Cryptocurrency Scam Involving $22 Million Uncovered in UK

Cryptocurrencies worth $22.2 million (roughly Rs. 165 crores) have been seized by the UK police after a global fraud scheme was unearthed. They have found USB sticks containing large quantities of Ethereum, the second-largest cryptocurrency in the world after Bitcoin. The Greater Manchester Police (GMP) said the scheme cheated people from the UK, US, Europe, China, Australia, and Hong Kong. The victims deposited money, some even their entire life's savings, believing it to be a genuine saving and trading service using Binance Smart Chain.

Who was behind the scam?

Police are investigating over 150 reports of fraudsters targeting people using the website, Binance Smart Chain, and other cryptocurrency websites, including Coin Ferry, Coinmarketcap and a number of other other mainstream portals in the UK. They will also be investigating reports of people transferring money from their bank accounts to their bitcoin wallets, only to discover that the money was being sent to the scammers. How does the scam work? The perpetrators claimed they were running a multi-million-dollar company called Coinmachines. The victims had to pay a commission fee of 50% of their cryptocurrency funds after withdrawing money from a bank or online trading platform. The fraudsters told victims that they needed to buy Bitcoins from them in exchange for their coin trading fee.


Who were the victims?

According to the police, the victims included traders, who lost money for their trade in crypto-currencies and people looking for investment opportunities in this field. The fraudsters created 'trading bots' and 'pump-and-dump' schemes. However, the police suspects that the fraudsters may have started off as traders themselves. The GMP warned that those engaging in crypto-currency trading should be especially wary of advice from third-party platforms and should check the credentials of such companies, according to the Guardian. The police have alerted government departments, including the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). What is Binance Smart Chain?


What were they doing?

"Victims believed they were making savings or trading their life savings for cryptocurrency which could then be used to make a quick profit," said a police statement, according to CNN. The blockchain-based network is essentially an online ledger where transactions and ownership of digital currency is stored, according to AFP. The police said it "was used by a criminal enterprise to exploit people in Europe, North America and China, raking in up to £5 million pounds (approximately Rs. 50 crore)" over the last five months. However, the investigation is ongoing. The police had started working on the case after receiving a referral from Binance. Was the project hacked?


How did they find out about this scam?

The victims thought they were investing in cryptocurrencies when they were actually losing. The scam was discovered in September 2018, when users from the UK approached police and shared their experiences of losing large amounts of money. The first instance came when six victims lost £375,000 (roughly Rs. 30 crores) to the fraudsters. Read Also: PNB scam: Here is what you should know about Nirav Modi "This was the first time the Greater Manchester Police had seen such an extreme case of this kind and it has subsequently led us to have our Specialist Fraud Unit involved in the case," said Chadderton police station Detective Chief Inspector Michael James.


What does this mean for cryptocurrency scams now?

The accused in the case, Phillip Philbin and Ben Henderson, had gone on to set up businesses in Hong Kong after the scam was discovered. Binance co-founder Changpeng Zhao is said to have been contacted by the fraudsters as he was on a plane when the scam was detected. Authorities said, after their arrest on June 22, Philbin and Henderson had tried to gain access to Zhao's laptop by giving him some malware. They were brought to the UK for "interview and caution" but "there is no suggestion of any wrongdoing by the pair," police said. The pair were on bail while the police investigation continues. How does the crypto scam work?



Cryptocurrencies are big, bad, and growing. In a bid to build a better Bitcoin (BTC), the price of BTC has shot up, even breaching the $19,000 mark. The plummeting value of Bitcoin (BTC) has been around for a while now, mostly thanks to its relatively poor governance structure. But that won't affect the price as long as you have other altcoins. It seems like exchanges and wallet services are alluringly easy to steal the Bitcoin (BTC) stored on them. But what if all that money is on a random exchange?


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