Youth in $37 Million Crypto Heist; BitConnect Ponzi Payout - BankInfoSecurity.com

Blockchain & Cryptocurrency , Cryptocurrency Fraud , Fraud Management & Cybercrime

Canadian SIM Swap Latest Crypto Scam; US Returns $57 Million Prajeet Nair (@prajeetspeaks) • November 20, 2021    

Lawmakers and regulators are concerned by high-profile cryptocurrency breaches. (File Photo: Executium via Unsplash)

A Canadian teenager is under arrest after allegedly stealing C$46 million ($37 million) from one person in a cryptocurrency scam.

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The Hamilton police in Ontario, Canada, who made the arrest, say the individual allegedly conducted a SIM swap scam, a method that involves convincing a mobile operator's customer service employee to move a cellphone number to a different SIM card or port it to another carrier, which allows a threat actor to intercept two-factor authorization requests.

Joint Investigation

The U.S. Federal Bureau of Investigations and the U.S. Secret Service Electronic Crimes Task Force, along with Canada's Hamilton police, jointly investigated the theft of cryptocurrency from a victim located in the United States in March 2020.

"The joint investigation revealed that some of the stolen cryptocurrency was used to purchase an online username that was considered to be rare in the gaming community. This transaction led investigators to uncover the account holder of the rare username," the police note.

The investigators claim that this heist is one of the largest cryptocurrency scams involving one individual in the history of Canada.

The Hamilton police arrested the unnamed youth for theft more than C$5,000 ($4,000) and possession of property or proceeds of property obtained by crime. The case is currently in the Canadian courts.

The Hamilton police also made multiple cryptocurrency seizures valued at the time of seizure in excess of C$7 million ($5.5 million).

"Because of the YCJA [Youth Criminal Justice Act] and just because it's part of our investigation, we made the decision not to disclose the age of the accused," Detective Constable Kenneth Kirkpatrick told news platform CTV News Toronto.

Kirkpatrick also told CTV News Toronto that multifactor authentication is key to protecting personal information and money.

Further Crypto Frauds and Concerns

The Canadian SIM swap scam is just the latest in a long list of cryptocurrency frauds. This week, in the U.S., the U.S. Department of Justice announced that the U.S. Attorney's Office for the Southern District of California, in conjunction with the U.S. Postal Investigative Service, will start selling off $57 million worth of cryptocurrency seized from the North American $2 billion cryptocurrency Ponzi scheme BitConnect.

The liquidation is believed to be the largest single recovery of cryptocurrency for victims to date, according to the DOJ.

The U.S. Securities and Exchange Commission in September announced civil action against the defunct cryptocurrency lending platform BitConnect; its founder, Satish Kumbhani; and its top U.S. promoter, Glenn Arcaro; for allegedly defrauding investors out of $2 billion by lying to them about an automated cryptocurrency trading bot and promising to generate profits of as much as 40% (see: SEC Charges BitConnect on $2 Billion Fraud Scheme)

Arcaro had also pleaded guilty to related criminal charges and faces up to 20 years in prison and must repay investors $24 million gained from the offense. Kumbhani's whereabouts are unknown.

Arcaro admitted that he and others misled investors about BitConnect's purported proprietary technology, known as the "BitConnect Trading Bot" and "Volatility Software," being able to generate profits and guaranteed returns. The truth is that BitConnect operated a textbook Ponzi scheme by paying earlier BitConnect investors with money from later investors.

"The order entered on November 12, 2021, begins the process of making those victims whole by liquidating the fraud proceeds in Arcaro's possession - the vast majority of which were in the form of cryptocurrencies, including Bitcoin, Ethereum, Litecoin, Dash, and several others," according to the DOJ.

Lawmakers and federal regulators alike continue to wade into the cryptocurrency space due to its volatility and recent high-profile breaches with initial losses amounting to hundreds of millions of dollars (see: Hacker Steals $97 Million From Crypto Exchange 'Liquid').

Stricter Regulations

In August, the SEC said it will monitor decentralized finance transactions, after contracting with the blockchain cybersecurity firm AnChain.AI. Legal experts suggested that this and other recent moves preview increased regulation of the decentralized finance space (see: SEC to Monitor Illicit Activity on DeFi Platforms).

The U.S. Senate-approved $1 trillion U.S. infrastructure bill will also impose new tax obligations on crypto operators. A proposed amendment to soften the requirements failed to pass the Senate. Supporters have said that the measure will generate $28 billion in new tax revenue, while critics said it burdens a wide range of crypto operators and can stifle innovation (see: Senator Seeks Input on Securing Crypto, Blockchain).

Another bill introduced in the Senate earlier this month - the Sanction and Stop Ransomware Act - recommends regulatory actions around use of cryptocurrency to pay ransoms (see: Countering Cyberthreats: 2 Legislative Proposals Introduced).

On Aug. 3, SEC Chairman Gary Gensler called crypto markets "rife with fraud, scams and abuse." Gensler called on lawmakers to provide the independent agency with additional authority to regulate crypto markets (see: PayPal to Hire Dozens of Cryptocurrency Security Experts).