- "Four Individuals Charged for Laundering Millions from Cryptocurrency Investment Scams", Department of Justice press release [archive]
Estimates by Chainalysis suggest that victims have lost a combined $1.3 billion (with a B) to the scam thus far.
The scheme's operators Sam Lee and Zijing "Ryan" Xu were also behind Blockchain Global, a collapsed company that operated the Australian ACX crypto exchange that collapsed in 2019. The company is in liquidation, and creditor claims are expected to surpass $50 million. Although Lee and Xu were reported for investigation to the Australian Securities & Investments Commission, ASIC did not take any action.
Lee has also been involved in other investment platforms, including two that are currently active: StableDao and We Are All Satoshi. Both platforms were the target of cease and desist letters from the Californian Department of Financial Protection and Innovation in September 2023, who described them both as "fraudulent pyramid and Ponzi scheme[s]".
- "Investors lose millions as crypto schemes operate unchecked in Australia", The Guardian [archive]
- "'They are so convincing': Vera Gazzard lost her life savings to HyperVerse", The Guardian [archive]
- "Crypto Scam Revenue Dropped 46% in 2022, While Blockchain Analysis Finds Links Between What Appear to be Distinct Scams", Chainalysis [archive]
- "More than $50 million owed to creditors after collapse of Blockchain Global's cryptocurrency exchange", ABC News [archive]
The scam in question was a Ponzi scheme called EXW, in which the eight defendants stole at least €17.6 million (~$19.3 million) from at least 40,000 victims in late 2019 and 2020. The fraud later resurfaced under a different name. However, in court, the ex-girlfriend of the main defendant testified that the scam had actually brought in €80–100 million ($88—$110 million).
One of the defendants, who from reports seems to be the same one who just admitted his guilt in court, reportedly feigned being autistic when he was arrested by police, somehow earning himself enough time to erase the contents of his phone.
He and seven other defendants have been charged with fraud, money laundering, running a pyramid scheme, and operating a criminal organization.
- "EXW Wallet indictments, arrests & criminal trial in Austria", Behind MLM [archive]
- "EXW-Prozess: Hauptangeklagter bekennt sich schuldig", Salzburger Nachrichten (in German) [archive]
- "Angeklagter bekennt sich im Prozess um Kryptobetrug vollumfänglich schuldig", Der Standard (in German) [archive]
"We found that by offering large amounts of cash with no limit barrier to entry, we encouraged heavy cheating on the platform and degraded the user experience for our legitimate player base who want a fair and safe place to play chess online," they wrote. Who could have guessed.
Somewhat ironically, they suggested that they may still intended to look into using web3 technology for "anti-cheat measures".
Now, Trump is hawking a new set of $99 NFTs, featuring the August 2023 mugshot taken in connection to his ongoing racketeering lawsuit. Those who purchase 47 of the NFTs — amounting to $4,653 plus fees — are promised a scrap of the suit Trump wore in the mugshot and a dinner with the president-turned-fulltime criminal defendant.
The fine print, however, reserves the possibility that neither promise will come through.
In addition to pulling off the original scam, the fraudsters also came up with a fake investigative agency called the "Federal Crypto Reserve", where they directed victims who were seeking to recover their losses.
The scammers were charged with wire fraud, money laundering, and obstruction of justice, which carry hefty maximum prison terms.
- "Two Men Charged for Operating $25M Cryptocurrency Ponzi Scheme", Department of Justice press release [archive]
It appears the attacker was able to gain access to the smart contract admin key, which gave them the ability to upgrade the contracts to enable malicious functionality.
OKX announced that they would reimburse the losses, and pursue legal action against the exploiter.
KuCoin has admitted to allowing New Yorkers to trade securities and commodities on the platform, and representing themselves as an "exchange" without having registered as such.
In addition to paying the fine, KuCoin has agreed to shut down all New Yorkers' accounts in the coming months and prevent residents of the state from signing up for new accounts.
Because there was not sufficient liquidity for such a large trade at the going price, the trade was ultimately fulfilled, but at a 63% loss. Before the trade, that quantity of tokens was priced at around $2.28 million; however, Yearn received only around $780,000 in stablecoins because of the slippage.
Yearn quickly identified the issue and embarked on a campaign to ask nicely for the counterparties in the trade to please give some of their profits back. In on-chain messages, Yearn wrote: "one of yearns multisigs made a costly mistake last night that affected a critical source of yCRVs liquidity. we identified you as having made a profit off of this and are kindly requesting that you return as much as you see reasonable to yearns main multisig: ychad.eth. sorry we have to ask this, but hope you can understand." Doesn't hurt to ask, I guess. So far, only one wallet has taken them up on the offer, returning 2 ETH (~$4,400).
After tracing the attacker's attempts to launder the money through Tornado Cash and then obfuscate that it had come from the mixing service (something that raises flags at some exchanges), zachxbt observed the funds go to a broker of Magic: The Gathering based in the United States. Altogether, the hacker appeared to be spending millions on starter decks, alpha sets, and sealed boxes — often overpaying by 5-10%. These items routinely sell for hundreds or thousands of dollars.
The thief is probably a creative money launderer rather than an massive MTG fan, and is probably reselling the cards to further obscure the source of the money. Then again, MTG is more than a little addictive.