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India: Police Arrest Four More Suspects in Alleged $14 Million Crypto Scam

Indian law enforcement has arrested four more suspects allegedly involved in a cryptocurrency scam that amassed nearly $17 million.

Law enforcement in Mumbai, India have arrested four more suspects allegedly involved in a cryptocurrency scam that amassed an estimated 1 billion rupees (over $14 million). English-language daily media outlet The Times of India reported on the arrests on March 22.

Per the report, the police arrested Ashok Goyal Jaipuria, Asif Malpani, Baljit Singh Saini and Pradeep Arora from Delhi. Several of Goyal’s bank accounts have been reportedly frozen as well, since he is allegedly the head of the scheme. The Times of India also states that an unnamed Bollywood actor who reportedly attended promotional events of the scam will likely be questioned as well.

As Cointelegraph reported last month, Indian law enforcement first exposed the alleged scam and arrested the first four suspects in February, but did not arrest Goyal until recently. The first complaint that led to the prosecution was filed in Surat, a city in the Indian city of Gujarat, by an individual alleging to have been defrauded of the equivalent of nearly $150,000.

At the beginning of January, Indian police also arrested an associate of a separate group accused of conducting a crypto scam involving 5 billion rupees (about $71.6 million).

In another recently uncovered crypto scam, Morgan Rockcoons, also known as Morgan Rockwell, has pleaded guilty to two cryptocurrency-related charges in San Diego federal court. He reportedly admitted both to selling land he didn’t have for a crypto city project dubbed “Bitcointopia” and to operating a money transmitting business without a license.

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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 shadowcrew.com 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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Australia: Clients Take Crypto Fund Manager to Court, Cite $14.2 Million in Losses

Cryptocurrency fund manager Stefanos Papanastasiou is about to be brought to court by his clients over alleged losses.

The founder of what reportedly claims to be Australia’s first online mattress retailer OzMattress and cryptocurrency fund manager Stefanos Papanastasiou is about to be brought to court by his clients over the loss of over AUD$20 million ($14.2 million). Daily Australian newspaper The Age reported about the controversy on March 19.

Per the report, Papanastasiou told his clients in 2017 that he had spent half a million Australian dollars ($355,000) to develop an algorithm that delivers substantial returns through the trading of Bitcoin (BTC) and Ethereum (ETH)-based tokens. According to the claim filed by property developer Savvas Alexiadis, one of his clients, Papanastasiou owes him more than AUD$2.7 million (nearly $2 million).

The documents filed with the Supreme Court of Victoria state that Alexiadis transferred over AUD$2.1 million (nearly $1.5 million) into a Papanastasiou’s trading account. Furthermore, he reportedly also transferred an unspecified quantity of BTC into wallets managed by Papanastasiou.

The claim also cites messages allegedly sent by Papanastasiou:

“Sam, don’t get caught up in the details. Leave it to me. Let me know password login for ACX [trading account]. I’ll deal with whatever funds are in there … Eyes on the prize Sam. Understood? Got your back.”

Furthermore, the documents also claim that Papanastasiou asked Alexiadis to transfer AUD$40,000 (over $28,000) to his wife, AUD$35,000 (nearly $25,000) to his sister and $450,000 (almost $320,000) to a mattress supplier in Thomastown, promising to send an equivalent in crypto assets.

The Age notes that Papanastasiou and his wife, Shalini Ganapathy, defaulted on the purchase of a AUD$5.44 million house after December 2017, when Bitcoin had reached its $20,000 peak.

The website of Papanastasiou’s mattress retail business, OzMattress, is seemingly offline at press time. The claim also notes that Papanastasiou has repeatedly refused to provide an account of trading activity and did not comply with requests to repay the amounts asked by his clients.

In response to Alexadais’s claim to return the around $2 million, Papanastasiou reportedly said:

“The Supreme Court action is new to me and I intend to defend myself against his claim as he has been compensated in excess of $2.7m […] Sam [Alexadais] and his associates have a lot to answer for as the truth of events is vastly different and far more sinister.”

Also, Mark Thompson, a former Australian Football League coach accused of MDMA and methamphetamine trafficking in May last year, contributed over one million Australian dollars (about $709,000) to Papanastasiou’s fund as one of his clients.

As Cointelegraph reported, the Australian anti-money laundering watchdog has recently suspended the registrations of two cryptocurrency exchanges in connection with an unrelated drug trafficking case.

In other law enforcement and crypto news, a United States District Attorney also recently charged the founders of an international cryptocurrency pyramid scheme that involved the marketing of an allegedly fraudulent digital currency called “OneCoin.”

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Bitcoin Private Team Accuses Crypto Exchange HitBTC of Fraud After Delisting

Bitcoin Private (BTCP) developers have accused cryptocurrency exchange HitBTC of fraud in connection with the recent coinburn.

Bitcoin Private (BTCP) developers have accused cryptocurrency exchange HitBTC of acting in a fraudulent manner in regards to their delisting from the exchange following a planned coinburn.

The accusations are portrayed in a letter written on Feb. 26 to the exchange by the Petros Law Group on behalf of the BTCP community, developers and contributors, and published by the Bitcoin Private Twitter profile on March 9.

According to its authors, the letter — which was published the day BTCP was delisted from HitBTC — alleges that HitBTC attempted to extort BTCP following unresolved complications arising from the coinburn.

According to the document, at the beginning of March last year, BTCP was created in a fork from ZClassic (ZCL) and Bitcoin (BTC) with a notice of a future coinburn in its whitepaper: the scheduled event was meant to delete (or “burn”) all the coins which haven’t been claimed (or moved) since the fork. On March 3, 2018, the day after the launch, HitBTC reportedly charged the BTCP team a listing fee of half a million dollars in Bitcoin.

The document includes screenshots of apparently since-deleted tweets in mid-February from HitBTC, which explained to users that since the exchange’s BTCP addresses were created after the fork took place, users won’t be affected by the coinburn.

On Feb. 15, one day before the coinburn was planned to happen, HitBTC reportedly contacted BTCP requesting assistance to protect its users’ funds in a series of emails, which then escalated into a request for compensation of 58,920 BTCP to be given after the coinburn due to expected losses.

However, as the document underlines that BTCP addresses created after the fork will not be affected, the exchange cannot have been concerned about users’ loss of funds, as that situation did not exist. Instead, the document alleges that HitBTC secretly held 58,920 BTCP in a BTCP Segwit wallet, and the concerns over the coinburn were related to the exchange’s personal funds.

The document further claims that BTCP developers informed the exchange that they didn’t intend to accommodate the compensation demand, but did provide technical assistance — shown with email screenshots — meant to help protect the funds from the coinburn.

On Feb. 17, the coinburn reportedly happened, one day after it was forecasted, and on Feb. 21, HitBTC allegedly threatened to pull BTCP support if the coin’s development team did not compensate 58,920 BTCP.

HitBTC has released a statement on its official blog on March 9 stating that the BTCP team was unable to provide a safe way to move the funds before the burn, but that the exchange has compensated all the custody losses. HitBTC has not responded to Cointelegraph’s request for comment by press time.

As Cointelegraph reported in December last year, during the import of Bitcoin chain data, an additional 2.04 million units of altcoin Bitcoin Private were reportedly secretly coined.

The discovery was later confirmed by the coin’s developers, who stated that the findings were mathematically accurate but “at this time, the source, purpose, and recipient of this exploit is currently unknown.”

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CEO of Crypto City Project Bitcointopia Pleads Guilty to Selling Land He Didn’t Have

Morgan Rockcoons, the CEO of crypto city project Bitcointopia, pleaded guilty to selling land he didn’t have.

Morgan Rockcoons, also known as Morgan Rockwell, has pleaded guilty to two cryptocurrency-related charges in San Diego federal court this week. Rockcoons admitted both to selling land he didn’t have for a crypto city project dubbed “Bitcointopia” and to operating a money transmitting business without a license, daily news outlet the Los Angeles Times (LA Times) reported on March 8.

Per the report, Rockcoons first attracted the attention of law enforcement in 2015 with his Bitcoin (BTC)-fiat currency exchange services, which he advertised online. The LA Times reports that under United States federal law, businesses exchanging crypto for cash in the country must be licensed as money transmitters with the Financial Crimes Enforcement Network.

At the end of 2016, an undercover U.S. agent allegedly posed as a hash oil manufacturer who needed to pay for equipment in BTC. In his plea agreement, Rockcoons reportedly admitted that he transferred about $9,200 in Bitcoin to the agent for $14,500 in cash, keeping the surplus as a fee.

Per the report, during his bail period, Rockcoons launched his crypto city project Bitcointopia, an initiative described as “the desert crypto-kingdom of the future.” While the project’s website is evidently offline, an advertisement on what appears to be Bitcointopia’s official Twitter profile shows that the company was selling one acre of land in Nevada for 0.5 BTC (about $1,977 at press time), two acres for one BTC (about $3,956) and three acres for 1.5 BTC (about $5,934)

According to the LA Times, the land was located in Elko County, Nevada, but prosecutors said that Rockcoons in fact only owned under 5 acres in two non-contiguous plots. The report claims that he, however, advertised 500 to 1,000 acre plots and the loss to investors amounted at least to $45,600.

Rockcoons reportedly faces up to 20 years in prison over the fraud charge and up to 5 years because of operating an unregistered money transmission business in the U.S.

As Cointelegraph reported in October last year, a U.S. citizen then also pled guilty before a federal court to operating an unlicensed money transmitting business via LocalBitcoins.

In June 2018, news broke that an Los Angeles-based trader, who acted under the pseudonym “Bitcoin Maven,” was prosecuted for similar charges, allegedly running an unregistered multi-million dollar Bitcoin-fiat money transmitting business, also via a LocalBitcoins.

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US District Attorney Charges OneCoin Founders With ‘Billions’ in Alleged Fraud

А U.S. District Attorney has charged the founders of a crypto pyramid scheme that involved the marketing of a fraudulent digital currency “OneCoin.”

A United States District Attorney has charged the founders of an international cryptocurrency pyramid scheme that involved the marketing of an allegedly fraudulent digital currency called “OneCoin.” The announcement was published by the U.S. Attorney Office of the Southern District of New York on March 8.

The founders and leaders of OneCoin, Konstantin Ignatov and his sister Ruja Ignatova, were reportedly arrested on March 6, 2019, in Los Angeles. The siblings were accused of “wire fraud, securities fraud, and money laundering offenses,” wherein they allegedly lured investors to contribute “billions of dollars in the fraudulent cryptocurrency.”

OneCoin was established in 2014 and is based in the capital city of Bulgaria, Sofia. The project operates as a marketing network through which members receive commissions for attracting other potential investors to buy cryptocurrency packages. OneCoin purportedly has over three million members worldwide.

When Ignatov was asked when OneCoin members could “cash out” their coins at a meeting with investors in Las Vegas, he said “if you are here to cash out, leave this room now, because you don’t understand what this project is about.” Commenting on the charges, Manhattan U.S. Attorney Geoffrey S. Berman said:

“As alleged, these defendants created a multibillion-dollar ‘cryptocurrency’ company based completely on lies and deceit. They promised big returns and minimal risk, but, as alleged, this business was a pyramid scheme based on smoke and mirrors more than zeroes and ones.  Investors were victimized while the defendants got rich. Our Office has a history of successfully targeting, arresting, and convicting financial fraudsters, and this case is no different.”

The investigation reportedly found that between the fourth quarter of 2014 and the third quarter of 2016 OneCoin generated 3.353 billion euros ($3.769 billion) in sales revenue and earned “profits” of 2.232 billion euros ($2.509 billion).

New York County District Attorney Cyrus R. Vance, Jr. stated that “these defendants [the Ignatovs] executed an old-school pyramid scheme on a new-school platform, compromising the integrity of New York’s financial system and defrauding investors out of billions.”

Last month, the U.S. Department of Justice charged a New York-based operator,  Randall Crater, of a purported cryptocurrency payment services firm My Big Coin Pay Inc. (My Big Coin) with wire fraud and unlawful monetary transactions. The indictment states that Crater conducted four counts of wire fraud and three counts of unlawful monetary transactions, as well as misappropriated more than $6 million in investor funds for personal use.

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Australia: Financial Regulator Suspends Two Crypto Exchanges in Drug Trafficking Case

Australia’s financial watchdog has shut down the operations of two crypto exchanges in connection with a drug trafficking case.

The Australian anti-money laundering watchdog has suspended the registrations of two cryptocurrency exchanges in connection with a drug trafficking case, the agency announced in a press release on Friday, March 8.  

The Australian Transaction Reports and Analysis Centre (AUSTRAC) — a government financial intelligence agency that aims to prevent money laundering, tax evasion, welfare fraud and terrorism — suspended the two crypto exchanges’ operations because of their association with a suspect in an alleged organized crime syndicate.

According to the joint press release from AUSTRAC and the Australian Federal Police, a 27-year-old man has been arrested on several drug trafficking-related charges. The investigation found that the accused man “was a key member” of the crypto exchange businesses, leading the watchdog to suspend their operations.

According to Reuters, the move is the first crypto exchange suspension under AUSTRAC’s authority, since new legislation last year brought crypto exchanges within its sphere of oversight.

The number of cryptocurrency-related fraud and crimes has dramatically increased worldwide. As previously reported, about $1.7 billion in cryptocurrency had been obtained via illicit means in 2018, according to research published by crypto analytics company CipherTrace.

Previously, the United Kingdom Financial Conduct Authority had revealed that investment scams related to crypto led to over $255 million in investor losses in 2018, with approximately 5,000 reported cases, as Cointelegraph wrote on Feb. 6.

As Cointelegraph reported just yesterday, the South Korean Supreme Prosecutors’ Office established a new task force, aimed at fighting cryptocurrency-related scams. The number of such crimes in the country has reportedly increased from 53 registered cases in 2016 to 4,591 in 2018.

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South Korea Establishes Special Task Force to Prevent Cryptocurrency-Related Crimes

The South Korean Supreme Prosecutors’ Office has announced the establishment of a task force to fight crypto-related crimes.

The South Korean Supreme Prosecutors’ Office (SPO) has announced the establishment of a task force to fight cryptocurrency-related fraud and crimes. The development was reported by the Korean Broadcasting System (KBS), one of the largest national public broadcasters, in an article published on Tuesday, March 5.

The new task force will be responsible for the investigation — under the SPO’s authority — of fraud, illegal money laundering, crimes and other illegal activities within the fields of fintech and cryptocurrency.

The decision to create a special task force is a response to the significantly increasing number of fraud cases and crimes related to the cryptocurrency industry, KBS reports. According to the country’s Financial Supervisory Service, the number of reported fraud cases and counterclaims related to cryptocurrency investments has increased nearly nine times, from 53 in 2016 to 453 the following year.

The number of similar crimes in 2018 received by the SPO is reported to have increased by 4,591 registered cases, real-time economic news outlet Money Today reported March on 5.

As Cointelegraph reported on Feb. 28, the Japanese police received more than 7,000 reports of suspected money laundering tied to cryptocurrency in 2018, which is a tenfold increase compared to the previous year.

Earlier last month, the United Kingdom Financial Conduct Authority reported that investment scams, including those involving crypto, totalled 4,996 reported cases, and losses amounted to over $255 million in 2018, as Cointelegraph wrote on Feb. 6.

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UK Financial Watchdog Warns Against Firm Claiming to be Authorized With FCA

U.K.’s Financial Conduct Authority has warned the public against illicit Bulgaria-based Next Coin, which claims to be FCA-authorized.

The British financial regulator, the Financial Conduct Authority (FCA), has issued a warning against illegal crypto-related firm Next Coin Market, according to an official statement released on March 6.

According to the FCA, Bulgaria-based Next Coin falsely claims to be authorized with the U.K. financial authority to offer cryptocurrency-related services to British residents.

The FCA elaborated that Next Coin was sending users a link to a fake website that gives the impression that the firm is officially authorized by the FCA. However, Next Coin is not registered with the authority, the FCA said, claiming that the firm is involved in criminal activity.

The financial regulator has asked the public to report cases associated with false claims of being authorized with the FCA. In case money was transferred, the authority advises the public to report concerns to U.K’s national reporting center for fraud and cyber crime, Action Fraud.

The FCA also emphasized that anyone who deals with an unauthorized firm is not protected by the Financial Services Compensation Scheme, and thus cannot complain to the Financial Ombudsman Service, the official U.K. Parliament’s expert in sorting out financial issues.

Recently, Swiss crypto bank Dukascopy warned customers against forex trading company GCG Asia, which fraudulently claimed to represent the bank’s authorized firm.

In early February, the FCA reported that losses from common investment scams — including those crypto-related — amounted totally to more than $255 million in 2018.

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Japan: Reported Cases of Crypto-Related Money Laundering Increase 10-Fold in 2018

7,096 cases of suspected money laundering tied to crypto were reported to Japanese police in 2018.

More than 7,000 cases of suspected money laundering tied to crypto were reported to Japanese police in 2018, a more than tenfold increase from the 669 cases over a nine month period during the previous year. The news was reported on Feb. 28 by local English-language daily The Japan Times.

In 2017, just 669 cases were reported over a nine month period through December 2017, after new rules taking effect in April 2017 made it mandatory for crypto exchange operators to report transactions suspected to be tied to the movement of illicit funds. The twelve months and 7,096 cases in 2018 thus represent a 960 percent increase over the data for the nine month period in 2017.

According to the Japan Times, the more than 7,000 suspect transactions betrayed various red flags — such as being linked to user accounts held under different names and birth dates, but with an identical ID photo. In other sign, logins from accounts registered in Japan were identified as coming from overseas.

The rise in crypto-specific cases comes against a backdrop of a 2,296 percent increase in all cases of suspected money laundering. In 2018, there were 417,465 reported cases — up from just 17,422 in 2017. The lion’s share of cases reported in 2018 involved banks, which reported 346,014 cases, followed by credit card firms, with 15,114 cases.

In light of the rising statistics, the NPA reportedly plans to train experts in data analysis and pilot artificial intelligence technology that would expedite the detection of patterns related to suspected money laundering and other illicit transactions.

As Cointelegraph has reported, two high-profile scandals involving Japanese crypto exchanges — January 2018’s unprecedented $532 mln Coincheck hack and the infamous collapse of Tokyo-based Mt. Gox — have led to intensified interventions from the country’s financial watchdog, the Financial Services Agency (FSA).

Since April 2017, Japan’s Payment Services Act has required all crypto exchanges to be registered under an FSA license, with the first licenses being approved in September of that year. The watchog further tightened stipulations in 2018, continuing to focus on demanding robust Anti-Money Laundering and Know Your Customer compliance.