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Tag: Bitcoin

  • INTERPOL: ‘Digital Currencies Increasingly Used To Finance Criminal Activities[,] Including Terrorism’

    Pushing a murky, MLM-style digital currency scheme or even a purported one? Involving family, friends and online contacts?

    INTERPOL is warning that “digital currencies [are] increasingly used to finance criminal activities[,] including terrorism.”

    The warning is included in an INTERPOL announcement dated Jan. 16 about a law-enforcement conference in Qatar on the topic of transnational crime and how digital currencies are being used to launder money.

    “Digital currencies are not constrained by national regulations or borders, therefore cooperation in fighting against criminal uses of digital currencies must also transcend borders and integrate solutions from both law enforcement and the private sector,” said Tim Morris, INTERPOL’s executive director of Police Services.

    About 400 participants from law enforcement and private industry from 60 counties attended the conference in Doha, INTERPOL said. The event concluded today.

    INTERPOL, Europol and the Basel Institute on Governance, with the collaboration of the Qatar National Anti-Money Laundering and Terrorism Financing Committee, organized the conference, INTERPOL said.

    Even Bitcoin can be exploited for criminal purposes, INTERPOL said.

    Any number of murky cryptocurrencies are being marketed MLM-style online. BehindMLM.com has reported that one known as OneCoin is being investigated in multiple countries.and that even a kidnapping and ransom plot involving promoters has been reported.

    Read the INTERPOL announcement titled “Digital currencies and money laundering focus of INTERPOL meeting.”




  • URGENT >> BULLETIN >> MOVING: First U.S. Criminal Prosecution Of Bitcoin-Themed Scheme; Trendon Shavers Arrested

    breakingnews72In the first U.S. criminal prosecution involving a Bitcoin-themed scheme, Trendon Shavers has been arrested and charged with securities fraud and wire fraud.

    Shavers, 32, of McKinney, Texas, was charged civilly by the SEC in July 2013. He is known as “pirateat40,”  and allegedly pushed his Bitcoin Savings and Trust Ponzi scheme from a forum.

    FBI agents arrested him today at his Texas residence.

    “As alleged, Trendon Shavers managed to combine financial and cyber fraud into a Bitcoin Ponzi scheme that offered absurdly high interest payments, and ultimately cheated his investors out of their Bitcoin investments,” said U.S. Attorney Preet Bharara of the Southern District of New York.  “This case, the first of its kind, should serve as a warning to those looking to make a quick buck with unsecured currency.”

    A top FBI official threw down the gauntlet.

    “Shavers used a new currency, but the same old reprehensible tricks,” said FBI Assistant Director-in-Charge George Venizelos. “He claimed to offer a Bitcoin market-arbitrage strategy. In reality, it was nothing more than an insidious scheme motivated by greed. Today, Shavers’ jig is up. He finds himself under arrest and charged in Manhattan federal court.”

    Some HYIP schemes appear now to have moved away from payment processors such as the now-shuttered Liberty Reserve and are moving toward Bitcoin.

    From a statement by Bharara’s office, which previously prosecuted Liberty Reserve, calling it a $6 billion money-laundering operation that enabled HYIPs and others forms of fraud (italics added):

    From at least September 2011 up through and including September 2012, SHAVERS operated a Ponzi scheme. Specifically, SHAVERS solicited investments in BCS&T on the “Bitcoin Forum” – a public, Internet-based forum where, among other things, Bitcoin investment opportunities were posted. SHAVERS’s offer to investors was straightforward: investors who lent Bitcoin to BCS&T would be paid up to seven percent interest weekly – an annualized interest rate of 3,641% per year – and investors could withdraw their investments in BCS&T at any time. SHAVERS claimed that the Bitcoin invested by BCS&T investors would be used to support a Bitcoin market-arbitrage strategy, which included (i) lending Bitcoin to others for a fixed period of time; (ii) trading Bitcoin via online exchanges; and (iii) selling Bitcoin locally via private, off-markets transactions – i.e., “over-the-counter transactions.” SHAVERS also personally guaranteed to cover any losses in the event of a market change. In truth, SHAVERS largely failed to execute the claimed market arbitrage strategy, failed to honor all of his investors’ redemption requests as well as his personal guarantee, and failed to deliver the agreed upon rates of interest.

    In the end, BCS&T was a Ponzi scheme in which SHAVERS used Bitcoin from new investors to make purported interest payments to existing investors and to cover investors’ requests to withdraw Bitcoin from existing BCS&T accounts. In addition, SHAVERS diverted investors’ Bitcoin for day trading in his own account on a Bitcoin currency exchange, and exchanged investors’ Bitcoin for U.S. dollars to pay certain of his personal expenses. At the peak of the scheme, SHAVERS raised, and had in his possession, about seven percent of all the Bitcoin that were then in public circulation. In the end, at least 48 of approximately 100 investors lost all or part of their investment in BCS&T.

    Some Bitcoin enthusiasts have fretted that dark forces and criminal organizations are seeking to use Bitcoin in the same way they used Liberty Reserve. Criminal activities could undermine confidence in Bitcoin and affect its perception in the marketplace.

    In late August, some affiliates of the collapsed $850 million Zeek Rewards Ponzi scheme began pushing a Bitcoin-themed “program” known as BitClub Network, a purported “mining venture” with an investment arm attached that purportedly supplies a payout for 1,000 days.

    Prospects were encouraged to buy in with sums ranging from $500 to $3,500.

    Zeek used traditional forms of payment.

     

  • Tweets Claim SEC Inquiring About ‘Hundreds’ Of Bitcoin-Themed Companies

    4th UPDATE 8:09 A.M. EDT OCT. 30 U.S.A. In the past several hours, Tweets sourced to Bitcoin-themed publications such as CoinFire, CryptoCoinsNews and CoinTelegrah claim the SEC has opened preliminary inquiries into hundreds of Bitcoin-themed enterprises.

    On the CoinTelegraph website, the publication asserts there is a “gag order attached to these requests for voluntary cooperation.”

    For starters, there appears to be no independent corroboration from the SEC of the inquiries. None may be forthcoming, given that early inquiries — if they exist — are not public by design. Moreover, references to a “gag order” may be a misinterpretation of a phrase the SEC uses when opening preliminary inquiries. Using boilerplate language, the SEC typically informs the subjects of the inquiries that “This investigation is confidential and non-public.”

    The language is designed to protect both the recipient’s interests and the SEC’s. So, if the claim that a “gag order” has been issued is hung around the boilerplate language concerning the confidential nature of SEC inquiries at this early stage, it very well may mean the “gag order” claim is incorrect.

    Not all inquiries result in an enforcement action that involves a U.S. federal court or an SEC administrative law judge. Some do, however. Here, via the Chicago Sun Times, is an example of a nonBitcoin enterprise that received an SEC boilerplate letter in September 2013 and later became the subject of a full-blown  investigation that led to an enforcement action in June 2014.

    On the whole, though, we’d say the odds the SEC wants to look down certain Bitcoin-themed rabbit holes are very high — notwithstanding the fact that the PP Blog cannot confirm the Twitter claims about the inquiries.

    It is obvious that Bitcoin-themed HYIPs are operating. Another area of obvious concern: Are Bitcoin-themed enterprises running crowdfunding scams?

    One thing to look for as this situation evolves is crackpot “defenses” of everything Bitcoin. In response to the Tweets and coverage on Bitcoin-themed publications of the asserted SEC inquiries, some such defenses already have surfaced. One poster on CryptoCoinsNews, for example, appears to be advancing a conspiracy theory that the SEC is trying to dupe recipients of the asserted inquiry letters into confessing jurisdiction.

    In the Comments thread, the poster suggests that recipients of the asserted inquiries should respond as such (italics added):

    “I _______ (state your name), present myself in pro pria persona for a special appearance, as to be distinguished from a general appearance and respectfully ask [the court to direct the prosecution] to prove for and on the record all elements of jurisdiction binding me to perform in any way whatsoever.”

    The problem with such a response is that it comes off sounding like so much “sovereign citizen” poppycock that it has the potential to subject to additional scrutiny those who’d adopt the guidance. Beyond that, even if the inquiries actually are taking place, no court appears to be involved at this time and it’s already clear that the SEC has jurisdiction over matters pertaining to securities.

    Other “defenses” suggest the SEC is sending out a squad of “goons” to make it hard for companies to do business and that the SEC is interfering in “contracts” between consenting adults.

    For whatever reason, various “defenders” of online “opportunities” have adopted a bizarre narrative that more or less asserts that all commerce is lawful as long as the parties entering a contract agree that it is lawful. Such constructions, however, would legalize murder-for-hire, terrorism plots, extortion, human trafficking, selling narcotics to school children and many other pursuits society rejects.

    Simply put, there are a lot of holes in claims that all commerce is lawful as long as the parties agree that it is lawful. Such constructions would mean that John Q. Bloodthirsty Political Extremist could enter into a contract with Carlos the Jackal to plant a car bomb designed to kill innocents in France — and no government or no person could do anything about it, including maimed survivors who never agreed to be disfigured at the hands of the contracted parties.

    It is no more lawful to operate an HYIP or crowdfunding scam that involves Bitcoin than one that involved Liberty Reserve, alleged to have helped criminals launder $6 billion.

  • INVESTOR ALERT: Statement From Alabama Securities Commission On High-Yield ‘Opportunities,’ Bitcoin, Iraqi Dinars — And More

    EDITOR’S NOTE: This statement from the Alabama Securities Commission is dated March 12, 2014. The PP Blog has applied in-house formatting elements to the statement. Other than that, the statement is verbatim.

    INVESTOR ALERT – Understanding high-risk investments
    What you don’t know CAN hurt you!

    MONTGOMERY, ALABAMA (March 12, 2014) As our state’s and the country’s economy slowly improves, Alabama citizens could still be at risk for losing their hard-earned money to high-risk investment products that guarantee or promote unrealistically high rates of return with little or no exposure to loss. The Alabama Securities Commission (ASC) receives numerous inquiries about exotic-sounding, high-yield investment “opportunities” that, in many cases, are revealed to be unregistered investments touted by unlicensed individuals who employ vague or unrealistic trading strategies.

    And, with the rapid evolution and marketing potential of social media and the internet, investors may be lured by the illusion that most such opportunities are legitimate. The ASC alerts Alabama investors about two current, high-profile, high-risk investment opportunities that have the potential to seriously compromise their personal financial assets if not investigated thoroughly and carefully.

    BITCOIN issues

    Virtual or digital currencies, such as Bitcoin, have recently become popular as an alternative to cash or traditional lines of credit. Bitcoin and numerous other “crypto-currencies,” may be traded on online exchanges for conventional currencies, including the U.S. dollar, or used to purchase goods and services, usually online.

    Unlike traditional currencies, virtual currencies’ value can fluctuate radically according to user demand. In some cases, investors who trade on virtual currency exchanges have experienced trouble redeeming the digital currency or in cashing-out. The potential for fraudsters to use crypto-currencies to perpetrate financial scams is enticing due to the currencies not being issued by a governmental authority or financial institution, and having less regulatory oversight than transactions in conventional currencies.

    “The increasing prevalence of Bitcoin and other digital currencies has provided a fertile environment for financial criminals to make money on the increasing popularity and acceptance of these products,” said ASC Director, Joseph Borg. “The value of Bitcoin and other crypto-currencies can be highly volatile and investors should be aware that investments that incorporate ambiguous money systems can lead to very real risks, including the potential to lose one’s money!”

    Iraqi Dinar issues

    The Iraqi dinar “investment opportunity” is a scam that has existed for more than a decade and has regained some of its former popularity. As with many foreign exchange currency trading frauds, the dinar investment opportunity is often pitched as a “can’t miss” method by which the interested investor can profit from a severely undervalued Iraqi currency that is “certain” to appreciate in value in just a short time.

    Fraudsters engaging in the dinar scam promise that extravagant profits can be realized if the investor buys the dinar at today’s values, typically 1,000 or more dinars to one U.S. dollar. The investor then exchanges the dinars for dollars at a later date, once the dinar exchange rate has improved.

    ASC Director Borg cautions that foreign exchange currency trading is very risky for main street investors.

    “Often, promoters of foreign exchange currency trading schemes, such as those involving the Iraqi dinar, lure investors with the promise of “control” over a large amount of foreign currency with a relatively small initial outlay. Fraudsters often predict inevitable increases in the currencies’ value, which will supposedly lead to huge returns over a short time, with little or no downside risk.”

    According to Borg, investors should not be fooled by the promise of easy money.

    “As with any traded commodity, investing in foreign currencies can be extremely risky and generally unsuitable for all but the most seasoned investors who can afford the high risk.”

    Commodity trading platforms are subject to federal and state regulations; potential investors may contact the U.S. Commodity Futures Trading Commission (CFTC) at www.cftc.gov for more information; check registration status and disciplinary history of commodities at the National Futures Association (http://www.nfa.futures.org/) or call NFA at 800-676-4632; and contact the ASC at www.asc.alabama.gov or call 1-800-222-1253 to determine if an investment opportunity and the person making the office are properly registered.

    What you can do

    The Alabama Securities Commission encourages all Alabama citizens to learn and incorporate
    sound and proven investment techniques as a means to grow and safeguard their personal financial assets:

    • Check and verify. Before you buy, always independently verify with state and federal regulators who you are dealing with and whether the seller of the investment opportunity and the product is properly registered.
    •  Exercise skepticism. Be aware that many individuals who offer strategies for getting rich quickly make their money on the sales of their books or seminars. Ask yourself why they’re sharing their secrets with you instead of keeping it to themselves.
    • Beware of guarantees. Be suspect of anyone who promises or guarantees an investment will perform a
    • predictable way or will generate consistent or unreasonable returns.
    • Be suspect of complex strategies. Avoid any investment opportunity that touts complex or exotic-sounding techniques to achieve unusual success. Investors should be able to clearly discern what kind of opportunity is being offered; who is offering it; how does it make money; what is required to get your money out of the investment; and what are the risks.

    Avoid pushy salespeople and claims of urgency. No reputable financial professional should pressure you or insist that you “act now” when considering an investment opportunity. If it is such a good deal today, it will be a good deal tomorrow—after you have had a chance to check and verify.

    Contact the ASC with inquiries concerning securities broker-dealers, agents, investment advisers, investment adviser representatives, financial planners, registration status of securities or debt management programs, to report suspected fraud or to obtain consumer information. The ASC provides free investor education and fraud prevention materials in print, on our website and through educational presentations upon request.
    # # #

  • Greater Dallas Firm Allegedly Sold Unregistered Securities, Pooh-Poohed Qualification Criteria — And Accepted Bitcoin Without Disclosing Risks

    “Far from verifying that purchasers of the company’s investments are accredited, [Balanced Energy President Kirk] Johnson, according to the order, said ‘we don’t do any verification’ and ‘we’re not the paperwork police,’” — Texas State Securities Board, March 11, 2014

    recommendedreading1Balanced Energy LLC, an oil-and-gas firm based in the Dallas-Fort Worth suburb of Southlake, is not an HYIP in the classic sense of the term. But the company’s experience could presage danger to HYIP scammers who seek to hitch their wagons to Bitcoin and cherry-pick Bitcoin users.

    In an emergency cease-and-desist order dated March 10, the Texas State Securities Board has accused Balanced Energy of accepting payment through Bitcoin without disclosing the risk of using the digital currency.

    “Balanced Energy will convert some or all of the payments it receives through Bitcoin to traditional currency and use the money to pay for its business operations,” the board said, referring to its order.

    “Balanced Energy has failed to disclose to investors the risks in using Bitcoin to purchase working interests in wells, according to the order,” the board continued. “The price of digital currency is subject to extreme swings, which could affect the amount of money available for business operations.”

    Regulators conceivably could attack HYIPs accepting Bitcoin under the same theory, adding another layer of risk to the already insidious “opportunities.”

    Balanced Energy also sold unregistered securities and solicited unaccredited investors, the board alleged.

    Again the experience of Balanced Energy could signal bad news for HYIP scammers.

    “Far from verifying that purchasers of the company’s investments are accredited, [Balanced Energy President Kirk] Johnson, according to the order, said ‘we don’t do any verification’ and ‘we’re not the paperwork police,’” the board alleged.

    From a statement by the board (italics added):

    The working interests are not registered with the State Securities Board and no permit has been granted for their sale in Texas. Rule 506 of Regulation D under the federal Securities Act of 1933 does allow an issuer to solicit and sell certain securities without first complying with state registration requires, but only to accredited investors. The Securities and Exchange Commission defines individual accredited investors as persons whose net worth is at least $1 million – excluding their primary residence – or who make at least $200,000 a year.

    The issuer of a such an offering must also take reasonable steps to verify an investor’s accredited status.

    HYIP schemes — always a den of criminality — increasingly may be trying to tie themselves to Bitcoin and appear even to be launching Bitcoin-themed reload scams targeting Bitcoin users who lost money at Mt. Gox. Soliciting investors regardless of their financial standing is one of the oldest tricks in the HYIP scammer’s playbook.

    Consumers could be left holding the bag if a scheme goes south.

    “Although digital currencies such as Bitcoin are often touted as a sophisticated, online alternative to traditional currencies, investors should realize these currencies are not tangible, they are not issued by a government, and are not currently subject to traditional regulation or monetary policy,” Texas Securities Commissioner John Morgan said last month.

    Here are just two of the points made in an Investor Warning by the Texas board last month (italics added)

    Digital currencies may provide promoters with a significant degree of anonymity.  Unscrupulous promoters may be able to exploit the anonymous nature of certain digital currencies to conceal their true identity and assist in the concealment and laundering of the proceeds of a fraudulent investment offering.

    Securities offerings that incorporate digital currencies may be highly dependent upon their growth and acceptance in retail and commercial marketplaces.  Also, any change in consumer confidence, user demographic or governmental regulation, or the introduction of new and competing forms of digital currencies, may negatively affect the liquidity or value of such securities offerings.

    Applied to the HYIP sphere, the message may be that you can get in with Bitcoin — but you might not be able to get out.

    And a scammer, of course, could simply relieve you of your Bitcoins by plying you with offers of dazzling returns — and then simply hightail it to the next scam to do it all over again.

  • Spammers Push Bitcoin-Themed Reload Scams

    cautionflagYou’ve probably heard about the debacle at Mt. Gox, a Bitcoin exchange. Reuters, meanwhile, is reporting that a Bitcoin bank known as Flexcoin is shutting down after it lost $600,000 to a hacker attack.

    Elsewhere there are stories about the tragic death of 28-year-old Autumn Radtke, CEO of First Meta Pte Ltd, a Bitcoin exchange.

    Uncertainly about the future of Bitcoin and exchangers appears to be driving reload scams. These may be positioned as ways to recover Bitcoin losses incurred through Mt. Gox.

    Something styled “BitcoinInvestmentFund” at a .net has appeared online. One of the links on the site, which appears have been registered in January 2014, leads to a forum in which this claim is made (italics added/verbatim):

    Make millions EgoPay PerfectMoney Bitcoin SolidTrustPay in paying hyips fastest Real Investment

    The PP Blog reported yesterday about a scam known as “Mutual Wealth” that allegedly was gathering cash though EgoPay, PerfectMoney and SolidTrustPay, which often are facilitators for fraud schemes.

    Nothing is sacred in HYIP Ponzi Land. In a disturbing tale of disconnect, some promoters of TelexFree, an MLM “program” under investigation in North America, South America, Africa and the subject of warnings in Europe, more or less tried to cherry-pick recruits by posting in media accounts in Brazil about the suicide deaths of two TelexFree promoters.

    Tacky doesn’t begin to describe it.

    At 12:10 a.m. today, the PP Blog received a spam from someone (or something) tying to post in the Comments thread below this story about thousands of people being sued as a result of the Zeek Rewards scam. The would-be poster used the would-be user ID of “Hyip Egopay” and sought to plant a link to the purported Bitcoin recovery venture at the .net.

    Within the would-be post was an assertion about “Investment Insurance.” It also issued this appeal: “Cover Your Lost [sic] on MTGOX.”

    The would-be post appeared to solicit sums of between $300 and $250,000 — and the purported payouts were in the thousands of percent per hour.

    Among the claims on the actual .net site is this: “Bitcoin Investment Fund is short term, high yield private loan program, backed up Our Newest system of Forex trading.”

    Words fail me . . .