An alleged cryptocurrency trader managed to extort $100 million from his victims. The stolen funds were then laundered by two accomplices. Thanks to the blockchain, the authorities quickly understood how the scammers operated.
A news cryptocurrency scam has just been dismantled by the American justice system. According to the statement released by the United States Department of Justice, a dedicated cryptocurrency platform called EmpiresX stole $100 million from investors.
Joshua David Nicholas, a 28-year-old man from Florida, admitted to having set up a vast scam with the help of two accomplices. He faces a maximum sentence of five years in prison for “ conspiracy to commit fraud”.
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A Ponzi scheme
According to American justice, the scam was based on a Ponzi scheme, or pyramid scheme. This is a very common type of scam. The scam consists in promising high profits to potential investors. The scammer then remunerates the victims with the investments made by his previous targets. In this way, new entrants are convinced that the system works.
In this case, Joshua David Nicholas, who presented himself as a “chief trader” on the web, promoted a trading bot promising huge returns. There are many trading bots in the market. These computer programs carry out transactions in cryptocurrencies, or other assets, in order to generate profits. Note that not all bots are scams. There are completely transparent offers on the Internet, such as Napbots or Krill.
EmpiresX claimed to offer a trading bot that relies on artificial intelligence to choose transactions and maximize the profitability of investors”. The program was allegedly assisted by experienced traders. In fact, the platform paid the money collected from previous investors to new victims. In fact, EmpiresX has no invested a million dollars money paid by investors.
To reassure investors, the leaders of EmpiresX regularly posted screenshots showing the investments made. These are false captures intended to fool the victims. A fake website illustrating the bot’s transactions was also created.
American justice specifies that EmpiresX never bothered to obtain authorization from financial regulators of the United States to practice. The actors behind the platform, however, claimed to have received a license. Under these conditions, the SEC (Securities and Exchange Commission), the policeman of the financial markets, filed a complaint against the company and its three directors.
The platform is also accused of money laundering. Emerson Pires and Flavio Goncalves, the two Brazilian accomplices of the pseudo trader, had taken to laundering the funds obtained by sending them to a foreign exchange platform. A few months ago, the defendants also prevented EmpiresX customers from withdrawing their money.
Authorities say they have analyzed the blockchain to find out how scammers work. The blockchain indeed keeps a history of all transactions. It was enough to identify the address of EmpiresX’s digital wallet to be able to trace the movements of the funds. This is why law enforcement is hiring more and more blockchain experts.
The two accomplices responsible for the money laundering were officially charged last June. Unfortunately they had already left the United States for Brazil, reveals the Wall Street Journal.
“As cryptocurrency markets grow and provide new opportunities for consumers, criminals are also looking for ways to exploit them”says Luis Quesada, head of the FBI’s Criminal Investigative Division.
As the ecosystem continues to grow, many cybercriminals are taking advantage of the craze to trick Internet users. Recently, we also reported the case of CryptoGouv, the French influencer who stole 4 million euros from its subscribers.
Scammers have largely profited from the rise in the value of crypto-assets in 2021. As a study by Chainalysis shows, scams have reported over $5 billion last year. The fall in cryptocurrency prices subsequently penalized the actors behind the scams in 2022. So far, they have generated 65% less money than in 2021.
United States Department of Justice