5 high-end cryptocurrency scams that shocked the world
Where there's (a lot of) money, there's (usually) a fraud. Especially when it comes to cryptocurrency. With shows like The Tinder Swindler and Inventing Anna showing how easy it is to scam people off their money, it is natural for the regular public to try their hand at the same. And on March 8, a brother and sister duo in the US joined the list of high-end crypto fraudsters.
John and JonAtina (Tina) Barksdale are facing criminal charges for defrauding retail investors by using the cryptocurrency Ormeus Coin, for US $124 million. The case has been filed in Manhattan federal court and the justice department claims that John lied to investors about the value and profitability of Ormeus Coin’s 'mining' assets.
The elaborate lies stated that the coin was being sustained by a US $250 million mining 'operation', which could successfully produce a monthly revenue of more than US $5 million.
The brother-sister duo have also been charged by the Securities and Exchange Commission. The SEC claims that Jack and Tina have been able to raise US $124 million since 2017 by frauding over 20,000 investors through Ormeus Coin.
Through their company, Ormeus Global SA, the duo used multi-level marketing scemes to fraud investors and since 2017, been spending the money for personal expenses such as real estate and travel.
Other than the classic scam promotions done on social media, Jack and Tina were also able to advertise Ormeus Coin on the Times Square jumbotron in Manhattan. The ad on the jumbotron read, "$250 Million Cryptocurrency Mining Farm Revealed in Legal Audit by Ormeus Coin." (no wonder they were able to fraud so many people)
Only John has been arrested till now and could possibly be jailed for 65 years under the charges; securities fraud, wire fraud and conspiracy.
But Jack and Tina aren't the only high-end cryptocurrency fraudsters in the world.
Here are 5 others who will take you by shock:
1. FOUNDER OF BITCONNECT RUNS PONZI SCHEME
WHAT HAPPENED: The founder of BitConnect, Satish Kumbhani, an Indian national, masterminded a global Ponzi sceme which allowed him to defraud investors for US $2.4 billion. Satish was able to deceive investors through BitConnect's Lending Program. As per the US Department of Justice, the scheme allowed BitConnect to peak in the market at US $3.4 billion.
Through the Lending Program, Satish and his co-conspirators kept praising BitConnect's 'purported proprietary technology' known as BitConnect Trading Bot and Volatility Software for its ability to produce sizeable profits to investors to coax them into investing.
BitConnect ran a Ponzi scheme on its investors by passing on the money given to them by new investors to old investors, and this scheme ran for almost a year. After he shut the Lending Scheme, Satish shifted his network of so-called promoters to push up the price of BitConnect’s digital currency, BitConnect Coin in order to create a false appearence of high demand.
CHARGES: Satish is being charged with conspiracy to commit wire fraud and price manipulation, operation of an unlicensed money transmitting business and conspiracy to commit international money laundering.
OUTCOME: If Satish is found guilty, he could face up to 70 years in prison.
2. 900 INVESTORS LOSE RS 1,200 CRORE ON MORRIS COIN
WHAT HAPPENED: In January 2022, the Enforcement Directorate confirmed that at least 900 people had been frauded for over Rs 1,200 crore in Kerala through the cryptocurrency, Morris Coin. Victims began purchasing the fradulent crypto in 2020, particularly during the lockdown, through the Franc Platform cryptocurrency exchange in Coimbatore.
A source from the Enforcement Directorate told the Indian Express, "10 Morris coins were valued at Rs 15,000 with a lock-in period of 300 days. The currency was fake. The investors were given an e-wallet and told that the coin value would boom when traded in the exchange. But the promoters of the coin siphoned out the money and illegally invested in immovable properties in Kerala, Tamil Nadu and Karnataka, particularly in real estate without showing any source of income."
CHARGES: Nishad K, from Pookkottumpadam village in Malappuram district has been identified as the main perpetrator in this case. Although Nishad was arrested in September 2020, he was granted bail, and has since gone underground and most probably left the country.
OUTCOME: The ED has conducted raids at 11 locations in Kerala, Tamil Nadu, Karnataka, and Delhi and is also conducting an investigation into Nishad's assets and fradulent activities.
3. CELEBS SUED IN PUSH AND DROP CRYPTO SCAM
WHAT HAPPENED: In 2021, Kim Kardashian posted a story on her social media that promoted the EthereumMax cryptocurrency. But sadly for Kim, investors at EthereumMax have said that the creators were running a 'pump and dump' scheme.
As per the SEC, a pump and dump scheme is essentially when "fraudsters typically spread false or misleading information to create a buying frenzy that will 'pump' up the price of a stock and then 'dump' shares of the stock by selling their own shares at the inflated price." (READ MORE HERE: Kim Kardashian sued for Push and Drop crypto scam. What went wrong, explained in 5 points)
Launched in May 2021, EthereumMax is an altcoin with a total supply of 2 quadrillion. American boxer Floyd Mayweather and basketball star Paul Pierce promoted EthereumMax all through May 2021 which led to a boost of 632%. Kim promoted the token on June 14, 2021. On June 15, the value of EthereumMax dropped by 98% because creators of EthereumMax sold their shares and ‘locked’ their wallet addresses immediately after.
CHARGES: A lawsuit was filed against all three celebs. No celeb has yet responded to the charges. UK’s Financial Conduct Authority (FCA), Charles Randell said in September 2021 that Kim was promoting ‘a speculative digital token created a month before by unknown developers’.
OUTCOME: No arrests or settlements have yet occured.
4. TIKTOKER USES CRYPTO HACK TO STEAL US $4 BILLION
WHAT HAPPENED: Known to be a creater of cringey rap videos on TikTok, Heather Morgan and her husband, Ilya Lichtenstein who ran ‘cloud services and solutions business’, were the hackers behing the 2016 BitFinex hack. (READ MORE HERE: 4 billion dollar Bitcoin hack makes TikTok girl Heather Morgan an Internet sensation)
This is Heather:
Let’s make some EPIC FOOKIN ART IN 2022! ?♀️? …who’s with me? pic.twitter.com/tyj6mKkEcX
— Heather R Morgan (rzk.eth) (@HeatherReyhan) December 22, 2021
Back in 2016, Heather and Ilya were able to exploit a security breach in BitFinex. BitFinex is a Hong Kong-based popular cryptocurrency exchange platform, and the husband-wife duo were able to gain access to the exchange. Heather and Ilya were able to authorise over 2,000 unapproved transactions, stealing 119,754 $BTC which in 2016 was worth about $72 million.
What do:• $4 billion in missing $BTC• Female rapper RAZZLEKHAN• Forbes magazine• the US Department of JusticeHave in common? A thread on the 2016 Bitfinex hack, its resolution, and the implications.The strangest crypto story of the year (so far, at least):??
— Jack Niewold (@JackNiewold) February 8, 2022
CHARGES: The duo faces charges of money laundering and defrauding the US. If found guilty, they could be sent to prison for about 20 years for money laundering and 5 years for defrauding.
OUTCOME: The US Feds have been able to seize 94,000 Bitcoins worth over $3.6 billion and the rest had been laundered into the private accounts of Heather and Ilya.
5. ONLINE DATING LEADS TO FACEBOOK BITCOIN SCAM
WHAT HAPPENED: Back in 2020, Murphy Townsend from Washington DC, US, messaged Sharon Bulmer in Manchester, UK, on Facebook, saying he was lonely. He created a fake profile and used the picture of Latvian Defence Minister Artis Pabrikis as his display picture and said that he was a US soldier deployed in Syria.
After a few conversations, Murphy began to ask Sharon for money in the form of Bitcoin with the pretence that he needed to buy plane tickets and pay hospital bills. After losing nearly 80,000 Pound Stering over their two-and-half year relationship, Sharon finally contacted the US Army and found out that Murphy was not on their roll and he was a fraudster.
Sharon is currently under 37,000 Pound Sterling worth of debt. No charges and action have taken place against Murphy, if even that is his real name.