Crypto-based Ponzi schemes are one of the most prominent blemishes on the industry’s name. However, regulators in the United States have ramped up their crackdown of these criminal organizations. In the latest development, the United States Justice Department (DOJ) announced that it had arrested the operators behind a multimillion-dollar Ponzi scheme.
Scammers Lived The Classic Criminals’ Life
Per a press release from earlier today, the DoJ claimed that it had closed down Airbit Club, a crypto Ponzi scheme that defrauded tens of millions from customers across several years. After an investigation from the Department of Homeland Security, four of the company’s five top officials have faced a court date.
Airbit Club started operating in late 2015, according to the DoJ. The company functioned as a multilevel marketing scheme, with operators hosting elaborate presentations to encourage investors to join in and invite more people.
Incentives included significant daily returns from crypto mining and trading — operations that Airbit’s operators were never involved in. The company also had an online portal where investors could see their “returns,” but everything was staged. The operators took investments and spent them on luxury goods, properties, and more elaborate presentations for other investors.
Club members started to suspect the company’s true nature in 2016, when many were unable to withdraw their funds. The company soon locked many of them out of their accounts and told them to recruit more investors if they wanted their funds. They additionally mandated investors to pay up in cash, instead of bank transfers. They launched aggressive campaigns to scrub their social media profiles of any negative reviews as well.
In total, they laundered about $20 million. Homeland Security investigators eventually picked up the four operators earlier this month, and they faced their court date yesterday. The fifth club operator was arrested in Panama and is currently awaiting extradition.
Ponzi Schemes on the Prowl
Regulators have been especially busy recently, with Ponzi schemes cropping up from seemingly every corner. Last month, Romanian programmer Silviu Catalin Bacali pled guilty to running BitClub, a fraud scheme that duped investors of over $720 million.
Bacali and three accomplices ran the operation between December 2014 and 2019. They took money from investors in exchange for shares in crypto mining pools. Investors also got bonuses for recruiting others to join. He was eventually arrested last December and charged with one count each of conspiracy to commit wire fraud and conspiracy to offer and sell unregistered securities. He’s now facing a $250,000 fine and a maximum of five years behind bars.
With the threat of fraud schemes almost everywhere, members of the crypto space have also stepped in to help out. Yesterday, the Ukrainian Cyber Police announced that it had taken down a local ransomware and money laundering operation that had moved over $40 million in funds in the past two years.
The police credited Binance, claiming that it had used the exchange’s in-house “Sentry” division and blockchain analytics firm TRM Labs to detect and identify the group. Per the release, the police arrested the suspects in June. In a raid, they seized $200,000 in ammunition, computer equipment, cash, and digital evidence that linked three individuals to the operation.