Israeli Crime Organization Busted Over $6 Million Ponzi Scheme

An investigation into a new cryptocurrency scam has led to the arrest of 10 suspects by law enforcement authorities in France and Belgium. 

As Finance Magnates reported earlier today, the scam was organized by a crime group based out of Israel, and it is expected to have milked up to 85 investors in both countries out of about 6 million Euros ($6.6 million). According to the official indictments, the defendants are accused of having used “elaborate tactics” to lure victims to their investment scheme, promising returns of up to 35 percent on their capital. 

Joint Investigations Lead to Scammers’ Arrests 

The indictment further explained that the scammers paid early birds small yields in order to encourage them to bring in new investors, promising them more yields on every new recruit. The scammers also allegedly used finds gotten from new investors to pay back the older investors, essentially making their operation a classic Ponzi scheme. As investors brought in new recruits and threw in their money as well, the scheme was able to continue operating. 

As part of the investigations, officials from Europol were able to arrest 4 of the fraudsters in France earlier this month, while cooperation with Luxembourg-based authorities saw them seize an additional 1 million Euros ($1.1 million). Israeli authorities also joined in the investigations and apprehended five other members of the crime organization. 

Crypto Scammers Had a Record Year in 2019

Like many other asset classes, cryptocurrencies have been a particular favorite for scammers looking to make a quick buck off the ignorance of investors. According to a recent report from market analysis company Chainalysis, cryptocurrency scammers were able to gain about $4.3 billion from their operations across last year- a figure which, for comparison, is more than thrice the amount they raised the year before. 

Our 2020 Crypto Crime Report is out today. Download to get original data and research on crypto scams, darknet markets, ransomware, and more! https://t.co/Iv4yYZCHTZ

— Chainalysis (@chainalysis) January 29, 2020

Ponzi schemes were by far the most lucrative scam variant, as they accounted for a staggering 92 percent of the total haul gotten by scammers throughout the year. Millions of victims were scammed by Ponzi scheme operators, with all of them being enticed by the prospect of making significant returns on their investments. 

However, it also noted some other scam types that have started to gain some traction- including but not limited to fake token offerings, blackmail scams, and fake “mixer” services. Cryptocurrency mixers are services that take a person’s digital assets and “mix” them with those of others, thus sending them back to the users after funneling the assets through a series of transactions to help keep their anonymity. 

These services have become essential, especially given the fact that Bitcoin is becoming less anonymous. However, as Chainalysis notes, some mixing services promise to help you keep your identity- and Bitcoins- concealed, and just run off with the money you send them.