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Sunday, 10 December 19:47 (GMT -05:00)

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Another Bitcoin Fraud Is Caught

Crypto currencies are controversial. On the on hand they give investors a decent investment opportunity. On the other hand, the may be way too risky. Often times, those are both market and even non-market risks, including fraud.




In some of the previous articles, we recommended you to start with a sound financial strategy and risk management before you invest even a penny in crypto currencies. We are not trying to say that those are bad investments. They can make you money if you really know what you are doing. However, you should be really careful about it since the advantages of decentralized and anonymous currencies may turn into disadvantages and loses for your wallet.


Biggest Crypto Currency Scandals 2017


To start with, let’s recap some of the biggest scandals related to crypto currencies in 2017. Those caused a lot of troubles to both investors and average users.
Number one is all about Ethereum. For those of you who don’t know, this new crypto currency suddenly crashed from $370 all the way down to $10 not so long ago. Needless to say that all the investors were shocked. Most exchanges temporarily suspended transaction based on this currency. Later on, Ethereum recovered to $350, only to see another plunge down to $222. Experts say, this was all about speculative transactions designed to make the greedy traders richer. The market capitalization deflated from 110 billion dollars all the way down to around 90 billion dollars.
Number two is related to the owner of Bitcoin exchange Coin.mx, who was sentenced to 5,5 years in prison for money laundering with the help of this exchange (the amount is around 10 billion dollars).
Number three is all about China. The thing is, the People’s Bank of China has recently toughened the regulation related to crypto currencies as well as the local exchanges working with them. Before that, Chinese exchanges were the biggest and most active on the Internet. Since the regulator has been investigating into several cases related to money laundering, those exchanges were ordered to suspend offering leverage and introduce certain fees. All of that resulted in a massive flight of client capital.
Number four is virus Petya blocking infected PCs and blackmailing the users asking them to transfer them $300 in Bitcoins for unblocking the software and data.
Number five is related to Freewallet. Many of the users have found their funds missing. The total damage is over 8 million dollars.
Number six is about cryptocurrency HYIPs artificially increasing the yields to attract more of those unsuspecting investors, with further blocking the accounts and transferring money to anonymous accounts.
All of them are just some of the biggest cases, but this is just the beginning of a rather long list of scandals this year. Not so long ago, the list got even longer. The thing is that another crypto currency fraud was caught in the UK.


Fake Crypto Currency Exchange


It is interesting to note that Renwick Haddow was previously accused of fraud in the UK but he decided to change the location and switch to American investors. This time, the SEC and the U.S. Department of Justice managed to catch him red-handed. On June 30th, the SEC accused him of fraud in New York where he was residing at that moment. In particular, he was accused of scamming the clients of 2 fake companies by creating a fake crypto-currency exchange without registering it with the SEC, which is a serious violation.
The essence is that he ordered his assistants to call potential investors and sell them assets through Bitcoin Store Inc. and Bar Works Inc. According to the scammed investors, they were informed about experienced top managers of those firms, which was a lie. On top of that, the financial reports were corrupted. By using those fake companies and a fake exchange, he managed to accumulate serious amounts of money, 80% of which was transferred offshore. Attracting tons of money over a short period of time became possible due to the fact that he was promising his victims really big payoffs.


The bottom line is, think twice before you decide to invest in this risky business. Never do it if you don’t know what you are getting into. And even if you are about to invest in stable crypto currencies, make sure that you are dealing with honest companies.


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