a time, Rosie Okumura, 35, telephones thieves and messes with their minds. For the past two years, the LA-based voice actor has run a sort of reverse call centre, deliberately ringing the people most of us hang up on – scammers who pose as tax agencies or tech-support companies or inform you that you’ve recently been in a car accident you somehow don’t recall. When Okumura gets a scammer on the line, she will pretend to be an old lady, or a six-year-old girl, or do an uncanny impression of Apple’s virtual assistant Siri.

Once, she successfully fooled a fake customer service representative into believing that she was Britney Spears. “I waste their time,” she explains, “and now they’re not stealing from someone’s grandma.” Okumura is a “scambaiter” – a type of vigilante who disrupts, exposes or even scams the world’s scammers. While scambaiting has a troubled 20-year online history, with early forum users employing extreme, often racist, humiliation tactics, a new breed of scambaiters are taking over TikTok and YouTube. Okumura has more than 1.5 million followers across both video platforms, where she likes to keep things “funny and light”.

In April, the then junior health minister Lord Bethell tweeted about a “massive sudden increase” in spam calls, while a month earlier the consumer group Which? found that phone and text fraud was up 83% during the pandemic. In May, Ofcom warned that scammers are increasingly able to “spoof” legitimate telephone numbers, meaning they can make it look as though they really are calling from your bank. In this environment, scambaiters seem like superheroes – but is the story that simple? What motivates people like Okumura? How helpful is their vigilantism? And has a scambaiter ever made a scammer have a change of heart?

Batman became Batman to avenge the death of his parents; Okumura became a scambaiter after her mum was scammed out of $500. In her 60s and living alone, her mother saw a strange pop-up on her computer one day in 2019. It was emblazoned with the Windows logo and said she had a virus; there was also a number to call to get the virus removed. “And so she called and they told her, ‘You’ve got this virus, why don’t we connect to your computer and have a look.” Okumura’s mother granted the scammer remote access to her computer, meaning they could see all of her files. She paid them $500 to “remove the virus” and they also stole personal details, including her social security number.

Thankfully, the bank was able to stop the money leaving her mother’s account, but Okumura wanted more than just a refund. She asked her mum to give her the number she’d called and called it herself, spending an hour and 45 minutes wasting the scammer’s time. “My computer’s giving me the worst vibes,” she began in Kim Kardashian’s voice. “Are you in front of your computer right now?” asked the scammer. “Yeah, well it’s in front of me, is that… that’s like the same thing?” Okumura put the video on YouTube and since then has made over 200 more videos, through which she earns regular advertising revenue (she also takes sponsorships directly from companies).

“A lot of it is entertainment – it’s funny, it’s fun to do, it makes people happy,” she says when asked why she scambaits. “But I also get a few emails a day saying, ‘Oh, thank you so much, if it weren’t for that video, I would’ve lost $1,500.’” Okumura isn’t naive – she knows she can’t stop people scamming, but she hopes to stop people falling for scams. “I think just educating people and preventing it from happening in the first place is easier than trying to get all the scammers put in jail.”

She has a point – in October 2020, the UK’s national fraud hotline, run by City of London Police-affiliated Action Fraud, was labelled “not fit for purpose” after a report by Birmingham City University. An earlier undercover investigation by the Times found that as few as one in 50 fraud reports leads to a suspect being caught, with Action Fraud frequently abandoning cases. Throughout the pandemic, there has been a proliferation of text-based scams asking people to pay delivery fees for nonexistent parcels – one victim lost £80,000 after filling in their details to pay for the “delivery”. (To report a spam text, forward it to 7726.)

Asked whether vigilante scambaiters help or hinder the fight against fraud, an Action Fraud spokesperson skirted the issue. “It is important people who are approached by fraudsters use the correct reporting channels to assist police and other law enforcement agencies with gathering vital intelligence,” they said via email. “Word of mouth can be very helpful in terms of protecting people from fraud, so we would always encourage you to tell your friends and family about any scams you know to be circulating.”

Indeed, some scambaiters do report scammers to the police as part of their operation. Jim Browning is the alias of a Northern Irish YouTuber with nearly 3.5 million subscribers who has been posting scambaiting videos for the past seven years. Browning regularly gets access to scammers’ computers and has even managed to hack into the CCTV footage of call centres in order to identify individuals. He then passes this information to the “relevant authorities” including the police, money-processing firms and internet service providers.

“I wouldn’t call myself a vigilante, but I do enough to say, ‘This is who is running the scam,’ and I pass it on to the right authorities.” He adds that there have only been two instances where he’s seen a scammer get arrested. Earlier this year, he worked with BBC’s Panorama to investigate an Indian call centre – as a result, the centre was raided by local police and the owner was taken into custody.

Browning says becoming a YouTuber was “accidental”. He originally started uploading his footage so he could send links to the authorities as evidence, but then viewers came flooding in. “Unfortunately, YouTube tends to attract a younger audience and the people I’d really love to see looking at videos would be older folks,” he says. As only 10% of Browning’s audience are over 60, he collaborates with the American Association of Retired People to raise awareness of scams in its official magazine. “I deliberately work with them so I can get the message a little bit further afield.”

Still, that doesn’t mean Browning isn’t an entertainer. In his most popular upload, with 40m views, he calmly calls scammers by their real names. “You’ve gone very quiet for some strange reason,” Browning says in the middle of a call, “Are you going to report this to Archit?” The spooked scammer hangs up. One comment on the video – with more than 1,800 likes – describes getting “literal chills”.

But while YouTube’s biggest and most boisterous stars earn millions, Browning regularly finds his videos demonetised by the platform – YouTube’s guidelines are broad, with one clause reading “content that may upset, disgust or shock viewers may not be suitable for advertising”. As such, Browning still also has a full-time job.

YouTube isn’t alone in expressing reservations about scambaiting. Jack Whittaker is a PhD candidate in criminology at the University of Surrey who recently wrote a paper on scambaiting. He explains that many scambaiters are looking for community, others are disgruntled at police inaction, while some are simply bored. He is troubled by the “humiliation tactics” employed by some scambaiters, as well as the underlying “eye for an eye” mentality.

“I’m someone who quite firmly believes that we should live in a system where there’s a rule of law,” Whittaker says. For scambaiting to have credibility, he believes baiters must move past unethical and illegal actions, such as hacking into a scammer’s computer and deleting all their files (one YouTube video entitled “Scammer Rages When I Delete His Files!” has more than 14m views). Whittaker is also troubled by racism in the community, as an overcrowded job market has led to a rise in scam call centres in India. Browning says he has to remove racist comments under his videos.

“I think scambaiters have all the right skills to do some real good in the world. However, they’re directionless,” Whittaker says. “I think there has to be some soul- searching in terms of how we can better utilise volunteers within the policing system as a whole.”

At least one former scambaiter agrees with Whittaker. Edward is an American software engineer who engaged in an infamous bait on the world’s largest scambaiting forum in the early 2000s. Together with some online friends, Edward managed to convince a scammer named Omar that he had been offered a lucrative job. Omar paid for a 600-mile flight to Lagos only to end up stranded.

“He was calling us because he had no money. He had no idea how to get back home. He was crying,” Edward explains. “And I mean, I don’t know if I believe him or not, but that was the one where I was like, ‘Ah, maybe I’m taking things a little too far.’” Edward stopped scambaiting after that – he’d taken it up when stationed in a remote location while in the military. He describes spending four or five hours a day scambaiting: it was a “part-time job” that gave him “a sense of community and friendship”.

“I mean, there’s a reason I asked to remain anonymous, right?” Edward says when asked about his actions now. “I’m kind of embarrassed for myself. There’s a moment where it’s like, ‘Oh, was I being the bad guy?’” Now, Edward doesn’t approve of vigilantism and says the onus is on tech platforms to root out scams.

Yet while the public continue to feel powerless in the face of increasingly sophisticated scams (this summer, Browning himself fell for an email scam which resulted in his YouTube channel being temporarily deleted), But scambaiting likely isn’t going anywhere. Cassandra Raposo, 23, from Ontario began scambaiting during the first lockdown in 2020. Since then, one of her TikTok videos has been viewed 1.5m times. She has told scammers her name is Nancy Drew, given them the address of a police station when asked for her personal details, and repeatedly played dumb to frustrate them.

“I believe the police and tech companies need to do more to prevent and stop these scams, but I understand it’s difficult,” says Raposo, who argues that the authorities and scambaiters should work together. She hopes her videos will encourage young people to talk to their grandparents about the tactics scammers employ and, like Browning, has received grateful emails from potential victims who’ve avoided scams thanks to her content. “My videos are making a small but important difference out there,” she says. “As long as they call me, I’ll keep answering.”

For Okumura, education and prevention remain key, but she’s also had a hand in helping a scammer change heart. “I’ve become friends with a student in school. He stopped scamming and explained why he got into it. The country he lives in doesn’t have a lot of jobs, that’s the norm out there.” The scammer told Okumura he was under the impression that, “Americans are all rich and stupid and selfish,” and that stealing from them ultimately didn’t impact their lives. (Browning is more sceptical – while remotely accessing scammers’ computers, he’s seen many of them browsing for the latest iPhone online.)

“At the end of the day, some people are just desperate,” Okumura says. “Some of them really are jerks and don’t care… and that’s why I keep things funny and light. The worst thing I’ve done is waste their time.”

By:

Source: Who scams the scammers? Meet the scambaiters | Cybercrime | The Guardian

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ISBN9780190452568. Fisher, Bonnie S.; Lab, Steven (2010). Encyclopedia of Victimology and Crime Prevention. Thousand Oaks, CA: SAGE Publications. p. 493.

ISBN9781412960472. “FBI 2017 Internet Crime Report” (PDF). FBI.gov. Federal Bureau of Investigation. May 7, 2018. Retrieved 28 August 2018.

“The Economic Impact of Cybercrime— No Slowing Down” (PDF). McAfee. 2018. Retrieved October 24, 2018. Goel, Rajeev K. (2020).

“Uncharitable Acts in Charity: Socioeconomic Drivers of Charity-Related Fraud”. Social Science Quarterly. 101 (4): 1397–1412. doi:10.1111/ssqu.12794. ISSN1540-6237. Burke, Cathy.

“L.I. charity chief convicted of embezzling nearly $1 million meant for disabled”. nydailynews.com. Retrieved 2021-04-22.

“Charitable Contributions: For use in preparing 2016 Returns” (PDF). “Scam Watch – Nigerian Scams”. Scam Watch – Australian Government. 12 May 2016. Jamie Doward (2008-03-09).

“How boom in rogue ticket websites fleeces Britons”. The Observer. London. Retrieved 9 March 2008.

“USOC and IOC file lawsuit against fraudulent ticket seller”. Sports City. Retrieved 1 August 2008. Jacquelin Magnay (4 August 2008).

“Ticket swindle leaves trail of losers”. The Sydney Morning Herald. Kelly Burke (6 August 2008). “British fraud ran Beijing ticket scam”. The Sydney Morning Herald. Francis, Ryan (2017-05-11).

“What not to get Mom for Mother’s Day”. CSO from IDG. Retrieved 2017-11-28. Hew, Khe Foon (March 2011). “Students’ and teachers’ use of Facebook”. Computers in Human Behavior. 27 (2): 662–676. doi:10.1016/j.chb.2010.11.020. Kugler, Logan (27 October 2014). “Keeping online reviews honest”. Communications of the ACM. 57 (11): 20–23. doi:10.1145/2667111. S2CID11898299. Wilson, Brian (Mar 2017). “Using Social Media to Fight Fraud”. Risk Management. New York. 64 (2): 10–11.

ProQuest1881388527. “Woman loses £320,000 in ‘romance fraud’ scam”. BBC News. Retrieved 20 October 2020. Tom Zeller Jr (April 26, 2005).

“A Common Currency for Online Fraud: Forgers of U.S. Postal Money Orders Grow”. New York Times.

“Counterfeit Money Orders: The Ultimate Guide”. Fraud Guides. 2017-09-07. Retrieved 2021-04-22.

“CyberCops.com – Counterfeit Postal Money Orders”. http://www.cybercops.com. Retrieved 23 May 2017.

“Online Shopping Scams / Scams and Fraud / Consumer Resources / Home – Florida Department of Agriculture & Consumer Services

Chelsea Manning Is Back, And Hacking Again, Only This Time For A Bitcoin-Based Privacy Startup

Five years ago, from her prison cell, trans whistleblower Chelsea Manning sketched out a new way to protect online privacy. Now, she is helping an MIT-affiliated cryptographer bring the next generation of privacy software online.

Chelsea Manning’s long blonde hair catches in a cool summer breeze as she turns the corner into Brooklyn’s Starr Bar, a dimly lit counter-cultural haunt in the heart of the hipster enclave of Bushwick. The 33-year-old best known for leaking hundreds of thousands of top-secret government documents to Julian Assange in 2010, then coming out as a transgender woman, walks past a poster depicting sea turtles, humans and geese merging to form the outline of a dove. Beside the image are the words, “Your Nations Cannot Contain Us.”

Dressed in a black suit and wearing a silver Omega watch, she makes her way to a small wooden table illuminated by a shaft of sunlight. She orders a Coke. Contrary to what one might expect, this whistleblower turned trans icon looks uncomfortable in the hip surroundings. A fan reverently approaches her and welcomes her back. “This is my life,” she says after he leaves, expressing gratitude for the well wishes and lamenting the loss of her privacy. “I’m not just famous—I’m in the history books.”

While serving the longest sentence ever doled out to a whistleblower after she used the privacy-protecting Tor Network to anonymously leak 700,000 government documents, she used her time in incarceration to devise a better way to cover the tracks of other online users.

Knowing that the nonprofit Tor Project she used to send files to Wikileaks had become increasingly vulnerable to the prying eyes of intelligence agencies and law enforcement, she sketched out a new way to hide internet traffic using blockchain, the technology behind bitcoin, to build a similar network, without troublesome government funding. The entire plan was hatched in a military prison, on paper.

Fixing the known weaknesses of these networks is about more than just protecting future whistleblowers and criminals. Private networks are also vital for big businesses who want to protect trade secrets. The privacy network industry, including the virtual private networks (VPNs) familiar to many corporate users, generated $29 billion in revenue in 2019 and is expected to triple to $75 billion by 2027.

Manning thinks that not-for-profit efforts like Tor, which relies on U.S. government funding and a worldwide network of volunteers to run its anonymous servers, aren’t robust enough. “Nonprofits are unsustainable,” says Manning casually, sipping from her Coke. “They require constant upholding by large capital funds, by large governments.”

By January 2017, she was 7 years into a 35-year sentence at Fort Leavenworth, home to the likes of former Army Major Nidal Hasan, who killed 14 fellow soldiers in 2009. As President Barack Obama prepared to leave office, he granted Manning an unconditional commutation of her sentence. Newly tasting freedom, she was contacted by Harry Halpin, the 41-year-old mathematician who worked for World Wide Web inventor Tim Berners-Lee at MIT from 2013 to 2016 helping standardize the use of cryptography across Web browsers.

Halpin asked Manning to look for security weaknesses in his new privacy project, which eventually became Nym, a Neuchâtel, Switzerland-based crypto startup. Halpin founded Nym in 2018 to send data anonymously around the Internet using the same blockchain technology underlying Bitcoin. To date, Nym has raised some $8.5 million from a group of crypto investors including Binance, Polychain Capital and NGC Ventures. The firm now employs ten people and is using its latest round of capital to double its team size.

Halpin was impressed by Manning’s technical knowledge. More than just a famous leaker who happened to have access to secret documents, Manning struck Halpin as someone with a deep technological understanding of how governments and big business seek to spy on private messages.

“We’ve very rarely had access to people who really were inside the machine, who can explain what they believe the actual capabilities of these kinds of adversaries are, what kinds of attacks are more likely,” says Halpin. “She’ll help us fix holes in our design.”

Born in Oklahoma on December 17, 1987, Manning had her first exposure to what’s called network traffic analysis in high school. She and her Welsh mother, Susan, had moved to Haverfordwest, Wales, in 2001, when Manning was 13. In a computer class there, in 2003, she first learned to circumvent blocks put in place by the school to prevent students downloading certain files—and got caught pirating music by Linkin Park, Jay-Z and others.

The headmaster had been watching remotely. “It was the first moment where it dawned on me, ‘Oh, this is a thing. You can do this.’ By 2008 Manning’s interest in network traffic analysis first brought her to The Onion Router (Tor), a volunteer network of computers that sits on top of the internet and helps hide a user’s identity. The nonprofit organization leveraged something called “onion routing,” which hides messages beneath layers of encryption.

Each message is only decipherable by a different member of the network, which routes the message to the next router, ensuring that only the sender and receiver can decipher it all. Ironically, the network colloquially known as the “Dark Web,” used by Manning to send classified documents to WikiLeaks, was developed by the U.S. government to protect spies and other government agents operating online.

At around the same time Manning discovered Tor, she joined the U.S. Army. As a young intelligence analyst her job was to sort through classified databases in search of tactical patterns. After becoming disillusioned with what she learned about the fighting in Iraq and Afghanistan, she plugged into her computer, put in her headphones, and loaded a CD with music from another of her favorite musicians, Lady Gaga.

Instead of listening to the album, though, she erased it and downloaded what would eventually be known as the largest single leak in U.S. history, ranging from sensitive diplomatic cables to video showing U.S. soldiers killing civilians, including two Reuters journalists.

In prison she studied carpentry, but she never stopped exploring her earlier vocation. “I’m a certified carpenter,” she says. “But when I wasn’t doing that, I would read a lot of cryptography papers.” In 2016, she was visited in prison by Yan Zhu, a physicist from MIT who would later go on to become chief security officer of Brave, a privacy-protecting internet browser that pays users in cryptocurrency in exchange for agreeing to see ads.

She and Zhu were concerned with vulnerabilities they saw in Tor, including its dependence on the goodwill of governments and academic institutions. In 2020 53% of its $5 million funding came from the U.S. government and 27% came from other Western governments, tax-subsidized nonprofits, foundations and companies. Worse, in their opinion, the technology being developed to break privacy was being funded at a higher rate than the technology to protect it.

“As the Dark Web, or Tor and VPN and all these other services became more prolific, the tools to do traffic analysis had dramatically improved,” says Manning. “And there’s sort of been a cold war that’s been going on between the Tor project developers, and a number of state actors and large internet service providers.” In 2014, the FBI learned how to decipher Tor data. By 2020 a single user reportedly controlled enough Tor nodes to steal bitcoin transactions initiated over the network.

Using two lined pieces of composition paper from the prison commissary, Manning drew a schematic for Zhu of what she called Tor Plus. Instead of just encrypting the data she proposed to inject the information equivalent of noise into network communications. In the margins of the document she even postulated that blockchain, the technology popularized by bitcoin, could play a role.

Then, this February Halpin woke her up late one night with an encrypted text message asking her to take a look at a paper describing Nym. Developed completely separately from Manning’s jailhouse sketch, the paper detailed an almost identical system disguising real messages with white noise. A hybrid of the decentralized Tor that relies on donor support and a corporate-owned VPN that requires trusting a company, this network promised the best of both worlds.

Organized as a for-profit enterprise, Nym would pay people and organizations running the network in cryptocurrency. “The next day I cleared my schedule,” she says. By July she’d signed a contract with Nym to run a security audit that could eventually include a closer look at the code, the math and the defensive scenarios against government attacks.

Unlike Tor, which uses the onion router to obscure data sent on a shared network, Nym uses what’s called a mix network, or mixnet, that not only shuffles the data, but also alternates the methods by which the data is shuffled, making it nearly impossible to reassemble.

“Imagine you have a deck of cards,” says Manning. “What’s really unique here is that what’s being done is that you are taking essentially a deck of cards, and you are taking a bunch of other decks of cards, and you are shuffling those decks of cards as well.”

And, as it, turns out, not every government is comfortable using a privacy network largely funded by the U.S. government. Despite Halpin’s commitment to build a network that doesn’t require government funding to operate, in July Nym accepted a €200,000 grant from the European Commission to help get it off the ground.


“Knowing that Wikileaks had become increasingly vulnerable to prying eyes from intelligence agencies and law enforcement, she sketched out a new way to hide internet traffic using blockchain, the technology behind bitcoin.”


“The problem is that there was never a financial model that made any sense to build this technology,” says Halpin. “There was no interest from users, venture capital and big companies. And now you’re seeing what we consider a once-in-a-lifetime alignment of the stars, where there’s interest in privacy from venture capital. There’s an interest in privacy for users.

There’s interest in privacy from companies. And most of the interest from the venture capital side and the company side and the user side has been driven by cryptocurrency. And this was not the case even five years ago.”Even Tor itself is exploring how to use blockchain to create the next generation of its software. After receiving 26% of its total donations in cryptocurrency last year, the Tor Project received a $670,000 grant from advocates of the Zcash cryptocurrency and sold a non-fungible token (NFT) representing the first .onion address for $2 million in May, 2021.

Now, Tor cofounder Nick Mathewson says the Seattle-based nonprofit is exploring some of the same techniques developed by cryptocurrency companies to create Tor credentials that let users develop a reputation without revealing their identity. What he calls an “anonymous blacklistable credential.”

“If you’ve got a website, and somebody does something you don’t like, you can ban them,” says Mathewson. “You can ban the person who did that activity without ever finding out what other activities they did or figuring out whom you banned.”

Though Mathewson is interested in the possibility of using blockchain to upgrade Tor itself, he warns that making for-profit privacy infrastructure could lead to more money being spent on marketing than product development. “Our mission is to encourage the use of privacy technology,” says Mathewson. “I don’t really care whether that privacy tool is the one I made or not.”

Ironically, the same cryptocurrency culture Halpin says brought so much attention from investors, deterred Manning from getting involved earlier. Though she counts herself among the earliest bitcoin adopters, claiming to have mined cryptocurrency shortly after Satoshi Nakomoto activated it in 2009, she sold her bitcoin last year for decidedly nonmonetary reasons.

“I am not a fan of the culture around blockchain and cryptocurrency,” she says. “There’s a lot of large personalities that are very out there, like your Elon Musks and whatnot,” she says. “And it‘s very, like, ‘Oh, we’re going to get rich off of blockchain.’ It’s very nouveau riche. Like a new-yuppies-bro-culture that’s surrounded it. It has gotten a little bit better in some corners. But I think that culture is what I’m talking about. It’s like Gordon Gekko, but blockchain.”

Michael del Castillo

By: Michael del Castillo

Source: Chelsea Manning Is Back, And Hacking Again, Only This Time For A Bitcoin-Based Privacy Startup

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‘Easy money’: How International Scam Artists Pulled Off An Epic Theft of Covid Benefits

Russian mobsters, Chinese hackers and Nigerian scammers have used stolen identities to plunder tens of billions of dollars in pandemic aid, officials say. From a report: In June, the FBI got a warrant to hunt through the Google accounts of Abedemi Rufai, a Nigerian state government official.

What they found, they said in a sworn affidavit, was all the ingredients for a “massive” cyberfraud on U.S. government benefits: stolen bank, credit card and tax information of Americans. Money transfers. And emails showing dozens of false unemployment claims in seven states that paid out $350,000.

Rufai was arrested in May at John F. Kennedy International Airport in New York as he prepared to fly first class back to Nigeria, according to court records. He is being held without bail in Washington state, where he has pleaded not guilty to five counts of wire fraud.

Rufai’s case offers a small window into what law enforcement officials and private experts say is the biggest fraud ever perpetrated against the U.S., a significant part of it carried out by foreigners. Russian mobsters, Chinese hackers and Nigerian scammers have used stolen identities to plunder tens of billions of dollars in Covid benefits, spiriting the money overseas in a massive transfer of wealth from U.S. taxpayers, officials and experts say.

And they say it is still happening. Among the ripest targets for the cybertheft have been jobless programs. The federal government cannot say for sure how much of the more than $900 billion in pandemic-related unemployment relief has been stolen, but credible estimates range from $87 million to $400 billion — at least half of which went to foreign criminals, law enforcement officials say.

Those staggering sums dwarf, even on the low end, what the federal government spends every year on intelligence collection, food stamps or K-12 education.

“This is perhaps the single biggest organized fraud heist we’ve ever seen,” said security researcher Armen Najarian of the firm RSA, who tracked a Nigerian fraud ring as it allegedly siphoned millions of dollars out of more than a dozen states.

Jeremy Sheridan, who directs the office of investigations at the Secret Service, called it “the largest fraud scheme that I’ve ever encountered.”

“Due to the volume and pace at which these funds were made available and a lot of the requirements that were lifted in order to release them, criminals seized on that opportunity and were very, very successful — and continue to be successful,” he said.

While the enormous scope of Covid relief fraud has been clear for some time, scant attention has been paid to the role of organized foreign criminal groups, who move taxpayer money overseas via laundering schemes involving payment apps and “money mules,” law enforcement officials said.

“This is like letting people just walk right into Fort Knox and take the gold, and nobody even asked any questions,” said Blake Hall, the CEO of ID.me, which has contracts with 27 states to verify identities.

Officials and analysts say both domestic and foreign fraudsters took advantage of an already weak system of unemployment verification maintained by the states, which has been flagged for years by federal watchdogs. Adding to the vulnerability, states made it easier to apply for Covid benefits online during the pandemic, and officials felt pressure to expedite processing. The federal government also rolled out new benefits for contractors and gig workers that required no employer verification.

In that environment, crooks were easily able to impersonate jobless Americans using stolen identity information for sale in bulk in the dark corners of the internet. The data — birthdates, Social Security numbers, addresses and other private information — have accumulated online for years through huge data breaches, including hacks of Yahoo, LinkedIn, Facebook, Marriott and Experian.

At home, prison inmates and drug gangs got in on the action. But experts say the best-organized efforts came from abroad, with criminals from nearly every country swooping in to steal on an industrial scale.

“They were literally calling this easy money,” said Ronnie Tokazowski, a senior threat researcher at Agari, a security firm, who has been monitoring dark web communications by West African fraud gangs.

In some cases, overseas organized crime groups flooded state unemployment systems with bogus online claims, overwhelming antiquated computer software benefits in blunt-force attacks that siphoned out millions of dollars. On several occasions, states have had to suspend benefit payments while they tried to figure out what was real and what was not.

“It’s definitely an economic attack on the United States,” said FBI Deputy Assistant Director Jay Greenberg, who is investigating cases as part of the Justice Department’s Covid fraud task force. “Tens of billions of dollars will be missing. … It’s a significant amount of money that’s gone overseas.”

Under the Pandemic Unemployment Assistance program for gig workers and contractors, people could apply for retroactive relief, claiming months of joblessness with no employer verification possible. In some cases, that meant checks or debit cards worth $20,000, Hall said.

“Organized crime has never had an opportunity where any American’s identity could be converted into $20,000, and it became their Super Bowl,” he said. “And these states were not equipped to do identity verification, certainly not remote identity verification. And in the first few months and still today, organized crime has just made these states a target.”

Sheridan, whose purview at the Secret Service includes financial crimes, pointed out that the stolen sums far exceed the annual cost of ransomware, a problem estimated to cost the economy $20 billion a year, which has commanded outsize media attention.

The windfall for criminal groups will fuel other types of crime, including drug and human trafficking, he said.

“These groups that are profiting so greatly from these types of schemes, they engage in a host of other crimes,” he said. “Drug trade, crimes against children, more sophisticated cyber-related fraud. And this money is basically an investment to them to conduct more extensive criminal operations … some of which include crimes that will compromise national security.”

Missed opportunities

By the time states recognized the extent of the criminality, the spigot of cash had been gushing for months.

“Nobody really understood how big the problem was until it was playing out,” said Najarian, the RSA security researcher. “We all accepted that there was fraud taking place, organized fraud and local fraud. But what we didn’t realize … was that the organized fraud was very aggressive and very efficient and moving very, very large sums of money offshore.”

The investigative journalism site ProPublica calculated last month that from March to December 2020, the number of jobless claims added up to about two-thirds of the country’s labor force, when the actual unemployment rate was 23 percent. Although some people lose jobs more than once in a given year, that alone could not account for the vast disparity.

The thievery continues. Maryland, for example, in June detected more than half a million potentially fraudulent unemployment claims in May and June alone. Most of the attempts were blocked, but experts say that nationwide, many are still getting through.

The Biden administration has acknowledged the problem and blamed it on the Trump administration.

“There is perhaps no oversight issue inherited by my Administration that is as serious as the exploitation of relief programs by criminal syndicates using stolen identities to steal government benefits,” Biden said in a statement in May as the government announced a Justice Department Covid fraud task force.

The Biden administration has allocated $2 billion to shore up state unemployment systems. That appears to be badly needed, because states have failed to take basic steps to improve identity verification, according to the Labor Department’s inspector general.

In a memo in February, the inspector general reported that as of December, 22 of 54 state and territorial workforce agencies were still not following its repeated recommendation to join a national data exchange to check Social Security numbers. And in July, the inspector general reported that the national association of state workforce agencies had not been sharing fraud data as required by federal regulations.

Twenty states failed to perform all the required database identity checks, and 44 states did not perform all recommended ones, the inspector general found.

“The states have been chronically underfunded for years — they’re running 1980s technology,” Hall said.

Not a victimless crime

Along with the huge losses inflicted on the U.S. Treasury, the criminals also hurt tens of thousands of people, many of whom suffered delays in getting much-needed benefits.

When Yvonne Matlock lost her job last year as a fundraiser for an Indiana addiction treatment center, she applied for unemployment benefits online, like millions of other Americans.

But she was told she was already getting relief money.

“Somebody had gotten ahold of my Social Security number and set up an account in my name. It seems as though it was really easy for them to do,” she said.

She said it was an ordeal to verify her identity with the state and get her benefits.

“I sent them everything but a blood sample,” she said. “I sent my driver’s license, my Social Security card, my gun permit — which they issued, by the way — my W-2 forms.”

“I sent more than what they asked me for and was still denied,” Matlock added.

She finally got the benefits after three months. And then she was victimized again. Somebody else stole her identity and diverted $1,200. Police are investigating.

The detective “said I’ll do my best, [but] the chances of us finding this person are pretty slim,” she said.

So far, there has been relatively little recovery of the stolen cash — or accountability for the criminals who took it.

The FBI has opened about 2,000 investigations, Greenberg said, but it has recovered just $100 million. The Secret Service, which focuses on cyber and economic crimes, has clawed back $1.3 billion. But the vast majority of the pilfered funds are gone for good, experts say, including tens of billions of dollars sent out of the country through money-moving applications such as Cash.app.

‘Sick to my stomach’

The government does not seem to know how much has been stolen.

Through a public records request, NBC News obtained data from the Labor Department, which funds Covid relief unemployment benefits programs, that are riddled with blank values and underestimates. The data list just over a billion dollars in fraud across the three CARES Act unemployment programs — a figure experts say is off by orders of magnitude.

In fact, state officials have made statements that refute their own reporting into the Labor Department data system. California, for example, appears to have reported only $2 million in fraud across CARES Act programs, despite publicly having acknowledged over $11 billion in unemployment fraud after an audit in January. State officials said early this year that projected losses could reach $31 billion.

More than two-thirds of states, 34, reported no cases of identity theft overpayments in the most vulnerable unemployment benefits program. Experts say that simply is not accurate.

The inspector general pointed out in a recent report that the Labor Department reduced testing and reporting requirements on state unemployment systems during the pandemic.

One result is that the public is in the dark about the scope of the fraud.

“It makes me sick to my stomach, particularly when I see how much is coming out of my taxes each month for unemployment,” said John Wilson, Agari’s field chief technology officer.

The inspector general has projected that there will be $87 billion in misspent unemployment funds, a conservative estimate that assumes no spike in fraud rates. Both the inspector general and the FBI declined to offer an estimate of what the actual value of lost funds might be.

ID.me’s estimate of $400 billion comes from the data the company has seen across the states, Hall said.

ID.me implements extra verification steps beyond paper or digital records, requiring people, for example, to prove through FaceTime that their faces match the ones on the drivers’ license. As a result, fraudsters have used Barbie dolls, silicon masks and deep fake videos in an unsuccessful effort to beat the system, he said.

A Nigerian fraud group strikes

One of the few examples in which analysts have pointed the finger at a specific foreign group involves a Nigerian fraud ring dubbed Scattered Canary by security researchers. The group had been committing cyberfraud for years when the pandemic benefits presented a ripe target, Najarian said.

“The moment the pandemic hit, that was the next big thing that they jumped on, and they did a great job exploiting that opportunity,” he said.

Scattered Canary took advantage of a quirk in Google’s system. Gmail does not recognize dots in email addresses — John.Doe@gmail.com and JohnDoe@gmail.com are routed to the same account. But state unemployment systems treated them as distinct email addresses.

Exploiting that trait, the group was able to create dozens of fraudulent state unemployment accounts that funneled benefits to the same email address, according to research by Najarian and others at Agari.

In April and May of 2020, Scattered Canary filed at least 174 fraudulent claims for unemployment benefits with the state of Washington, Agari found — each claim eligible to receive up to $790 a week, for a total of $20,540 over 26 weeks. With the addition of the $600-per-week Covid supplement, the maximum potential loss was $4.7 million for those claims alone, Agari found.

Scattered Canary and other groups made use of so-called money mules — witting or unwitting third parties who moved the stolen funds through bank accounts so they could be transferred out of the country, Najarian said.

Cash App, which describes itself as “the easiest way to send money, spend money, save money, and buy cryptocurrency,” has been frequently used by fraudsters to move money, law enforcement officials and private consultants said.

“When you use the app, you can quickly and easily convert everything over to Bitcoin,” Tokazowski said. “Within like 10 minutes, you can get that cash converted and sent on its way.”

Cash App said in a statement that it has “enhanced our systems to monitor and act upon deposits that we deem to be risky, despite coming from largely trusted sources like state unemployment agencies. We also partner with law enforcement and government agencies to investigate potential fraud and work collaboratively to return those funds when possible.”

Rufai, the Nigerian official, is accused of having used 100 fraudulent claims to steal $350,000. He is being held without bail after having been transferred from New York to Washington state. He has been placed on leave from his government job, said his attorney, Lance Hester.

Federal officials have not linked the cases to Scattered Canary. But at a detention hearing, prosecutors portrayed Rufai as a significant player in cyberfraud going back to 2017.

“This is a defendant who is charged with participating in a massive fraud on the United States,” said Seth Wilkinson, an assistant U.S. attorney in Seattle, according to a public transcript. “It is someone who exploited our country’s efforts to take care of its own people during the biggest emergency of our lifetime.”

Hester said he could not comment because he had not had a chance to speak with his client in detail.

“I know he stands strongly behind his not guilty plea,” Hester said.

By:

Source: ‘Easy money’: How international scam artists pulled off an epic theft of Covid benefits

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To Combat Billions In Unemployment Benefit Fraud, Startup SentiLink Raises $70 Million

At least in improper payments, much of it fraud, have been distributed by the Federal government since the pandemic struck in March 2020. In California alone, state officials admitted that as much as of unemployment benefits payments may have been fraudulent.

“Unemployment insurance fraud is probably the biggest fraud issue hitting banks today,” says Naftali Harris, co-founder and CEO at San Francisco’s SentiLink, which just closed a $70 million round of venture capital to expand its business of helping financial institutions detect fake and stolen identities for new account applications.

, a San Francisco-based venture firm, led the Series B round which brings SentiLink’s total capital raised to date to $85 million. Felicis, Andreessen Horowitz and NYCA also joined SentiLink’s latest capital infusion.

SentiLink plans to use the capital raised to continue to help institutions with this recent increase in fraud instances spurred by the CARES Act. They also plan to expand their fraud toolkit to prevent other types of scams, such as and, and investigate new ones.

Harris’ team has seen a huge uptick in fraud rates affecting their clients, as high as 90% among new applications, associated with the CARES Act COVID relief. Fraudsters have been using the same name, social security number or date of birth in several applications, filing in high volumes in several states.

According to Harris, his team is currently verifying around a million account openings per day, and is working with more than 100 financial institutions – due to a non-disclosure agreement Harris could not comment on which financial institutions his company serves.

The company says that beyond simply using artificial intelligence to detect fraud, they have a risk operations team that catches in real time cases of synthetic fraud – a form of identity theft in which the defrauder combines a stolen Social Security Number (SSN) and fake information to create a false identity – that would normally go unnoticed by their clients.

Harris discovered this type of fraud when he was working as a data scientist at Affirm in 2017. At the time, synthetic fraud was relatively unknown, so when he saw that crooks were creating brand new identities instead of stealing  existing ones to apply for credit, he founded SentiLink to focus on tackling this new scam. “We realized this was a really big issue and that nobody in the financial services industry was talking about it,” says Harris.

Now, criminals are creating new identities or stealing existing ones to tap into unemployment benefits. Harris says the problem is not only them stealing from the government, but uncovering the tactics they use to deposit the stolen funds.

“What a lot of people don’t realize is that as a fraudster you have to be able to use the money stolen, and put it into the financial system,” Harris says.

To Harris, the biggest differentiation in SentiLink’s approach is how much it emphasizes “deep understanding of fraud and identity in our models.”

“We have a team of fraud investigators that manually review applications every day looking for fraud, and we use their insights and discoveries in our fraud models and technology,” he told TechCrunch. “This deep understanding is so important to us that every Friday the entire company spends an hour reviewing fraud cases.”

SentiLink, Harris added, focuses on “deeply” understanding fraud and identity, and then using technology to productionalize these insights.  Those discoveries include the deterioration of phone/name match data and uncovering “same name” fraud. “This deep understanding is so important that SentiLink employs a team of risk analysts whose full time job is to investigate new kinds of fraud and discover what the fraudsters are doing,” the company says.

SentiLink, like so many other startups, saw an increase in business during the COVID-19 pandemic. “The various government assistance programs were rife with fraud. This had a cascading effect throughout financial services, where fraudsters that had successfully stolen government money attempted to launder it into the financial system,” Harris said. “As a result we’ve been very busy, particularly with checking and savings accounts that until now have had relatively little fraud.”

genesis-3-1

The startup plans to use its new capital to build out its product suite and do some hiring. Today it has 25 employees, with five accepted offers, and expects to end the year with a headcount of 45-50.

Follow me on  or . Send me a secure .

I’m an assistant editor at Forbes covering money and markets. Before joining Forbes, I worked at NextEra Energy, Inc. developing and implementing successful media relations and public relations campaigns in the energy industry.

I graduated from Stetson University with a degree in Finance, and have a master’s degree in Journalism and International Relations from New York University, where I worked as a staff writer for Latin America News Dispatch and New York Magazine’s Bedford + Bowery.

Source: To Combat Billions In Unemployment Benefit Fraud, Startup SentiLink Raises $70 Million

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Crypto Exchange And XRP Refuge Bitsane Vanishes, Scamming As Many As 246,000 Users

Exchange for Ripple's XRP scam users.

Ireland-based cryptocurrency exchange Bitsane disappeared without a trace last week, likely taking hundreds of thousands of users’ assets with it.

Account holders told Forbes that attempts to withdraw bitcoin, XRP and other cryptocurrencies began failing in May, with Bitsane’s support team writing in emails that withdrawals were “temporarily disabled due to technical reasons.” By June 17, Bitsane’s website was offline and its Twitter and Facebook accounts were deleted. Emails to multiple Bitsane accounts are now returned as undeliverable.

Victims of the scam are comparing notes in a group chat with more than 100 members on the messaging app Telegram and in a similar Facebook group. Most users in the groups claim to have lost up to $5,000, but Forbes spoke with one person in the U.S. who says he had $150,000 worth of XRP and bitcoin stored in Bitsane.

Bitsane’s disappearance is the latest cautionary tale for a cryptocurrency industry trying to shed its reputation as an unsafe asset class. Several exchanges like GateHub and Binance have been breached by hackers this year, but an exchange completely ceasing to exist with no notice or explanation is far more unusual.

Bitsane had 246,000 registered users according to its website as of May 30, the last time its homepage was saved on the Internet Archive’s Wayback Machine. Its daily trading volume was $7 million on March 31, according to CoinMarketCap.

“I was trying to transfer XRP out to bitcoin or cash or anything, and it kept saying ‘temporarily disabled.’ I knew right away there was some kind of problem,” says the user who claims to have lost $150,000 and asked to remain anonymous. “I went back in to try to look at those tickets to see if they were still pending, and you could no longer access Bitsane.”

At the height of the cryptocurrency craze in late 2017 and early 2018, Bitsane attracted casual investors because it allowed them to buy and sell Ripple’s XRP, which at the time was not listed on Coinbase, the most popular U.S. cryptocurrency exchange. CNBC published a story on January 2, 2018 with the headline “How to buy XRP, one of the hottest bitcoin competitors.” It explained how to buy bitcoin or ethereum on Coinbase, transfer it to Bitsane and then exchange it for XRP.

Three of the five Bitsane users Forbes spoke to found out about the exchange through the CNBC article. Ripple also listed Bitsane as an available exchange for XRP on its website until recently. A Ripple spokesperson did not respond to a request for comment.

Bitsane went live in November 2016 according to a press release, registering in Dublin as Bitsane LP under CEO Aidas Rupsys, and its chief technology officer was Dmitry Prudnikov. Prudnikov’s LinkedIn account has been deleted, and neither he nor Rupsys could be reached for comment.

A separate company, Bitsane Limited, was incorporated in England in August 2017 by Maksim Zmitrovich. He wanted to own the intellectual property rights to part of Bitsane’s code and use it for a trading platform his company, Azbit, was building. Zmitrovich says Bitsane’s developers insisted that their exchange’s name be on the new legal entity he was forming. But Azbit never ended up using any of the code since the partnership did not materialize, and Bitsane Limited did not provide any services to Bitsane LP.

On May 16, Bitsane Limited filed for dissolution because Zmitrovich wasn’t doing anything with it and the company’s registration was up for renewal. Some of the Bitsane exchange’s victims have found the public filing and suspected Zmitrovich as part of the scam, but he insists accusations against him are unfounded.

He says he hasn’t spoken to Prudnikov—who was in charge of negotiations with Azbit—in at least five months, and Prudnikov has not returned his calls since account holders searching for answers began contacting him. Azbit wrote a blog post about the Bitsane scam on June 13, explaining Bitsane Limited’s lack of involvement.

“I’m sick and tired of these accusations,” Zmitrovich says. “This company didn’t even have a bank account.”

The location of the money and whereabouts of any of Bitsane LP’s employees remain a mystery to the scam victims, who are unsure about what action to take next. Multiple account holders in the U.S. say they have filed complaints with the FBI, but all of them are concerned that their cash is gone for good.

Follow me on Twitter or LinkedIn. Send me a secure tip.

I’m a reporter on Forbes’ wealth team covering billionaires and their fortunes. I was previously an assistant editor reporting on money and markets for Forbes, and I covered stocks as an intern at Bloomberg. I graduated from Duke University in 2019, where I majored in math and was the sports editor for our student newspaper, The Chronicle. Send news tips to htucker@forbes.com.

Source: Crypto Exchange And XRP Refuge Bitsane Vanishes, Scamming As Many As 246,000 Users

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Critics:

Cryptocurrency and crime describes attempts to obtain digital currencies by illegal means, for instance through phishing, scamming, a supply chain attack or hacking, or the measures to prevent unauthorized cryptocurrency transactions, and storage technologies. In extreme cases even a computer which is not connected to any network can be hacked.

In 2018, around US$1.7 billion in cryptocurrency was lost due to scams theft and fraud. In the first quarter 2019, the amount of such losses was US$1.2 billion.

Exchanges

Notable cryptrocurrency exchange hacks, resulting in the theft of cryptocurrencies include:

  • Bitstamp In 2015 cryptocurrencies worth $5 million were stolen
  • Mt. Gox Between 2011 and 2014, $350 million worth of bitcoin were stolen
  • Bitfinex In 2016, $72 million were stolen through exploiting the exchange wallet, users were refunded.
  • NiceHash In 2017 more than $60 million worth of cryptocurrency was stolen.
  • Coincheck NEM tokens worth $400 million were stolen in 2018
  • Zaif $60 million in Bitcoin, Bitcoin Cash and Monacoin stolen in September 2018
  • Binance In 2019 cryptocurrencies worth $40 million were stolen.

Josh Garza, who founded the cryptocurrency startups GAW Miners and ZenMiner in 2014, acknowledged in a plea agreement that the companies were part of a pyramid scheme, and pleaded guilty to wire fraud in 2015. The U.S. Securities and Exchange Commission separately brought a civil enforcement action against Garza, who was eventually ordered to pay a judgment of $9.1 million plus $700,000 in interest. The SEC’s complaint stated that Garza, through his companies, had fraudulently sold “investment contracts representing shares in the profits they claimed would be generated” from mining.

Following its shut-down, in 2018 a class action lawsuit for $771,000 was filed against the cryptocurrency platform known as BitConnect, including the platform promoting YouTube channels. Prior fraud warnings in regards to BitConnect, and cease-and-desist orders by the Texas State Securities Board cited the promise of massive monthly returns.

OneCoin was a massive world-wide multi-level marketing Ponzi scheme promoted as (but not involving) a cryptocurrency, causing losses of $4 billion worldwide. Several people behind the scheme were arrested in 2018 and 2019.

See also

A Crypto Fraudster Looking at 25 Years in Prison After Pleading Guilty in California

https://www.pivot.one/share/post/5c8634791d57e7746034ac03?uid=5bd49f297d5fe7538e6111b6&invite_code=JTOJYV

XRP Fans Fire Back After Analyst Calls Ripple a Scam, Says Bitcoin and Crypto Must Be ‘Shut Down’

https://www.pivot.one/share/post/5c7cb728ad59e746e38c0a3e?uid=5bd49f297d5fe7538e6111b6&invite_code=JTOJYV

Tokyo Police Shuts Down Cryptocurrency Pyramid Scam, Arrests 8 Men – Scott Jeffrey

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When investing in cryptocurrency it’s extremely important to be mindful of various scams that you could be targeted for. There are a number of individuals that are working to create scams that con people out of Bitcoins and other cryptocurrency. Because it’s quite easy to transfer crypto and because it could be difficult to receive a refund on cryptocurrency, it can be one of the perfect tools for the creation of financial scams.

A recent cryptocurrency pyramid scheme was highly successful in targeting around 6000 people internationally from a hub in Tokyo. Eight men were arrested and charged with stealing roughly $68.42 million in various cryptocurrencies.

The company that they were associated with was called Sener and they claimed to be an official United States investment firm. The company that they created was unregistered and they were collecting cryptocurrency from people to have it then reinvested at several levels of membership status. The group held a series of seminars and gatherings promising monthly returns of roughly 20% on any of the money invested through their system. Customers could receive a referral bonus for bringing in new investors to the system.

The company that they created was widely successful through their seminars as well as through a series of YouTube videos that were published on the subject of cyptocurrency investment with them. The group was able to work unimpeded over several months without for filling their promise and while operating illegally without registration.

Their practices would have continued if a lawsuit was not properly filed against them. A group of 73 of their members stepped forward to create a lawsuit in the Tokyo District Court. This group of individuals is seeking ¥370 million in damages for the funds that were taken from them in the illegal operation of this business.

There are a number of other members that bought into this company that have still yet to come forward or request any type of compensation for the scheme.

As news continues to spread about Sener, more of their victims are coming forward in an effort to seek damages. Because the company was not operating with a proper securities license it’s also quite possible that they will be unable to continue their operations in the United States as well as several other international locations.

When you are considering an investment in cryptocurrency or having your currency managed for investment is important to consider the validity of a company and its structure. If you are starting to see that there are levels of membership, ongoing referrals and an overall lack of publication on a company, this could represent a risky choice for your investment.

Asking the right questions such as whether a company is properly registered for the trade of securities can also help to make sure that they aren’t forcibly shut down in a hurry for operating illegally and that your money can remain safe in their hands.

 

 

 

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