Three arrests made in relation to Metamax pyramid scheme

Three people have been arrested in connection to a crypto pyramid scheme called Metamax. Those behind the scam promised that people who invested in the scam could then earn income of up to $400 a day simply by watching, sharing, liking, and reviewing videos. There was, of course, a referral component as well, where people earned commission on the "investments" of people they referred. And for people who chose to invest in one of Metamax's fixed investment plans, they were promised 1.5% daily returns.

Unsurprisingly, the project turned out to be a pyramid scheme. On June 25, the Philippines SEC issued a warning, noting that the project was not registered with them, and that it "has the characteristics of a 'Ponzi scheme'". Shortly afterwards, Metamax deleted their Twitter account, and shut down victims' online access to their accounts.

Local news estimated that the scheme affected around 15,000 victims, mainly in Cyprus and Greece. Three people have been arrested in connection to the scheme, including a retired Cypriot police officer. One of the suspects turned himself in to police, claiming that he himself was a victim of the scam, and that he believed his life was in danger as he was being threatened by Metamax victims. Days later, a bomb was detonated near a home he once rented.

Silvergate Bank pays $63 million to settle charges from multiple agencies

More than a year after the crypto-friendly Silvergate Bank collapsed, its parent company has agreed to pay $63 million in fines to the Federal Reserve and California Department of Financial Protection and the Innovation. The SEC also imposed a $50 million fine, though the terms of the settlement noted this "may be offset" by the other penalties.

According to the regulators, Silvergate "had serious deficiencies" in its anti-money laundering programs, including in its intra-customer crypto transfer product. In particular, the SEC highlighted $9 billion in suspicious transfers among FTX entities that should have been detected by compliance programs. The SEC also alleged that Silvergate misrepresented its financial state during the post-FTX collapse bank run.

SEC sues Consensys, maker of MetaMask wallet

As expected, the SEC has filed a lawsuit against Consensys, the maker of the popular MetaMask cryptocurrency wallet. Although Consensys had recently gloated about the SEC completing an investigation into the company's offering of ETH, and determining not to pursue action over it, a Wells notice sent to the firm in April suggested that some legal action was impending. Shortly afterwards, Consensys filed a lawsuit against the SEC, alleging regulatory overreach.

The SEC's lawsuit claims that Consensys violated securities laws by acting as an unregistered securities broker, and by offering staking services that constituted unregistered securities offerings. The SEC has previously cracked down on staking offerings by other firms, including Coinbase and Kraken.

Logan Paul files defamation lawsuit over Coffeezilla's coverage of his failed CryptoZoo project

Logan PaulLogan Paul (attribution)
A year and a half after threatening to sue YouTuber Coffeezilla for his series of videos exposing influencer Logan Paul's (alleged) role in (allegedly) scamming his large following with a failed blockchain game, Paul has followed through on the threat. Although he acknowledges in the lawsuit that the project was definitely a scam, Paul says that he too was duped by several "conmen" who he'd brought on as advisers.

In the lawsuit, Paul claims that Coffeezilla knowingly falsely accused Paul of being in on the scam in hopes of getting more attention on his videos. Paul is seeking more than $75,000 in damages.

In January 2024, Paul filed suit against the advisers he's described as "conmen". He's also pointed the finger at them while defending a potential class action complaint from defrauded investors.

FBI busts group of crypto-seeking home invaders

The Department of Justice busted a group of more than a dozen people, led by a 24-year-old man named Remy St. Felix, who perpetrated a string of break-ins and violent assaults in hopes of obtaining their victims' cryptocurrency holdings. The group seems to have been far more successful with their hacking thefts than with their in-person attempts to obtain cryptocurrency, but that didn't stop them from committing a string of eleven break-ins where they assaulted, threatened, and kidnapped victims.

In one case, a victim was able to transfer $150,000 in cryptocurrency to the attackers before their cryptocurrency exchange blocked the suspicious transfers. However, in their other attempts to physically steal crypto, they were unsuccessful, with victims either refusing to hand over their crypto or successfully escaping.

In one case, St. Felix and his associates targeted a woman from whom his group had already stolen $3 million in a SIM swapping attack. When they broke in and held the woman at gunpoint to try to steal the $500,000 in crypto she had left, the woman refused to turn over her password to her cryptocurrency account, so dismayed by her earlier loss that she told the men just to shoot her.

St. Felix was convicted on nine counts by a federal jury, and faces a sentence of seven years to life in prison. Thirteen co-conspirators also pleaded guilty.

Terraform Labs, Do Kwon reach $4.5 billion settlement with the SEC

Terraform Labs and its former CEO Do Kwon have agreed to settle the SEC's civil action against them with a $4.5 billion payment of disgorgement, interest, and penalties. Kwon and the company were behind the collapsed Terra/Luna stablecoin project, which imploded in May 2022. It was among the first dominoes in what ended up being an industry-wide collapse.

If the settlement is approved by the judge, Kwon will personally be responsible for around $200 million of the settlement payment, with Terraform Labs shouldering the rest. Although the settlement is among the largest the SEC has received in a securities fraud lawsuit, it's unlikely the company will ever pay anything close to the total amount, as it is in bankruptcy and claims to have only around $150 million in assets remaining. Both the company and Kwon will be banned from trading crypto asset securities.

The substantial fine is among the lesser of Kwon's worries at the moment, as he is still in jail in Montenegro pending extradition to either South Korea or the United States to face serious criminal charges for his role in the fraud.

New York Attorney General sues over $1 billion NovaTech and AWS Mining crypto pyramid schemes

Cynthia and Eddy Petion, with a car behind them printed with the NovaTech brandingCynthia and Eddy Petion (attribution)
The New York Attorney General’s office has sued Cynthia and Eddy Petion over two allegedly fraudulent cryptocurrency pyramid schemes called AWS Mining and NovaTech. They particularly targeted victims of Haitian descent, promoting their schemes in Creole, leveraging their victims’ religion, and promising them “financial freedom” and “freedom from the plantation”.

In reality, the schemes were pyramid schemes in which investors earned crypto for recruiting others to buy in. NovaTech also used the funds from newer investors to pay out the supposed “returns” from the investment scheme, in a classic Ponzi fashion. From August 2019 – April 2023, victims deposited more than $1 billion into NovaTech. Though it was described as a trading operation, only about $26 million ever went into crypto trading.

In June 2022, the couple secretly sold their Florida house and moved to Panama, while continuing to pretend they were in the state. Speaking to another operator of the scheme, Cynthia Petion advised: “leave the country…they can’t serve you if they can’t find you lol.”

DOJ indicts Epoch Times executive for crypto scam

Widong "Bill" Guan, Chief Financial Officer of the far-right Epoch Times media company, has been indicted on money laundering conspiracy and bank fraud charges for his alleged involvement in a cryptocurrency scam and money laundering operation. According to the Justice Department, Guan used cryptocurrency to purchase prepaid debit cards that were loaded with fraudulently obtained unemployment insurance benefits. Guan and others then laundered the funds through bank accounts they'd fraudulently opened using stolen personal information.

According to the DOJ, banks became suspicious when the revenue for the Epoch Times increased 410% — from around $15 million to around $62 million — from the previous year.

FTX executive Ryan Salame sentenced to 7.5 years imprisonment

Ryan SalameRyan Salame (attribution)
Ryan Salame was the CEO of FTX Digital Markets which was the Bahamian portion of the FTX business. In September 2023, just before Sam Bankman-Fried's trial began, Salame pleaded guilty to one count each of conspiracy to operate an unlicensed money transmitting business and conspiracy to make unlawful political contributions and defraud the Federal Election Commission. He was the only co-conspirator of four to not plead under a cooperation agreement, and he did not testify at Bankman-Fried's trial.

In his sentencing memo, Salame asked for a sentence of no more than 18 months imprisonment, claiming that "he was duped, as was everyone else, into believing that the companies were legitimate, solvent, and wildly profitable." Judge Kaplan didn't seem to agree, ultimately passing down a sentence greater than the five to seven years requested by prosecutors. He also will pay $6 million in forfeiture, $5 million in restitution, and spend three years on supervised release.

Salame is the first of Bankman-Fried's co-conspirators to be sentenced.

Crypto scam money launderers charged for laundering more than $73 million through Deltec

Two people were charged in California for laundering money obtained from cryptocurrency and fiat "pig butchering" scams. After receiving the money from the investment scammers, the launderers then allegedly helped to obfuscate at least $73 million in transactions by moving the money through Deltec Bank in The Bahamas and converting it into the Tether stablecoin.

Deltec is a well-known bank in the cryptocurrency world, mostly for its ties to Tether and to FTX. In July 2023, US authorities seized tens of millions from Deltec accounts in connection to a cryptocurrency money laundering investigation. It's not clear if that was the same investigation.

No JavaScript? That's cool too! Check out the Web 1.0 version of the site to see more entries.