Is Scam in Cryptography Thriving?
Bogdan LashchenkoCryptography is a perfect place for earning money, considering the Xs that investors can get. However, it is not that simple. As it is said, a chance to earn big money is always followed by a chance to come across big risks. The world of cryptocurrency has barely recovered from the FTX collapse but 2023 has already prepared for us a new case with catching scammers.
Game over for Bitzlato
This time the main characters in the story are representatives of a little-known exchange called Bitzlato. Thanks to the worldwide publicity, the company has become more popular, however, to put it mildly, it must affect their work negatively.
So, what happened? On 18 January, Anatoly Legkodymov, the founder of the Bitzlato exchange was arrested by the police in Miami, the USA. His company was accused of scamming and money laundering. The developers from Bitzlato left their own comment, saying that they were attached.
The result of the so-called “attack” is that the money was withdrawn from the exchange and allegedly the hackers started money laundering for fixing their profit. Representatives of Bitzlato also reported that the function of withdrawing money is suspended. We should note that various countries united to stop the scam. Consequently, several countries have arrested the representatives of Bitzlato who were living in Spain, Portugal, Cyprus, Ukraine and russia.
Financial Crimes Enforcement Network discovered dishonest activity of the founder of the cryptocurrency exchange Anatoly Legkodymov. They also accused Binance of helping the company to launder money. According to the accusations, one of the largest cryptocurrency exchanges scammers managed to run a few ‘dark’ transactions of the sum over $700,000,000. The darknet market Hydra that was closed down in the spring 2022. According to their information, the cryptocurrency exchange managed to earn $15,000,000 more thanks to the ransomware. You can read more about it here.
The United States Department of Justice places additional emphasis on the fact that the majority of clients of the cryptocurrency platform are representatives of the criminal world like drug and arms dealers, etc.
The United States Deputy Attorney General Lisa Monaco reported about their collaboration with France. Thanks to the cooperation of authorities from both of the countries, they managed to take action against the cryptocurrency exchange Bitzlato. The authorities received evidence that proves the illegal activity of the cryptocurrency platform.
It was a real challenge to get this result as several state authorities were working on collecting the irrefutable evidence. The search of the clues was run by the United States Department of Justice (US DOJ), FinCEN (Financial Crimes Enforcement Network), Federal Bureau of Investigation, and National Gendarmerie (France).
According to Lisa Monaco, the act of arrest of the founder of Bitzlato will become an illustrative example for other cryptocurrency exchanges that operate on the darknet and money laundering, and Anatoly Legkodymov is very unlikely to escape well-deserved punishment:
As they claim today, Legkodymov deliberately let Bitzlato become an alleged shelter for money used for various criminal offenses and received as a result of such an activity. The FBI and our partners are still firmly committed to protection of the cryptocurrency markets from illegal activities. Today’s action may serve as an example of this commitment as now Legkodymov will face the consequences of his own deeds in our system of criminal justice.
Consequently, Anatoly Legkodymov will soon have to stand trial in the US District Court in Florida. In case of success of the prosecution in terms of proving the guilt of the founder of Bitzlato, Legkodymov may be sentenced for a very long time as he became a very serious offender. Other inhabitants of the CIS countries may also be prosecuted together with him.
Now the US government has started hunting for the companies that pose a particular threat not only deceiving people but also helping the criminal activity thrive. Money laundering and using it on the darknet is not anyhow different from their direct participation in the crime development.
In the nearest future we should expect new revelations from regulators. Meanwhile Bitzlato will be closed and their activity will no longer continue in the way it has been working.
FTX
If you reflect on other famous cases of scam in the cryptocurrency sphere, the first thing that comes to our mind is the American cryptocurrency company FTX. This company has been discussed lots of times, and people who follow the cryptocurrency sphere know everything about the happening events.
In a nutshell, the whole top management of the cryptocurrency platform was accused of using the clients’ money improperly. In the last 2 years, the management of FTX spent over $40,000,000 purchasing almost two tens of property objects in the Bahamas. Besides, the top management has bought first-class airplane tickets on several occasions, ate luxurious meals at their expense and did not limit himself anyhow.
The biggest evil was done by Samuel Benjamin Bankman-Fried who decided to use the investors’ money on FTX to repay the debt of his other company, Alameda Research. In total, the American cryptocurrency platform caused damage to all its clients amounting to over $1,800,000,000.
Due to the wrong actions of the management, the cryptocurrency company faced insufficient financial support and liquidity problems. John Ray who took the post of a new general director FTX reported that in 40 years of his work with bankruptcy he had never seen such incompetent work in terms of company management.
The most interesting thing about this situation is that after such wrong deeds and events, the top management intends to restore the exchange. According to many experts, this idea is doomed to fail as no one would want to return to FTX whereas regulators from the USA, the UK and Australia would never let them receive the necessary license for servicing customers in the cryptography sphere.
Regulators are awake
Now we can see that the Financial Crimes Enforcement Network has come into play, helping to contribute to revealing Bitzlato’s criminal activity. Thanks to such actions, the world of the cryptocurrency market can become much safer than it is now.
Also the events related to FTX encourage people to put in more efforts to protect the participants of the market.
We should note that not all actions of the regulators are treated as something useful and necessary. For example, the proceedings between The United States Securities and Exchange Commission (SEC) and the Ripple company show that the audience mostly supports XRP. The SEC has a complaint about Ripple as they made an initial placement on the financial exchange (ICO) without the necessary preliminary procedures.
Nevertheless, the SEC shows that their competence has a lot of room for improvement. The CEO of Ripple Bradley Kent Garlinghouse claims that The United States Securities and Exchange Commission has to put in a lot of work to make a set of rules that will regulate the cryptocurrency space. Gary Gensler, who is the head of the SEC, claims that there is no need for this and digital assets must be regulated in the same way as regular stocks and bonds.
Nevertheless, almost all representatives of the cryptocurrency market are not in line with the head of SEC, as there are significant differences between digital assets and stocks.
We should also note that The U.S. Securities and Exchange Commission showed themselves extremely unprofessionally. Even though it was unintentional, the SEC violated the federal law about confidentiality when they published personal data of some miners. You can read about it in detail in the corresponding news report (https://rus.egw.news/crypto/news/21843/sec-violated-federal-privacy-law-9YsX7znuc).
However, the SEC is not the only authority that can regulate the cryptocurrency sphere. Patrick McHenry, the representative for North Carolina's 10th congressional district, announced creation of the first subcommittee on “Digital Assets, Financial Technology and Inclusion” for the first time in American history. French Hill is appointed to head the subcommittee and work there together with his team. The subcommittee is going to work on their own set of rules that will regulate the market of digital assets.
Due to the circumstances, we can be positive that in the future the cryptography world will become a safer place for investors. If it happens, this sphere can attract more people open to investing into something new. It will entail the growth of the market and solid earnings. Besides, people can be more willing to accept the idea of cryptocurrencies and this sphere really can become a new way of making money.
Along with acceptance of cryptocurrencies, regular payment methods can also start thriving, enabling people to pay for products in a ship with digital assets. Metaverses and NFT games also get a logical development that will change the real world in tens of years and turn it into something that we are not used to seeing.
Moving away from the positives, we should mention that in theory regulation of cryptography can affect regular investors negatively. For instance, if digital assets are equal to stocks and bonds, in this case in the US only those whose income is $200,000 a year and more can invest in the industry. This salary, to put it mildly, can be a reason for bragging of not so many people, so if we witness such changes, the cryptocurrency market can lose a huge part of its capitalization. But it is just an assumption and we are unlikely to see it, so we could think about it hypothetically.
Summing it up, we should reach a conclusion that the regulatory authorities start to show more actions, so we are going to see that in the nearest future we will see how the world will be developing along with the changes in the real world. Cryptography is unlikely to be absolutely safe but people will not stop putting in effort to fight scams.
Bogdan Lashchenko – content manager at EgamersWorld.Bogdan has been working at EGamersWorld since 2023. Joining the company, he began fillin the site with information, news and events.