fraud

Security engineer pleads guilty to Nirvana Finance exploit and one other hack

Shakeeb Ahmed was arrested for hacking an unspecified DEX, and then admitted to the Nirvava Finance hack too.

A software engineer pleaded guilty in the Southern District Court of New York on Dec. 14 to one count of computer fraud in connection with the hacking of Nirvana Finance and an unnamed decentralized cryptocurrency exchange. The United States Attorney’s Office said the case was the first-ever conviction for hacking a smart contract.

Shakeeb Ahmed, described as a “senior security engineer for an international technology company,” was arrested in July in connection with the hack of the unnamed exchange on or about July 2 and 3, 2022. According to the U.S. Attorney’s Office statement:

Ahmed returned all but $1.5 million to the exchange, which “agreed not to refer the attack to law enforcement.” The exchange “allowed users to exchange different kinds of cryptocurrencies, and paid fees to users who deposited cryptocurrency to provide liquidity on the Crypto Exchange.”

IRS tax bill will swipe creditors of any ‘meaningful recovery,' says FTX

FTX Trading said the firm “never earned anything anywhere near the amount” that would justify a $24 billion tax bill.

A proposed $24 billion tax bill from the United State IRS will likely suck up any “meaningful recovery” that was meant for victims of FTX, according to the bankrupt crypto exchange.

The United States tax authority has been trying to chase tax arrears from the crypto exchange and its sister firm Alameda Research since May this year. The IRS initially claimed $44 billion across 45 separate claims against FTX and its subsidiaries in May. 10, but recently brought that number down to $24 billion.

However, in a Dec. 10 filing to a Delaware-based bankruptcy court, FTX said the claims put forth by the Internal Revenue Service were “meritless” and would also impact the funds meant to reimburse impacted FTX users.

IRS tax bill will swipe creditors of any ‘meaningful recovery,’ says FTX

FTX Trading said the firm “never earned anything anywhere near the amount” that would justify a $24 billion tax bill.

A proposed $24 billion tax bill from the United States Internal Revenue Service (IRS) will likely suck up any “meaningful recovery” that was meant for victims of FTX, according to the bankrupt crypto exchange.

The United States tax authority has been trying to chase tax arrears from the crypto exchange and its sister firm, Alameda Research, since May. The IRS initially claimed $44 billion across 45 separate claims against FTX and its subsidiaries on May 10 but recently brought that number down to $24 billion.

However, in a Dec. 10 filing in the U.S. Bankruptcy Court for the District of Delaware, FTX said the claims put forth by the IRS were meritless and would also impact the funds meant to reimburse affected FTX users.

DEBT Box urges judge to toss suit as SEC got case ‘badly wrong’

The SEC initially misled a court to freeze DEBT Box’s assets, which has since been reversed, and the firm cited the incident as grounds to dismiss the suit.

DEBT Box and other defendants in a Securities and Exchange Commission lawsuit want the case tossed after the court found the agency lied to secure a temporary restraining order against them.

“The SEC got this case wrong. Badly wrong,” lawyers for Digital Licensing Inc., which does business as DEBT Box, told Utah federal court Judge Robert Shelby in a Dec.

The SEC won a temporary restraining order to freeze DEBT Box assets on Aug.

The agency accused the firm of perpetrating a $50 million fraudulent crypto scheme.

“Not only are such allegations false, but they also fail to meet the basic pleading standards,” it wrote in its latest motion.

A Utah federal court reversed the asset freeze on Nov.

The court found the firm didn’t close the bank accounts, and a $720,000 transfer the SEC alleged was sent overseas was actually sent domestically.

*Excerpt from DEBT Box’s motion to dismiss. Source: CourtListener*

The SEC “misrepresents the state of law regarding crypto assets” in its “fatally flawed pleading,” DEBT Box said.

Debt Box urges judge to toss suit, says SEC got case ‘badly wrong’

The SEC initially misled a court to freeze Debt Box’s assets, which has since been reversed, with the firm citing the incident as grounds to dismiss the suit.

Debt Box and other defendants in a United States Securities and Exchange Commission (SEC) lawsuit want the case tossed after a court found the agency lied to secure a temporary restraining order against them.

“The SEC got this case wrong. Badly wrong,” lawyers for Digital Licensing, which does business as Debt Box, told Judge Robert Shelby of the U.S. District Court for the District of Utah in a Dec. 4 motion to dismiss. “The SEC should not be allowed to continue to spin a false narrative to avoid dismissal.”

The SEC won a temporary restraining order to freeze Debt Box assets on Aug. 3, claiming the firm would remove evidence and secretly transfer assets overseas if they were notified the order would be imposed on them.

Do Kwon lawyers reportedly dismiss SEC‘s securities fraud allegation

Kwon’s lawyers claimed the SEC failed to prove he defrauded U.S. investors in connection with the $40 billion collapse of Terra’s TerraUSD and LUNA.

Lawyers representing Terraform Labs co-founder Do Kwon reportedly argued in court against the allegations of the United States Securities and Exchange Commission that Kwon defrauded U.S. investors by illegally offering unregistered securities.

On April 21, Kwon’s lawyers asked the judge to dismiss the SEC lawsuit, claiming that the regulator’s acquisitions were unfounded, according to a Bloomberg report. While requesting to dismiss the lawsuit, Kwon’s lawyers asserted that U.S. law prohibits regulators “from using federal securities law to assert jurisdiction over the digital assets in this case.”

In addition, the lawyers claimed the SEC failed to prove that Kwon had defrauded U.S. investors in connection with the $40 billion collapse of Terra’s TerraUSD (UST) and LUNA (LUNA). According to the lawyers, the UST stablecoin is a currency, not a security.

The legal proceedings began following Kwon’s arrested at the Podgorica airport in Montenegro on March 23 while allegedly attempting to fly to Dubai using fake documents. After his arrest, both South Korean and American authorities requested the entrepreneur’s extradition.

At the time of writing, it remains unclear which country, if any, will be granted their extradition request.

“In the case when we receive several extradition requests, I would like to say that determining to which state they will be extradited is based on several factors like the severity of the committed criminal offense, the location and time when the criminal offense has been committed, the order in which we have received the request for extradition and several other factors,” said Montenegrin Justice Minister Marko Kovač through an interpreter on March 29.

The Seoul Southern District Court recently denied an arrest warrant for Terraform Labs co-founder Shin Hyun-Seong. While prosecutors saw Kwon’s arrest as an opportunity to pin down Shin, the court denied the request, citing the unconfirmed nature of the allegations and the unlikeliness of Shin being a flight risk or destroying evidence.

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Do Kwon lawyers reportedly dismiss SEC’s securities fraud allegation

Kwon’s lawyers claimed that the SEC failed to prove the alleged defrauding of US investors in connection with Terra’s $40 billion collapse of TerraUSD (UST) and Luna (LUNA).

The lawyers representing Terraform Labs co-founder Do Kwon reportedly argued in court against the allegations pressed by the US Securities and Exchange Commission (SEC). The federal agency had sued Kwon for allegedly defrauding US investors by illegally offering unregistered securities.

On April 21, Do Kwon’s lawyers asked the judge to dismiss the SEC lawsuit claiming that the regulator’s acquisitions were unfounded. While requesting to dismiss the lawsuit, Kwon’s lawyers asserted that US law prohibits regulators “from using federal securities law to assert jurisdiction over the digital assets in this case,” reported Bloomberg.

In addition, the lawyers claimed that the SEC failed to prove that Kwon had defrauded US investors in connection with Terra’s $40 billion collapse of the TerraUSD (UST) and Luna (LUNA) cryptocurrencies. According to the lawyers, the stablecoin at issue is a currency, not a security.

The legal proceedings began when Do Kwon was arrested in Podgorica airport, Montenegro on March 23, while attempting to fly to Dubai using fake documents. Following his arrest, both South Korean and American authorities requested the entrepreneur’s extradition.

At the time of writing, it remains unclear as to which country, if any, would be the most likely to be granted the extradition of Kwon.

The Seoul Southern District Court recently denied an arrest warrant for Terraform Labs co-founder Shin Hyun-Seong.

While prosecutors saw Kwon’s arrest as an opportunity to pin down Shin, the court denied the request while citing unconfirmed allegations and the unlikeliness of Shin being a flight risk or destroying evidence.

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Brooklyn court charges former banker for allegedly defrauding crypto investors

Brooklyn federal court charged a former investment banker for allegedly taking investors’ money under the pretext of making profitable crypto investments.

The federal court in Brooklyn, New York, charged a former investment banker and registered broker for allegedly defrauding numerous investors by promising profits on fake cryptocurrency investments and misappropriating the funds received to finance his lifestyle.

Documents with the court claim the defendant, Rashawn Russell, misused the growing interest in crypto investments to mislead investors. Russell convinced multiple investors to reinvest their fiat savings into cryptocurrencies, often promising significant or “guaranteed” returns. However, it is alleged that Russell misappropriated the investors’ money to fund his personal lifestyle.

Breon Peace, United States attorney for the Eastern District of New York, revealed the court’s intent to pursue the case against the former banker:

“As alleged, Russell turned the demand for cryptocurrency investments into a scheme to defraud numerous investors in order to fund his lifestyle. This Office will continue to aggressively pursue fraudsters perpetrating these schemes against investors in the digital asset markets.”

After convincing investors about the fake cryptocurrency investment scheme based on his credibility as a former investment banker and a registered broker with the Financial Industry Regulatory Authority, Russell allegedly used their money to gamble and repay other investors.

According to the information shared by the U.S. Department of Justice (DOJ), Russell fabricated documents to mislead unwary investors about the status of their crypto investments. The forgery involved altering an image of a bank’s website to depict fake balances and bank wire transfer confirmations.

If convicted, Russell could face a maximum of 20 years in prison. The DOJ also requested other investors to reach out if they suspect themselves of falling victim to the alleged crime.

On April 6, the Washington State Department of Financial Institutions issued a consumer protection alert against the crypto exchange Eucoinotrade.

According to the report, Eucoinotrade facilitated an “advanced fee fraud” wherein users were asked to pay up for upgrading accounts and withdrawing funds. While users faced no problems depositing money, they encountered problems when trying to cash out.

Washington state DFI warns Eucoinotrade may be engaging in ‘advanced fee fraud’

One user claims they were defrauded out of more than $50,000 by the website, which authorities are now referring to as an “alleged cryptocurrency exchange.”

The Washington State Department of Financial Institutions (DFI) has issued a consumer protection alert addressing the “alleged cryptocurrency exchange” known as Eucoinotrade.

At least one person may have fallen victim to what appears to be “advanced fee fraud,” per the report. This is a confidence scheme that involves soliciting large sum payments for fees under the guise that they’re needed to release supposed earnings.

According to the DFI, “after investing 5 or 6 times, for a total of nearly $50,000, the investor’s Eucoinotrade account purportedly grew to over $414,000.” However, the problems allegedly began when the investor attempted to cash out.

Initially, “customer service” claimed that the investor’s gains required them to upgrade their account to “elite status” and demanded the investor pay “software upgrade” fees in the amount of $40,000.

“Customer service” then agreed to waive the $40,000 fee but insisted the investor would still need to pay a $14,000 processing fee to access their money. Once that fee was obtained, the investor was then solicited for another $9,400 fee called an “IRS compulsory fee” — something the Washington DFI says doesn’t exist.

*A screenshot of a pop-up alert visitors receive upon navigating to the Eucoinotrade website.*

The alert goes on to state that, per the organization’s research, the Eucoinotrade website throws up several potential red flags:

It claims to be registered in Ireland, but the alleged exchange’s business ID appears to refer to a different company altogether;
The website’s FAQ states that it still accepts Payza, a service that was shut down in 2018 ahead of its founders pleading guilty to conspiring to launder money and operating an internet-based unlicensed money service business; a
The website appears to be built with a template shared by hundreds of other questionable sites.

The Ecoinotrade site claims to offer 150% daily profit on user accounts with investment minimums ranging from $1,000 to $150,000 using a “binary algorithm.” However, no research or company profile information appeared on the website.

Cointelegraph asked Ecoinotrade about the alert but did not receive an immediate response. This story will be updated should it respond.

National Futures Association adds rules for members handling digital assets

The CFTC-linked self-regulatory organization has disclosure rules for members engaging in activities with BTC and ETH, and standards of conduct are now being added.

The National Futures Association (NFA) — the United States self-regulatory organization for derivatives markets — has issued a new compliance rule addressing members’ conduct. The new rule complements requirements issued in 2018.

The NFA has “well over 100” members engaging in activities with digital asset commodities, but no way to address fraud or misconduct committed by those members, the organization explained to the secretary of the Commodity Futures Trading Commission (CFTC) Christopher Kirkpatrick in a Feb. 28 letter as it submitted the proposed new rule for approval.

The new rule is modeled on the NFA’s antifraud rules for exchange-traded futures, swaps transactions and retail foreign exchange. The NFA is the only registered self-regulatory organization with delegated authority from the CFTC, giving it an analogous status to the Financial Industry Regulatory Authority with the Securities and Exchange Commission.

Currently, the NFA only imposes disclosure requirements on its members engaged in spot commodity activities with digital assets, which are detailed in a single document. When the new rule comes into effect on May 31, members will be subject to guidance on fraud, trade principles and employee supervision. The rule applies only to Bitcoin (BTC) and Ether (ETH), as they alone “have related commodity interests certified by a registered entity for listing under Part 40 of CFTC Regulations.”

@CFTCpham applauds the National Futures Association (CFTC-designated SRO for derivatives industry) for establishing supervision and disclosure requirements for the trading of digital commodities.

✅ Importantly, the NFA (and Pham) reinforce ETH’s https://t.co/uu0Vc3WD7F…

— Alexander Grieve (@AlexanderGrieve) March 31, 2023

CFTC commissioner Caroline Pham released a statement praising the new rule:

“This is a clear example of using existing authority to ensure that there are customer protections in place, because registration with the NFA requires that firms and individuals comply with NFA rules.”

The NFA “can modify this rule in the future to include other digital asset commodities” besides BTC and ETH, Pham added. She noted that NFA rules on foreign exchange preceded the CFTC’s authority granted by Congress to regulate that market by five years. “I believe it is common sense to start with what we have and what works in order to extend our regulatory framework over spot digital asset commodity markets,” she added.

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