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Judge Denies AT&T Request for Dismissal in $224M SIM Swap Crypto Case

A federal judge has denied AT&T’s request for dismissal in a SIM-swapping case that resulted in the theft of cryptocurrencies.

The federal judge overseeing Terpin v. AT&T — a legal battle pertaining to stolen crypto via SIM-swapping that has been going on for almost a year — has denied the telecom giant’s motion for dismissal.

As previously reported by Cointelegraph, investor Michael Terpin had sued AT&T for $224 million. Terpin reportedly lost $24 million as a result of theft, and is seeking an additional $200 million in punitive damages. Terpin claims that he lost the foregoing assets in two hacks within seven months, due to the telecom provider’s alleged cooperation with the hacker and gross negligence.

Judge Wright denied AT&T’s request to ignore their own 2011 Consent Decree with the Federal Communications Commission, according to a press release by Terpin’s legal representatives at Greenberg Glusker on July 22. This consent decree purportedly holds AT&T responsible for protecting customer data.

Wright said that, because Terpin’s claims concern the illegality and unenforceability of AT&T’s customer agreement, the contract’s relevant terms are directly implicated:

“Specifically, he objects to the exculpatory provision that exempts AT&T from liability from its own negligence, acts or omissions of a third party, or damages or injury caused by the use of the device. […] Mr. Terpin alleges that as a result of these illegal contract provisions, the entire customer agreement is unenforceable because the central purpose of the agreement is tainted with illegality. […] AT&T and Mr. Terpin have adverse legal interests of sufficient immediacy and reality to warrant a claim for declaratory judgment. The terms of the wireless customer agreement are directly implicated by this lawsuit, particularly the terms that Mr. Terpin has identified.”

While Terpin is currently seeking action against AT&T, in May he won a civil case against Nicholas Truglia, the alleged fraudster who actually perpetrated the SIM swap and subsequent crypto theft. The California Superior Court ordered Truglia to pay over $75 million in compensatory and punitive damages.

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Crypto Criminals Send Scam Emails Impersonating British Financial Watchdog

Cyber criminals have been sending scam emails claiming to be from the United Kingdom Financial Conduct Authority and promoting crypto asset investments.

Cyber criminals have been sending scam emails claiming to be from the United Kingdom Financial Conduct Authority (FCA) and promoting crypto assets investments, financial market-focused platform FT Adviser reported on July 22.

The letter impersonating the FCA is entitled “Guaranteed chance to earn” and features the watchdog’s logo and branding. After reading that “Bitcoin is still a long way off its peak price of $20,000, which it reached in 2017, but some cryptocurrency experts believe it could hit an even higher value by 2020,” it offers recipients to follow a link dubbed “Click her” [sic].

The FCA has reportedly confirmed that it has no relation with the aforementioned emails. The agency also warned that it would never ask the public to provide it with their bank account details. The FCA said:

“The correspondence is likely to be linked to organized fraud and we strongly advise you not to respond to the criminals in any way. Look for signs that the email, letter or phone call may not be from us, such as it listing a mobile or overseas contact phone number, an email address from a hotmail or gmail account, or a foreign PO Box number.”

FCA asks the public to remain cautious

In May, the FCA reported that cryptocurrency investors in the U.K. lost over $34 million due to cryptocurrency and forex scams from 2018–2019. At the time, the FCA considered a ban on “high-risk derivative products linked to cryptoassets,” with the watchdog’s executive director Mark Steward saying:

“Scammers can be very convincing so always do your own research into any firm you are considering investing with, to make sure that they are the real deal.”

Recently, the FCA announced that it will soon publish a consultation paper on a potential ban on cryptocurrency derivatives such as Bitcoin futures and other crypto-related trading products.

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Facebook and Instagram Now Have a Problem With Scam Libra Ads

While Facebook is struggling to agree on its Libra project, a wave of fake Libra accounts have spread online and onto Facebook itself.

While Facebook is struggling to agree on its crypto project Libra, a wave of fake Libra accounts have come up online, including on Facebook itself.

According to a report by The Washington Post on July 22, nearly a dozen fake Libra pages have circulated across Facebook and its social photo-sharing app Instagram, posing as official entities for the much-discussed digital currency.

Facebook removed Libra scam pages only after alerted by Washington Post

As said in the report, a number of those fake Facebook and Instagram accounts were removed on July 22 only after The Washington Post reported on them to Facebook. Elka Looks, communications manager at Calibra, reportedly stated that Facebook removes ads and pages that violate their policies when they become aware of them.

Some of the Libra fakes invited offered to participate in a pre-sale of not-yet-launched Libra coins at a discount, while many others included Facebook’s logo, photos of Facebook CEO Mark Zuckerberg or Libra’s official marketing materials, the report notes.

One clear example of Libra fakes online is website, which copies Libra logo from official website, and offers users to create an account and invest in Libra with major cryptocurrencies such as Bitcoin (BTC). While the website’s Instagram page has been allegedly removed, the website remains available at press time.

Fake Libra website

Fake Libra website

Fake ads undermine trust in Facebook and Libra

Eswar Prasad, an economics professor at Cornell University, pointed out a deep irony in that Facebook itself is used as the platform that could undermine trust in its cryptocurrency project. Outlining trust problem as the major obstacle of Facebook on its path to introducing the global cryptocurrency, Prasad said in the report:

“Facebook has an enormous worldwide network and enormous financial muscle . . . But the only way Libra will work well as a medium of exchange is if everyone can trust it. And that’s the big question right now: whether there is going to be enough trust in Facebook.”

Facebook eased crypto ads rules one month before Libra white paper 

In early 2018, Facebook broke the news by announcing the ban of cryptocurrency and initial coin offerings-related ads on its platform in a move to prohibit advertising that use “misleading or deceptive promotional practices.” 

However, the social media giant eased the restrictions in May 2019, around one month before releasing the white paper for its own cryptocurrency project Libra on June 18.

Meanwhile, Damian Collins, a senior official at the British Parliament has recently argued that Libra will be open to massive fraud as t would be created and controlled by Facebook and be inaccessible by anyone outside a “Facebook walled garden.”

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South Korea: Crypto Crimes Cost $2.28B Since July 2017

South Korean authorities estimate that crypto-related crimes have caused 2.69 trillion won of financial damages between July 2017 and June 2019.

The South Korean Justice Ministry estimates that cryptocurrency-related crimes have caused 2.69 trillion won (about $2.28 billion) of financial damage between July 2017 and June 2019.

According to a July 21 report by English-language local media The Korea Herald, the ministry claimed that 132 cryptocurrency-related criminals and fraudsters had been indicted and detained, with another 288 indicted without physical detention during the aforementioned time frame.

The report states that, while Justice Minister Park Sang-kim has ordered stern measures against cryptocurrency criminals, a lack of clear regulations on cryptocurrency exchanges has led to an increase in the use of quasi-anonymous or opaque accounts. 

Despite a ban on anonymous crypto exchange accounts in January last year, minor exchanges reportedly started using so-called “beehive accounts” to circumvent the regulation.

Exchanges employing these kind of accounts keep user funds on their corporate bank accounts, keeping the identity of their users private. The government reportedly proposed to end the practice, but a court halted the initiative ruling that it would be inappropriate for the government to close the exchange’s corporate bank accounts.

As Cointelegraph reported earlier this month, South Korea’s leading credit card firm Shinhan Card was granted a patent for a blockchain payments system.

On July 1, news broke that Busan, South Korea’s second most-populous city after Seoul, is considering the launch of a local cryptocurrency in collaboration with BNK Busan Bank, a subsidiary of local holding company BNK Financial Group.

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Israeli Citizen Accused of Stealing Over $1.7 Million in Crypto

A Tel Aviv resident has been arrested and accused of international phishing fraud, using a collection of websites to steal cryptocurrencies.

Eliyahu Gigi, a 31-year-old from Tel Aviv, has been charged with stealing over $1.7 billion in a variety of cryptocurrencies. Gigi allegedly stole BTC, Ethereum, and Dash from users in the Netherlands, Belgium, and Germany. 

Lawyer Yeela Harel of the cyber department in the State Attorney’s Office filed charges against Gigi on July 17, according to a report published the same day by Globes. Gigi has reportedly been charged with crimes including theft, fraud, and money laundering, among others.

According to the report, Harel’s indictment claims that Gigi set up a network of scam websites to steal crypto through the use of malware. He is accused of using a number of methods to cover his tracks, including employing remote servers and shuffling the stolen funds around through different wallets. 

Gigi and his brother, a demobilized soldier, were reportedly arrested in June. The pair were suspected of being involved in international phishing fraud, but Harel moved to indict only Gigi.

The police apparently first began to look into Gigi when they received information suggesting that he was dropping scam links on digital wallet forums. According to the report, Gigi would link to a website that appeared to have a downloadable wallet manager. However, Gigi appeared to have collected and misappropriated users’ account credentials to steal their crypto.

As previously reported by Cointelegraph, an employee at Microsoft was recently arrested on suspicion of stealing $10 million in crypto. Volodymyr Kvashuk allegedly stole and flipped crypto gift cards for Microsoft products, selling them for a profit to customers over the Internet.

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Roubini: BitMEX in Violation of Securities Laws, Crypto a Metastasized Cancer

Nouriel Roubini derided BitMEX as an example of a criminally unregulated crypto exchange, and called for authorities to enforce crypto regulation at large.

Economist and anti-cryptocurrency pundit Nouriel Roubini has recently declared that there is “overwhelming evidence of rampant fraud and abuse” in the crypto space. 

Roubini, a professor at NYU’s Stern School of Business, also took aim specifically at the compliance policies of crypto exchange BitMEX in an essay entitled “The Great Crypto Heist.” The essay was published by opinions publication site Project Syndicate on July 16.

According to Roubini, anonymous sources from within BitMex told him that criminals perform a massive amount of money laundering on the exchange:

“BitMEX insiders revealed to me that this exchange is also used daily for money laundering on a massive scale by terrorists and other criminals from Russia, Iran, and elsewhere; the exchange does nothing to stop this, as it profits from these transactions.”

Roubini also criticized the exchange’s anti-money laundering (AML) and know your customer (KYC) regulations at large, going so far as to say that the exchange is in violation of securities laws. Roubini writes:

“At any rate, we do know that BitMEX skirts AML/KYC regulations. Though it claims not to serve U.S. and U.K. investors who are subject to such laws, its method of “verifying” their citizenship is to check their IP address, which can easily be masked with a standard VPN application. This lack of due diligence constitutes a brazen violation of securities laws and regulations.”

Roubini recently debated BitMEX CEO and co-founder Arthur Hayes, as he recalls. Following the debate, he wrote a Twitter post calling Hayes a coward and telling him to release the tape. According to Roubini’s recent article, Hayes has subsequently released the video.

Roubini has also called on authorities to intervene and enforce regulation. He gave a nod to U.S. Treasury Secretary Steven Mnuchin, who recently said that “… to a large extent, these cryptocurrencies have been dominated by illicit activities and speculation.” 

Roubini mentioned several studies to support his claim that there exists “overwhelming evidence of rampant fraud and abuse.”  He said there is one study which concludes that up to 95% of Bitcoin transactions are fake, which he says suggests “that fraud is not the exception but the rule.” Another study he refers to reportedly concluded that 80% of initial coin offerings (ICOs) in 2017 were scams.

As previously reported by Cointelegraph, ICO advisory firm Statis Group ran a study that looked at data on ICOs in 2017. According to the study, 80% of the ICOs in 2017 were indeed scams. However, out of a total $11.9 billion raised via ICOs, only $1.31 billion — approximately 11% — of those funds actually went to scam projects.

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Venezuelan Investors File Lawsuit With US Court in Connection With $30M Crypto Fraud

Seven Venezuelans claim to have been lured into a $30 million Ponzi scheme with a cryptocurrency pegged to diamonds

A group of Venezuelans has filed a lawsuit with a Florida Federal Court in connection with a Ponzi scheme involving $30 million in cryptocurrency promoted by Canadian investment radio host Harold Seigel.

Payment and commerce news outlet reported today, July 16, that seven Venezuelans claim to have been lured into a $30 million worth digital currency Ponzi scheme conducted by companies such as Eagle Financial Diamond Group Inc. and Argyle Coin. The cryptocurrency involved into the fraud was reportedly pegged to diamonds.

The frauds allegedly used raised funds to pay back earlier investors

The plaintiffs accuse Canadian financial commentator Harold Seigel, his son Jonathan Seigel and his partner Jose Angel Aman — the principal behind Argyle Coin — of misleading with promises of huge returns on the investments.

The plaintiffs have reportedly never seen documentation indicating allocation of the invested funds, nor have they had access to their crypto wallets holding claimed Argyle Coins. The fraudulent investment scheme operators allegedly used the raised funds to pay back earlier investors. The complaint reportedly reads:

“The plaintiffs bring this lawsuit to get back not only their initial investment money, but also their owed interest on their invested funds, as per their contracts, and their owed attorneys’ fees and costs incurred in bringing forth this action.”

The U.S. SEC’s crackdown on the confirmed cryptocurrency Ponzi scheme

In late May, the United States Securities and Exchange Commission (SEC) halted the aforementioned crypto Ponzi scheme after it had taken funds worth $30 million, with Aman becoming subject to legal action in connection with the fraud. Eric I. Bustillo, director of the SEC’s Miami Regional Office, said at the time:

“As alleged, Aman operated a complicated web of fraudulent companies in an effort to continually loot retail investors and perpetuate the Ponzi schemes as well as divert money to himself.”

That same month, the SEC initiated court proceedings against California resident Daniel Pacheco for allegedly operating a multimillion-dollar crypto pyramid scheme. The SEC accused Pacheco of conducting a fraudulent, unregistered offering of securities through two California-based companies, IPro Solutions LLC and IPro Network LLC, from January 2017 through March 2018.

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Ron Paul: ‘I’m All for Cryptocurrencies, I Like Competing Currencies’

Former congressman Ron Paul reiterated his views on cryptocurrencies as being good competition for fiat money, as long as there is no fraud involved.

Former Republican congressman and presidential candidate Ron Paul says he is in favor of cryptocurrencies and blockchain technology because he likes competing currencies. Ron Paul delivered his remarks in a “Squawk Alley” interview on CNBC on July 15.

According to Paul, cryptocurrencies are a great idea, and governments should only step in to regulate the space to prevent fraud:

“… I’m for the least amount of regulation. I don’t know what’s gonna happen to cryptocurrencies. I think it’s a great idea. And I only have one rule: no fraud … I think that the government has a role. And [if] somebody has a case that there is fraud, I think it should be investigated …  What I want to do is legalize the freedom of choice, absent blatant fraud.”

Ron Paul also drew several comparisons to the traditional asset gold. One way in which Paul appears to think gold is similar to crypto is that both are assets competing with fiat money. Paul said, “governments aren’t very tolerant of competition, and they’re not even tolerant with using the Constitution to compete with the fiat dollar. Because gold and silver, you can’t use it.”

Ron Paul has previously discussed his bullish views on cryptocurrency. In 2014, Paul expressed concerns about the backing of Bitcoin (BTC) and crypto in general, but adopted a pro-crypto attitude that is bearish on fiat money in the long run:

“I just don’t think the dollar is going to last. I don’t think any fiat currency lasts forever. They all self-destruct. Right now, the world is engulfed with fiat currency; they’re all paper currencies. That’s one of the other reasons the dollar holds up: What are you competing against, the euro and the yen? The competition out there isn’t any good.”