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Beware of Crypto Criminal Ponzi Schemes

Under the pseudonymity and decentralization of cryptocurrency’s infrastructure modern-day criminals now often sit comfortably on their living room sofa, sipping their favorite libation, as they quickly and quietly rob unsuspecting businesses and individuals of their crypto assets. Some are extremely savvy on how to successfully and consistently mask their identities through many many layers of pseudonymity and encryption. Others make mistakes here and there. Even the tiniest mistake, such as allowing an IP leak, or posting an email address that can eventually lead to a real ID, get caught. Furthermore, cryptocurrency transactions are transparent, recorded on a public ledger known as the blockchain. Using various tools and techniques, cryptocurrency crime investigators can examine crypto transactions, note patterns, analyze what transactions may be associated with crime, sharpen their understanding of what types of cryptocurrency crimes are more prevalent, and share what they know with the law enforcement community. Digital gold rush scammers of all kinds lined up to make big bucks off of people who didn’t really understand how the technology worked. In April 2017, a company called OneCoin, amid their pitch for its own digital currency, was raided by financial enforcement officers. OneCoin was pitching itself as the next Bitcoin. However, it was nothing more than a Ponzi scheme that had already moved about $36 million in scammed funds via their payment processor in Germany. Eighteen OneCoin representatives were jailed. Authorities seized more than $2 million in investor funds. More recently, in March 2020, Zima Digital Asset co-founder Zachary Salter and John Caruso pled not guilty to conspiracy to commit wire fraud and money laundering charges. The indictment against them alleged that Salter and Caruso ran a classic Ponzi scheme to defraud more than 90 of their investors out of $9 million. Nearly $2 million of the total was remitted back to early investors in the form of “investment returns” to validate and boost the scheme. At the same time, the remaining $7mil was spent lavishly livin’ la Vida Loca. In December 2019, five people who operated the BitClub Network were charged with scamming investors out of $722M in a Ponzi scheme. To add insult to financial injury, BitClub operators ridiculed their clients, calling them “sheep” and “idiots.” BitClub investors joined a pool to share in Bitcoin mining earnings. BitClub operators said they’d invest in the necessary software and hardware, do the sophisticated algorithm solving math, and the investors would share in the great rewards. BitClub solicited investments by providing false and misleading figures touted as “Bitcoin mining earnings.” The investment scheme was advertised as “the most transparent company in the history of the world” and “too big to fail”. They failed. Big time. Two of the BitClub operators, Matthew Boettsche and Jobadiah Weeks, are now appealing to the U.S. federal court asking to be released from prison due to their fears over penal institutions harboring the coronavirus pandemic.

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