It’s been a few weeks since our last cryptocurrency post and the industry’s news continues to dominated by scams. Now that the prices of cryptocurrencies has cooled a bit, many of the scams are beginning to surface. We have already several posts on specific cryptocurrency scams and ICO offerings. Use the search feature on our blog for stories on BitConnect, The Crypto Company and SI – Tech Ltd.
Just this week we were contacted by a potential client who invested $1.3 million in a cryptocurrency scheme to a guy he met in an online forum. It turns out the promoter is a convicted felon. His crime? Investment fraud. As more investors chase the lure of huge returns, we figured it was time to update our cryptocurrency scam list.
DavorCoin billed itself as having the highest returns in the crypto marketplace. How they calculated those returns remains a mystery, however. On January 16, 2018, the price of DavorCoin was $139.77. Two weeks later the Texas State Securities Board issued an emergency cease and desist order against the company. Now its shares are worth less than 3¢.
Texas claims that DavorCoin was operating as an unregistered security and had intentionally concealed material information of its business, how it planned on raising enough money to pay the promises made to investors and the location of their business. (Many Initial Coin Offerings or “ICOs” are nothing more than a website. There is no physical address or business.)
DavorCoin promised investors who “loaned” the company $30,000 a return of $15,390 in just 30 days. That equates to an annual rate of return well in excess of 1000%.
Texas regulators also halted trading of a company called R2B, an ICO believed to be located in Hong Kong. Investors were promised a cryptocurrency “coin” at an offering price of anywhere from less than a penny to $188. R2B claimed that their coins would be worth $200 within 90 days of trading and within a year would be one of the leading cryptocurrencies.
Bitstrade calls itself an “open source digital banking platform for Bitcoin & cryptocurrency investments solutions.” The State of New Jersey calls it a scam. In February, the New Jersey Bureau of Securities issued a cease and desist order forbidding the company from selling to New Jersey residents.
Bitstrade claimed that for as little as $10, an investor could earn a 700+% rate of return. Invest $10,000 or more and the rate of return skyrockets to 3650%. That is 10% per day! And those crazy rates of return were guaranteed!
The Bitstrade website says, “investors don’t need thousands or millions to have a private trader working for you day by day.”
Regulators issued the emergency order after finding Bitstrade violated state securities laws by “failing to disclose key material facts to prospective investors, including the names of its executive officers, the address of its principal office, information about Bitstrade’s financial condition, the risks of the Bitstrade Investment, and how Bitstrade invests investors’ money.”
The Bitstrade website lists two business addresses but regulators found that one didn’t even exist and the other is the corporate headquarters of GoDaddy, an Internet domain registrar.
In issuing the order, New Jersey’s Attorney General said, “The Bureau’s action today reinforces our commitment to protecting investors as they navigate the uncharted and largely unregulated domain of cryptocurrency-related investments. We want to make sure that investors tempted to cash in on the cryptocurrency rage aren’t being lured into sending funds to an anonymous internet entity without knowing where the funds are going or how they’ll be used.”
LoopX claimed it had the “most advanced loop trading software to date,” whatever that means. Their website proclaimed, “The arrival of electronic currencies could revolutionize the way we pay for goods and services, in much the same way as the Internet shook up how we access information. The LoopX System gives you guaranteed profits every week …”
So just how guaranteed are those profits? Media reports say the company raised $6.5 million in an ICO and then simply vanished.
Need more examples of cryptocurrency scams ? Prodeum is a Lithuania based cryptocurrency startup that at least had a sense of humor when it apparently made off with people’s money. A penis.
Prodeum was going to revolutionize the fresh food industry by putting in on the Ethereum blockchain. How it proposed to do that and pay investors was always a bit fuzzy, however.
In January, their website suddenly went dark. Worried investors searching the company’s website for answers found just one thing. The word “penis.” There was no mention of where their money had gone. The company reportedly also paid freelancers working through fiverr to write “Prodeum” on their bodies and post the photos on social media.
How Do I Recover My Money from ICO and Cryptocurrency Scams?
If you lost money on a cryptocurrency investment there is probably very little we can do. Your money is probably gone. That’s right. Although we are fraud recovery lawyers, it is difficult to fight ghosts and even more difficult to get them to pay money.
Most ICOs and cryptocurrency transactions are carried out online. And often the transactions are made with other untraceable cryptocurrencies like Bitcoin. There is no one or no place to sue and any money raised by the company is untraceable.
There is one exception — cryptocurrency scams peddled by investment advisers and stockbrokers. Any legitimate broker selling one of these investments would get fired in a heartbeat if caught. Unfortunately, there are plenty of bad brokers out there.
Do you remember the movie Wolf of Wall Street? If Jordan Belfort hadn’t been convicted of securities fraud, we have no doubt he would be one of the leading sellers of these cryptocurrency scams.
Brokers know that everyone wants to get in on the cryptocurrency craze. In fact, brokers are losing money because many investors are more interested in the lure of huge returns. AT&T stock and a 2% dividend or BitConnect and a 1000% return?
For us, the answer is easy, but greed is greed and billions of dollars continue to flow into cryptos and ICOs. Worse, many of these crypto scams pay high referral fees giving dishonest brokers a further incentive to sell them.
So how does a broker sell something his firm doesn’t allow? The industry term is “selling away.” The broker sells these riskier investments on the side. Instead of getting a statement from the brokerage firm, you receive one directly from the cryptocurrency investment itself.
There is some good news, however. Even though the brokerage firm has no idea that these unauthorized trades are occurring, those firms can be held liable if the investor thought he or she was investing through the brokerage firm. That is the little known secret of the industry. Investment firms are responsible for the actions of their agents and employees.
We hope would be cryptocurrency investors heed our advice and avoid ICOs. Anything that offers “guaranteed returns,” ridiculous rates of returns, or offers any sort of return without fulling explaining how they expect to generate the income to pay them is probably a scam.
Despite our warnings, millions of dollars get invested daily into ICOs and cryptocurrency promotions. And many of those investments are Ponzi schemes and scams. If you happened to invest through am investment adviser or stockbroker, we may be able to help.
Did you lose $1 million or more in a cryptocurrency scam involving a stockbroker or investment adviser? You may be entitled to a refund of your money and damages. Need more information or think you qualify for an award? Visit our cryptocurrency fraud recovery page or contact us directly at , online or by phone at (414) 704-6731 (direct).
All services are offered on a contingent fee basis meaning you do not pay unless we recover money for you.
Do you work for one of these ICOs or cryptos? If you have inside information about fraud you may be eligible for cash whistleblower award from the SEC. Contact us for more details. All inquiries are protected by the attorney – client privilege and kept confidential.
MahanyLaw – America’s Whistleblower and Cryptocurrency Scam Recovery Lawyers