Sunday, December 4, 2022

$300 million fraud exposed in US crypto pyramid scheme

Fraud cases are increasing in the crypto segment. In the US, 11 people have been accused of defrauding a large number of people of more than $ 300 million through the crypto pyramid scheme. The Securities and Exchange Commission (SEC) said that these people had promised to reward them for adding more members to increase the number of members in the pyramid scheme.

These people created a platform called ‘Forsage’ and new investors were asked to set-up a crypto wallet and buy slots from the firm’s smart contracts. From these slots, the investors used to get commission from the people they used to join the scheme. Carolyn Welshhans, in charge of the SEC’s crypto and cyber unit, statement “It was a phony pyramid scheme that was run on a large scale and marketed aggressively. Fraudsters cannot deceive securities laws with such schemes under the guise of smart contracts and blockchains.”

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Authorities have tightened scrutiny of this segment due to increasing cases of crypto-related scams in the US. Last month, Hollywood producer Ryan Felton was exposed to crypto scams. He had cheated crypto investors to meet the mounting expenses. Felton, who has been involved in some big film projects, is reported to have received about 2.5 million dollars from the scam. The scam was done through two initial coin offerings (ICOs). One was for a streaming platform called ‘FLiK’ and the other for crypto exchange CoinSpark.

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The promotion for the streaming platform FLiK claimed that it would surpass Netflix. In CoinSpark’s ICO, investors were told that 25 percent of the exchange’s profits would be given as dividends. Investors took interest in both these ICOs but only Felton got the returns from them. Felton was charged with money laundering and fraud. The Department of Justice (DoJ) had said, “The investors’ money was used to buy expensive apartments and cars.” This case indicates the risk associated with crypto projects.

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