Posted on

FTC Issues Warning on Bitcoin Blackmail Scams

The U.S. Federal Trade Commission (FTC) is warning consumers warns about a new type of bitcoin scam aimed at blackmailing men.

Scammers are sending letters threatening to expose an alleged secret to men, and asking for a “confidentiality fee” paid through bitcoin, wrote Cristina Miranda, a member of the FTC’s Division of Consumer and Business Education on Tuesday.

An example letter stated:

“I know about the secret you are keeping from your wife and everyone else. You can ignore this letter, or pay me a $8,600 confidentiality fee in bitcoin.”

The letters reportedly also provide instructions on how victims can make these payments.

The education division, whose goal is to protect consumers from deceptive and unfair business practices, also provided guidance on how men can avoid losing funds to bitcoin-related blackmail scams.

The agency recommended that potential victims report letters “immediately” to both local police and the FBI.

While the FTC specifically said the scam is targeting men, comments suggested that it may also be targeting women. One comment, by username Hana, said “I am a female and have also received a similar threat.”

“The email had somehow confiscated one of my passwords and threated to use pictures, etc. to make pornographic videos and posters using my face. They also demanded that I pay thousands of dollars in bitcoin,” she added.

This is not the first time that the FTC has discussed cryptocurrency-related scams. As CoinDesk reported previously, the agency also hosted workshops on cryptocurrency scams and fraud back in June.

Federal Trade Commission image via Mark Van Scyoc / Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

$3 Billion: FTC Warns Consumers Could Pay High Price for Crypto Scams

Consumers lost $532 million to cryptocurrency-related scams in the first two months of 2018, an official for the Federal Trade Commission said Monday.

Speaking during an event focused on cryptocurrency scams and fraud, Andrew Smith, director of the trade watchdog’s Bureau of Consumer Protection, offered the figure and said that the figure could swell into the billions by the end of the year.

“Consumers will lose more than $3 billion by the end of 2018,” he told attendees of the event, which was live-cast on Monday.

One part of the problem is a lack of care on the part of investors. This was an issue highlighted by Joe Rotunda, enforcement director for the Texas State Securities Board. And it’s an especially acute one set against the backdrop of a huge rise – and subsequent fall – in the value of cryptocurrencies over the past six months.

Coin Center director of research Peter Van Valkenburgh said that people get sucked into fraud – from exit scams to pump-and-dump schemes – simply because they’re looking to see a higher return on their investment.

“I think nobody should ever buy any more cryptocurrency, put anymore [into] cryptocurrency than what they are completely willing to lose … if you are willing to participate at all,” Van Valkenburgh remarked, adding:

“That is a message that needs to be repeated and repeated.”

Rotunda said he believes that “regulators need to be proactive in any type of new market, especially this type. We didn’t have the public being pitched different types of investments like this on the scale a year ago. This is something that blew up late last year.”

“Regulators need to number one, identify companies that are trying to do it right and work with [them],” he remarked. “The companies that are trying to do it right [should] get a telephone call from the regulator, not a cease and desist order, right? Not a lawsuit. We can usually work with them … [and] we need to identify the fraudulent schemes and we need to act quickly and stop them.”

As might be expected, the event also saw calls for approaches to self-regulation, an idea that has seen advancement from both public and private sources in recent months.

Yet in the end, the discussion fell to a common recommendation: investors should do their due diligence.

“If you yourself are not capable of explaining to somebody what a token’s supposed to do, you should not buy the token,” said Van Valkenburgh. “If you can’t tell the wheat from the chaff, on what is techno-gibberish or actual innovation, you should not participate.”

FTC panel image via FTC

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

FTC to Host Consumer Protection Workshop on Cryptocurrency Scams

The Federal Trade Commission (FTC) is planning to host a workshop on cryptocurrency scams and fraud in June.

The agency announced on Monday that its “Decrypting Cryptocurrency Scams” workshop will feature stakeholders from law enforcement, consumer advocacy groups and private-sector businesses “to explore how scammers are exploiting public interest in cryptocurrencies such as bitcoin and litecoin and to discuss ways to empower and protect consumers.”

The event is being hosted in Chicago on June 25 at DePaul University. The session, which is free to the public, begins at 1 p.m. local time, and will also be broadcast live on the FTC’s website that day.

“Reported scams include deceptive investment and business opportunities, bait-and-switch schemes, and deceptively marketed mining machines. The FTC has continued its efforts to educate consumers about cryptocurrencies and hold fraudsters accountable,” the FTC said in a statement.

It’s an area that the agency has focused on with greater frequency in past months, as evidenced by its moves in the space to date. Last month, for example, lawyers for the FTC obtained a restraining order against four investment organizers based in Florida that the agency said were promoting cryptocurrency-related scams.

“This case shows that scammers always find new ways to market old schemes, which is why the FTC will remain vigilant regardless of the platform – or currency used,” Tom Pahl, acting director of the FTC Bureau of Consumer Protection, said at the time.

Image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

Judge Backs FTC Asset Freeze in Crypto Fraud Case

The Federal Trade Commission (FTC) is seeking to permanently freeze the assets of four men accused of running cryptocurrency referral scams.

The U.S. regulator also asked a federal court in Florida to order the defendants to stop working together or creating new business entities. Further, they would have to provide a list of their assets to the FTC if the proposed injunction is enforced.

As previously reported, the FTC sued the four individuals in the Florida court earlier this month, accusing them of promoting fraudulent referral investment schemes. At the time, the agency said that “this case shows that scammers always find new ways to market old schemes.”

U.S. Magistrate Judge Lurana Snow recommended that the court grant FTC’s motion for a preliminary injunction in a court report dated March 23.

“Based on the argument of the plaintiff’s counsel and evidence presented, the Court is persuaded that Plaintiff is likely to succeed on the merits and that injunctive relief is in the public interest,” Snow wrote. The motion still has to be approved by District Judge K. Michael Moore, however.

The motion followed a temporary restraining order, which Snow also supported, that provisionally froze the assets of My7Network and the Bitcoin Funding Team, as well as Thomas Dluca, Louis Gatto, Eric Pinkston and Scott Chandler.

According to the filing, Snow’s report and recommendation followed a public hearing that the defendants did not attend.

The proposed injunction accuses the defendants of acting deceptively, stating:

“Based upon the [evidence] submitted by the FTC, there is good cause to believe that Defendants Dluca, Gatto, Pinkston, and Chandler have engaged in and are likely to engage in acts or practices that violate Section 5(a) of the FTC Act.”

According to the filing, if Judge Moore grants the motion, the defendants will have two weeks from Snow’s report to object. If they do not, they will be unable to appeal the ruling “except upon grounds of plain error if necessary in the interest of justice.”

Because the temporary restraining order would expire before this two-week period ends, it has been extended until April 9 by Judge Moore, court filings show.

The original TRO was granted near the end of February, but its enforcement was not revealed until mid-March.

The full report and recommendation can be found below:

Dluca Et Al Report and Recommendation by CoinDesk on Scribd

Court image via Felix Lipov / Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

US Trade Regulator Launches Blockchain Working Group

The U.S. Federal Trade Commission (FTC) has created a Blockchain Working Group to examine the ways in which the technology, particularly cryptocurrencies, will affect its objectives.

“We believe this working group is an important step to ensure the FTC can continue its missions to protect consumers and promote competition in light of cryptocurrency and blockchain developments,” Neil Chilson, the agency’s acting chief technologist, wrote in a blog post Friday.

The group will aim to “build on FTC staff expertise in cryptocurrency and blockchain technology through resource sharing and by hosting outside experts.” It will also strive to improve coordination and communication of enforcement actions both within the agency and externally.

The creation of the group coincided with an FTC announcement that it is pursuing a lawsuit against four individuals associated with Bitcoin Funding Team and related operations My7Network and Jetcoin, who allegedly used bitcoin in fraudulent “chain referral schemes” – the first case of its kind for the agency.

“It is no surprise that fraudsters might use cryptocurrencies in their scams,” Chilson wrote of the case in Friday’s blog post, continuing:

“As the primary federal general consumer protection agency, the FTC has seen this pattern before. Fraudsters often attempt to capitalize on the excitement and confusion around hot new technologies, and they are quick to dress up old schemes in the clothes of the latest and greatest innovations.”

The FTC has been involved the crypto industry since 2015, when it filed its first cryptocurrency-related case over an app containing mining malware. It has since prosecuted at least one other crypto-related lawsuit, and held a public forum on blockchain technology in 2017.

In February, the commission published a blog post that outlined the risks associated with cryptocurrency investments for consumers.

The FTC is not the first government agency to form a blockchain working group. The State Department announced a similar initiative in January of 2017. Additionally, the Financial Stability Oversight Council, which assesses risks to the financial system, announced that it formed a cryptocurrency-focused working group in January of this year.

FTC image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

US Trade Regulator Shuts Down Crypto Investment Scheme Promoters

A U.S. district court in Florida has issued a temporary restraining order against four individuals accused of operating a string of cryptocurrency investment schemes following a request from the Federal Trade Commission.

The agency announced Friday that three of the four defendants – Thomas Dluca, Louis Gatto, and Eric Pinkston – were involved in two referral schemes, Bitcoin Funding Team and My7Network. A complaint dated February 20 and unsealed today alleged that they promised would-be investors major returns if they made initial payments in cryptocurrency, mentioning bitcoin and litecoin specifically.

“The defendants claimed that Bitcoin Funding Team could turn a payment of the equivalent of just over $100 into $80,000 in monthly income. The FTC alleges, however, that the structure of the schemes ensured that few would benefit. In fact, the majority of participants would fail to recoup their initial investments,” the agency said.

A fourth named defendant, Scott Chandler, was accused of promoting Bitcoin Funding Team as well as another alleged scam called Jetcoin. Like the others, Jetcoin was pitched as a money-making enterprise to investors but failed to yield the promised results prior to its collapse.

According to the FTC, the assets of the four defendants have been frozen pending a formal trial.

“This case shows that scammers always find new ways to market old schemes, which is why the FTC will remain vigilant regardless of the platform – or currency used. The schemes the defendants promoted were designed to enrich those at the top at the expense of everyone else,” Tom Pahl, acting director of the FTC Bureau of Consumer Protection, said in a statement.

The full complaint can be found below:

Dluca – Bitcoint Funding Team Complaint by CoinDesk on Scribd

FTC seal image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.