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QuadrigaCX Co-Founder Michael Patryn Is Actually Convicted Criminal Omar Dhanani: Report

QuadrigaCX’s co-founder Michael Patryn is allegedly formerly known as Omar Dhanani, who operated a credit card fraud scheme in 2002.

A co-founder of controversial QuadrigaCX exchange was reportedly involved in multiple criminal activities in the past, Bloomberg reports on March 19.

Michael Patryn, who co-founded Canadian crypto exchange QuadrigaCX along with Gerald Cotten in 2013, was previously known as Omar Dhanani, a person that was involved in multiple crimes in the United States, Bloomberg states.

$145 million in clients’ crypto assets was found to be missing from the QuadrigaCX exchange after its co-founder and CEO Cotten died at the age of 30 from complications of Crohn’s disease in December 2018. The exchange is now ongoing legal and financial proceedings amid the controversy over the missing funds, having appointed Ernst & Young as an independent monitor in its creditor protection case.

Patryn reportedly left QuadrigaCX in 2016, citing a fundamental disagreement with Cotten over the listing processes for the firm. According to Canadian newspaper Globe and Mail, Patryn and his partner, Lovie Horner, remain two of QuadrigaCX’s largest shareholders, although he has not had any involvement in the company’s operations since 2016.

While Patryn has recently denied the allegations that he and Dhanani are the same person, Bloomberg reportedly acquired official Canadian records saying that Patryn legally changed his name twice — first losing his last name, Dhanani and then replacing his first name, Omar — in 2003 and in 2008.

Dhanani, one of the alleged past identities of Patryn, was reportedly sentenced to 18 months in the U.S. federal prison for being involved in identity theft related to both bank and credit card fraud back in 2005. According to Bloomberg, 22-year-old Dhanani pleaded guilty to operating in 2002, a now-defunct marketplace that trafficked over 1.5 million stolen credit card and bank card numbers.

In 2007, Dhanani also admitted guilt in separate criminal cases for for burglary, grand larceny and computer fraud, Bloomberg reports, citing California state court records.

Per Bloomberg’s allegations, Patryn reinvented himself as a Bitcoin (BTC) entrepreneur after he was deported to Canada. According to Patryn’s LinkedIn profile, he is now based in Vietnam, and has been serving as founder and chairman at fintech Ventures Group (FVG), a Canada-based blockchain incubator.

Patryn provided few details about his 13-years working experience before QuadrigaCX on LinkedIn, only specifying that he worked in many digital currency-related firms from 1999 to 2013.

Recently, Cotten’s widow Jennifer Robertson revealed that Cotten was funding the exchange with his own money while it was in litigation with a major Canadian bank.

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Canadian Police Asks for Public Assistance to Identify Bitcoin Fraudsters

The Calgary Police Service Cybercrime Team has asked the public to assist in the identification of four individuals allegedly involved in multiple fraudulent Bitcoin transactions.

Canadian police are seeking information on individuals alleged to be involved in defrauding Bitcoin (BTC) ATMs (BTMs), according to an announcement published by the Toronto Police Service on March 13.

The Calgary Police Service (CPS) Cybercrime Team has asked the public to assist in the identification of four individuals allegedly involved in multiple fraudulent transactions made within the country and targeting one Canadian Bitcoin firm. The CPS initially received the information in October 2018.

The press release states that in September of last year, the suspects allegedly made 112 fraudulent transactions at BTMs in seven Canadian cities, including Calgary, Toronto, Montreal, Ottawa, Hamilton, Winnipeg, and Sherwood Park. The CPS believes that the suspects made “double-spend” attacks.

In such attacks, the suspect allegedly withdrew money from a kiosk and subsequently cancelled their transaction remotely before the BTM operator could process the withdrawal. The fraud reportedly resulted in CA$195,000 ($146,666) in losses to the company.

Recent research published by crypto analytics company CipherTrace in January revealed that about $1.7 billion in cryptocurrency had been obtained via illicit means in 2018. Of that $1.7 billion, over $950 million was stolen from crypto exchanges, representing a 3.6 times increase over 2017. In 2018, at least $725 million was lost to scams such as ponzi schemes, exit schemes and fraudulent initial coin offerings.

At the same time, analytics company Chainalysis reported that cryptocurrency-related crime has decreased over the past few years, only accounting for 1 percent of all Bitcoin transactions in 2018. Chainalysis also made a prediction of criminal trends in the space in 2019, outlining increased usage of decentralized platforms and efforts to move and launder money around the world through cryptocurrencies.

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UN Panel Says North Korea Obtained $670 Million in Crypto and Fiat via Hacking: Report

A U.N. Security Council report states that North Korean hackers obtained $670 million in crypto and foreign fiat from 2015 to 2018

North Korea has reportedly amassed $670 million in fiat and cryptocurrencies by conducting hacking attacks, Asia-focused financial newspaper Nikkei Asian Review reports on Friday, March 8. The publication cites a U.N. Security Council report.

The report, prepared by a panel of experts, was presented to the Security Council’s North Korea sanctions committee ahead of its annual report. According to the documents obtained by Nikkei, the hackers attacked overseas financial institutions from 2015 to 2018 and purportedly used blockchain “to cover their tracks.”

As cited by Nikkei, the report states that the attack were allegedly conducted by a specialized corps within the North Korean military, forming part of country’s government policy. The experts believe that the corps is responsible for hacking Interpark, a South Korean e-commerce site, and luring $2.7 million in exchange for stolen data.

According to Nikkei, the experts came to the conclusion that virtual currencies helped North Korea to circumvent economic sanctions — as they are harder to trace and can be laundered multiple times — and obtain foreign currency. The authors of the report recommended that U.N. member nations share information on possible North Korean attacks with other governments to prevent them in the future.

Nikkei also alleges that blockchain has been previously used by a Hong Kong-based startup, Marine Chain, to circumvent sanctions against North Korea. As the newspaper writes, the company, which traded ships around the world via blockchain, was suspected of supplying cryptocurrencies to the North Korean government and shut down in September 2018.

As Cointelegraph previously reported, in 2018 a study revealed that hacker group “Lazarus,” reportedly funded by North Korea, has stolen $571 million from cryptocurrency exchanges since early 2017. Out of fourteen separate exchange breaches analyzed, five have been attributed to “Lazarus,” including the industry record-breaking $532 million NEM hack of Japan’s Coincheck in January, 2018.

Meanwhile, other countries sanctioned by the world community, such as Iran and Venezuela, also have reported seeing cryptocurrencies as an effective way to circumvent financial restrictions. For instance, four Iranian banks reportedly developed a gold-backed cryptocurrency called PayMon, and the country is allegedly negotiating with Switzerland, South Africa, France, the United Kingdom, Russia, Austria, Germany and Bosnia to carry out financial transactions in cryptocurrency.

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Silver Miller Files Lawsuit Against Creator of Alleged Crypto Ponzi Scheme

U.S. crypto investor law firm Silver Miller has filed a lawsuit against a purported crypto hedge fund manager who was allegedly operating a fraudulent Ponzi scheme.

United States crypto-focused law firm Silver Miller has filed a lawsuit against a purported crypto hedge fund manager who was allegedly operating a fraudulent Ponzi scheme. The court documents were published to the Silver Miller website Dec. 26.

The case — which has been filed at the Court of the Southern District of New York on behalf of multiple plaintiffs who invested in the scheme — alleges that Jeremy Spence, alongside a small cohort of accomplices, orchestrated a fake entity called “Coin Signals.” Spence is alleged to have deceptively represented himself as a successful crypto trader. He reportedly offered investors in his scheme “lucrative returns” that he claimed were generated by the series of crypto hedge funds he purported to be managing.

These hedge funds reportedly included an “Alts Fund,” a “Long Term Fund,” a “managed entry” to an Initial Coin Offering (ICO) — dubbed “Evermarkets ICO” — and “Coin Signals Mex (CSM) Fund,” the latter of which is the primary focus of the lawsuit.

In truth, the lawsuit contends, the returns were not profits from investments, but “were simply reallocations to older investors of new investors’ assets” in a classic Ponzi scheme configuration. As the court documents state, Spence fended off questions from his investors with excuses — such as hacks and family emergencies — in order to “stall for time and plot his next move.”

The CSM Fund, as per Silver Miller, was not registered as a hedge fund with any U.S. regulatory authority, and failed to adhere to any of the regulatory requirements a legitimate investment fund is compelled to follow. At its height, the CSM Fund in particular is alleged to have held as much as 1,300 Bitcoin (BTC) deposited by the scheme’s investors — valued at the time at over $10 million.

When the CSM fund scheme started to fall apart in late 2018, Spence is alleged to have prevented the fund’s participants from withdrawing their assets. The lawsuit thus

“pleads that the Court rescind the investments in the fraudulent Coin Signals funds; return to the investors their cryptocurrency; impose a monetary penalty against Spence and his collaborators for their fraud, and impose a constructive trust over the assets collected by Spence.”

As reported earlier this fall, a New York federal court ordered a crypto hedge fund and its CEO — who had reportedly solicited over $600,000 from at least 80 investors — to pay over $2.5 million for operating a fraudulent Ponzi scheme. The order was pursuant to an anti-fraud enforcement action first  filed by the U.S. Commodity Futures Trading Commission against the fund last year.

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Korean Court Acquits Crypto Exchange Bithumb After Investor Filed Lawsuit Over $355K Hack

A South Korean judge has ruled in favor of Bithumb after an investor had sued the firm over his loss of around $355,000 in an alleged hack.

South Korean crypto exchange Bithumb has won a lawsuit in which an investor had sued the company for his loss of around $355,000 in an alleged hack. Local financial newspaper The Korea Economic Daily reported on the outcome on Dec. 24.

According to the report, the investor — 30 year old civil servant Ahn Park — alleged he had been the victim of a hack of his Bithumb account on Nov. 30, 2017, which resulted in a loss of 400 million Korean won, or around $355,000.

Within hours of making his won deposit, Mr. Park alleged an unidentified hacker had compromised his account and exchanged the fiat for Ethereum (ETH). That same day, in four separate transactions, the cryptocurrency was then alleged to have been transferred out of his wallet, reportedly leaving the investor with ETH worth just 121 won (around 11 cents).

At the heart of Park’s case was reportedly the claim that Bithumb had failed to offer security safeguards that are adequate to its responsibilities as a purported “financial services” company. He argued that Bithumb’s activities as a crypto exchange are similar in kind to services offered in the financial sector, and should thus fall subject to the security requirements that apply to electronic commerce transaction brokers.

The judge however, ruled against this argument, stating that:

“In general, virtual currencies cannot be used to buy goods and it is difficult to guarantee their exchange for cash because their value is very volatile. [Cryptocurrencies] are mainly used for speculative means, [and it] is not reasonable to apply [Korea’s] Electronic Financial Transactions Act to a defendant who brokers virtual currency transactions without the permission of [South Korean regulator] the Financial Services Commission.”

As previously reported, Bithumb suffered a high-profile hack this June, in which around $30 million worth of eleven various cryptocurrencies were estimated to have been stolen; the exchange soon stemmed the damage with the assistance of industry counterparts, reducing the figure to $17 million.

In October, Hong Kong-based crypto exchange service Changelly revealed it had helped Bithumb to recover 1,063,500 Ripple (XRP) of the assets stolen in June, reportedly worth about $585,000 at the time of the hack.

Earlier this month, Bithumb was prompted to deny allegations of artificially inflating its trade volumes, after crypto exchange ratings and analytics service CER had accused the platform of using wash-trading to fake to 94 percent of its trade volume as of late summer 2018.

As of press time, Bithumb does not feature in CoinMarketCap (CMC)’s rankings for crypto exchanges by adjusted volume, but comes top in CMC’s separate rankings based on self-reported statistics, claiming $1,617,305,865 in traded volume over the 24 hours before press time.

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Cryptojacking Overtakes Ransomware as Top Malware in Some Countries

Malware that uses infected hardware for mining crypto without authorization has become the top cyber threat in certain countries.

Cryptojacking, the unauthorized use of another’s hardware to mine cryptocurrency, has become the biggest cyber threat in many parts of the world, Bloomberg reported Dec. 14.

According to research from cyber security research firm Kaspersky Lab, cryptojacking overtook ransomware as the biggest cybersecurity threat particularly in the Middle East, Turkey, and Africa. In Afghanistan and Ethiopia over one out of four detected malware are cryptocurrency miners, according to Kaspersky’s data.

As cited by the Bloomberg, Kaspersky’s research “shows crypto mining attacks have risen almost fourfold in the region, from 3.5 million in 2017 to 13 million this year.” The cybersecurity firm reportedly also claimed that cryptojacking incidents are “likely to continue given the increased use of digital currencies.”

A report released by Kaspersky in November declares that the reason for the rise of cryptojacking malware compared to ransomware may “be due to the fact that people from developing markets are not so eager to pay a ransom.”

Not only PC but also smartphone users are targeted by unauthorized mining software — from the 2016-2017 period to the 2017-2018 period, these kinds of attacks reportedly increased by 9.5 percent.

Fabio Assolini, Kaspersky’s Senior Security Researcher, told Bloomberg that “the [Middle East, Turkey, Africa] region is becoming more appealing to cyber-criminals, with financial and malicious cryptomining attacks taking center stage.” Assolini also claimed that such attacks are becoming increasingly popular because they are “less noticeable” than ransomware.

Still, the increase in the popularity of this kind of malware has not been global. For instance, this year it registered a decrease of 15 percent in Zambia and 11 percent in Uzbekistan, according the cybersecurity firm. The report concludes

“Last year we asked what tips the scales for cybercriminals? Today, this is no longer a question. Miners will keep spreading across the globe, attracting more people.”

Cryptojacking is not the only way in which cybercriminals use cryptocurrency. As Cointelegraph reported in October, users of the popular video game Fortnite have been targeted by a malware that steals Bitcoin (BTC) wallet addresses.

Not only individuals resort to such actions in search of financial gains. According to a Chinese cybersecurity company, after targeting cryptocurrency exchanges, North Korean hackers have started to steal cryptocurrencies from individuals.

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Report: CEO of Largest Romanian Crypto Exchange Arrested on US Warrant

The CEO of Romanian crypto exchange Coinflux was reportedly arrested for alleged fraudulent activity.

The CEO of Romania’s largest crypto exchange Coinflux was reportedly arrested on a warrant from the United States for fraud, organized crime, and money laundering, local news outlet Mediafax reported Dec. 13. Coinflux has subsequently stopped all digital currency exchanges.

Founded in 2015 in the Romanian city of Cluj, Coinflux is an online digital currency trading platform, with reportedly more than 200 million euro worth of Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Ripple (XRP) in transactions.

Vlad Nistor, the CEO and founder of Coinflux, was supposedly arrested on the territory of Romania upon the request of U.S. prosecutors. Nistor is accused of alleged fraudulent activity, organized crime and money laundering. The issue of extradition of Nistor to the U.S. will reportedly be heard by the Appeals Court of Bucharest.

Following the purported arrest, Coinflux published an announcement saying that the exchange has temporarily suspended all digital currency exchanges, while the company’s bank accounts have been frozen. Coinflux states that the ongoing investigation has also restricted its access to some parts of the platform.

In July of 2018,  the Ministry of Finance of Romania released a draft Emergency Ordinance, which regulates the issuance of electronic money (e-money). Per the document, any legal entity looking to issue e-money must have a share capital of no less than €350,000 ($395,000), while its members are subject of approval by the Romanian National Bank (BNR).

While the first Bitcoin automated teller machine (ATM) in the country appeared back in 2014, it took Romanian authorities about three years to come up with an expanded comment on cryptocurrencies. In 2017, Ilan Laufer, Romania’s Business, Commerce and Entrepreneurship Environment Minister, expressed his belief in cryptocurrencies, but pinpointed that the area should be officially regulated.

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Ethereum Hacks on the Rise Again as Price Remains Below $100

Hackers are continuing to find exposed mining rigs and wallets, which make easy targets for stealing ETH funds.

A fresh wave of hacks targeting Ethereum (ETH) holdings continues, despite the altcoin’s price trailing at 18-month lows, tech magazine ZDNet reported Dec. 10.

Citing research by cybercrime monitoring company Bad Packets LLC, the publication revealed that the downturn in ETH/USD has failed to stop malicious parties attempting to steal funds from miners and investors.

Scanning the network, hackers are trying to identify mining rigs and wallets with an exposed port 8545, which ultimately allows them to gain control and redirect ETH funds elsewhere.

“Despite the price of cryptocurrency crashing into the gutter, free money is still free, even if it’s pennies a day,” Bad Packets co-founder and security researcher Troy Mursch commented.

Cointelegraph originally reported on the Ether scanning phenomenon in June this year after one operation netted a reported $20 million in ETH.

Other incidents had occurred previously, joining a spate of various campaigns to divorce cryptocurrency holders from their wealth.

2018 has been a particularly bad year for so-called ‘cryptojacking’ attacks, which Bad Packets also monitors.

Cryptojackers attempt to remotely commandeer devices in order to mine or steal cryptocurrency, with detections rising almost 500 percent this year. “Because this threat is relatively new, many people do not understand it, its potential significance, or what to do about it,” a dedicated report on the problem by the Cyber Threat Alliance said in September.

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Report: Financial Criminal Allegedly Revealed as Figure Behind ‘Blockchain Terminal’ ICO

The man behind the “Blockchain Terminal” ICO has been ousted as a convicted financial criminal who concealed his former identity.

The man behind the “Blockchain Terminal” (BCT) Initial Coin Offering (ICO) has been ousted as a financial criminal who concealed his former identity from employees and investors alike. An investigation into the circumstances were published Dec. 11 on news outlet The Block Crypto

The BCT project and its affiliated firm, CG Blockchain, are alleged to have raised as much as $31 million in an ICO to launch a crypto-focused version of the ubiquitous “Bloomberg Terminal” — a highly-successful financial data and trading tool for the traditional financial sector.

According to the report, BCT’s glossy “institutional-grade” tool for crypto “trading professionals” had at its helm a man who operated as “Shaun MacDonald,” but was in reality a convicted fraudster, Boaz Manor, who had received a four-year prison sentence in Canada in 2012 for siphoning $106 million from a Toronto-based hedge fund he co-founded.

The Canadian fund reportedly had $800 million in assets under management at its peak from 26,000 investors: Manor was also found guilty of using investors’ money to purchase $8.8 million worth of diamonds that later disappeared.

Having agreed to a lifetime ban from the securities industry, Manor-turned-MacDonald withheld his conviction and identity from his colleagues at BCT, reportedly “growing a beard and [dying] his hair red.” While formally assigning the company’s presidency to Bob Bonomo — former chief information officer at $500 billion asset management firm AllianceBernstein — MacDonald was reportedly the primary driver behind the BCT venture.

Although it marketed its $999 “Blockchain Terminal” to crypto hedge funds — a 32-inch “HD Terminal” with a hardware private key — the company is alleged to have raised most of its funds via a lucrative $31 million ICO for its native BCT token, which launched in September 2017.

One of the project’s purported investors is the high-profile crypto analyst and host of CNBC’s show Cryptotrader Ran Neuner, who tweeted his endorsement of the Blockchain Terminal in June, and is alleged to have invested as much as $1.3 million in the company’s ICO, according to two unnamed sources.

NeuNer yesterday stated he had “lost a ton” of his own cash investing in the BCT “fraud,” but accused The Block of “defamatory” misreporting, and falsely claiming to have reached out to contact him for comment on the story.

NeuNer has not responded to Cointelegraph’s request for comment by press time.

Besides MacDonald’s misrepresentations, the Block reports that Bonomo “quietly resigned” from BCT in summer, following which MacDonald revealed himself as Manor to his employees, and purportedly ceased to pay them. With Manor’s whereabouts “unclear,” BTC has now rebranded as BCT Inc., and announced in late October its Terminal would go on sale in to the public.

In June, the Bloomberg Terminal announced that it would begin listing crypto exchange Huobi’s Cryptocurrency Index, as well as nine crypto-trading pairs.