The United States Securities and Exchange Commission (SEC), the Federal Bureau of Investigation (FBI), and the Department of Justice (DOJ) have knocked down four fraudulent cryptocurrency firms in a conjoined action plan.
The lawsuits against Gotbit Consulting, ZM Quant Investment, and CLS Global were filed in the District Court of Massachusetts on October 9. Suits were also filed against nine officials of these organizations.
The Cases in Detail
The allegations against Gotbit Consulting and its marketing director Fedor Kedrov were that of wash trading. Wash trading is the process by which the market is deceived by self-trading by the company.
The company forges fake documents to show that real-time trade is taking place. The market interest will be kept alive by self-trading even when no actual trades are happening.
Gotbit Consulting’s wash transactions were organized by Vy Pham, a Vietnamese resident living in California. She was charged with separate cases for unregistered securities offerings, fraud in the offer or sale of securities, fraud in the purchase or sale of securities, and attempts at market manipulation.
ZM Quant Investment and CLS Global were charged with fraud attempts in connection with a cryptocurrency named NexFundAI.
ZM Quant and the four individuals associated with Vy Pham were charged with fraud connected to another crypto asset, the SaitaRealty coin.
The Department of Justice (DOJ) has also booked another company named MyTrade MM for fraud connected to the NexFundAI coin.
Crypto Frauds on the Rise in USA
Even after tight monitoring by the American government and other agencies such as the United States Securities and Exchange Commission (SEC), FBI, and DOJ, crypto frauds are rampant in the United States. The number of frauds and other such mishaps is increasing every year.
In 2023. Crypto scams and frauds in the USA increased by 45% from the previous year. The speed, ease of access, and irreversibility of crypto transactions have made them immensely popular in the country and susceptible to fraudulent transactions.
Criminal activities based on cryptocurrencies involve many avenues such as frauds related to providing technical assistance, scams that impersonate government schemes, frauds that build up investor confidence, etc. For instance, in 2023, investment fraud alone cost a $3.9 billion loss for the American economy.
The most number of complaints related to cryptocurrency frauds were reported in the United States with 57,762 complaints registered last year. $4,809, 737,956 was lost in cryptocurrency-related frauds in the US.
However, it is to be noted that the number of complaints reported amounted to only 10% of the frauds. Cryptocurrency-related frauds accounted for 50% of all money lost in the country.
Investment scams were at their highest last year accounting for almost 71% of the total cryptocurrency scams. Another 10% of the scams were associated with call centres impersonating government agencies to conduct scams.
The FBI officials believe that the best way to control such scam attempts is by registering as many complaints as possible and taking strict punitive measures against such fraud attempts.
The FBI formed a Virtual Assets Unit (VAU) to investigate such frauds against cryptocurrencies. It is important to analyze the blockchain and the related technologies well in advance to counter any chances of fraud.
Why are Cryptocurrencies an Easy Target for Fraudsters?
Ever since the inception of cryptocurrencies, there have been many instances of fraud reported related to cryptocurrencies. They are an easy target mainly due to their decentralized nature. There is a lack of supervision by a competent authority in the case of crypto assets. The transactions are quite fast and irreversible.
The transactions can be conducted anytime, anywhere. If a fraudster wants to siphon cryptocurrencies they can do it at a faster rate before being detected.
However, cryptocurrency fraud can be traced to an extent as the transactions are publicly recorded on blockchains, which is difficult in the case of ordinary, centralized financial systems.
Also, Read: Crypto Pig Butchering Scam: A New Digital Threat!
The Bottom Line
The combined efforts of the SEC, FBI, and DOJ have closed down four fraudulent cryptocurrency firms. Such collaborations are expected to take stricter actions to prevent the increasing cryptocurrency-related fraud in America.
Timely identification and punitive measures against such fraudulent organizations are important to safeguard the goodwill of the whole cryptocurrency industry.
