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Assessing the details of this latest Ponzi scheme amid the current market state

19 Nov, 20222 min readOther
Assessing the details of this latest Ponzi scheme amid the current market state

A 27-year-old investment manager from Ohio was arrested on 18 November for allegedly running a crypto Ponzi scheme. This fraudulent cryptocurrency investment scam raised at least $10 million from investors, according to a press release by the Department of Justice.

The accused allegedly misled investors by promoting himself as an expert cryptocurrency trader who specialized in Bitcoin [BTC] derivatives. According to the indictment, the individual falsely promised investors lucrative returns on their money, with no risk to the principle. In reality, the fraudster used funds from previous investors to pay off new investors, in what was a classic Ponzi scheme set-up.

The accused has been charged with five counts of wire fraud and can be sentenced to a maximum penalty of 20 years for each count.

The Commodities Futures and Trading Commission (CFTC) issued a cease-and-desist order against the accused and his two companies in August 2022. This order was filed on the allegations that he cheated investors out of more than $12 million.

Crypto Ponzi scheme creates fear for increased hacks in 2022

On 13 October 2022, blockchain analytics firm Chainalysis predicted that 2022 will almost certainly surpass 2021 as the most significant year for hacking. Over the course of 125 hacks, hackers have earned more than $3 billion dollars this year, as of 13 October.

1/ After four hacks yesterday, October is now the biggest month in the biggest year ever for hacking activity, with more than half the month still to go. So far this month, $718 million has been stolen from #DeFi protocols across 11 different hacks. — Chainalysis (@chainalysis) October 12, 2022

The vast majority of hacks in 2019 occurred on centralized cryptocurrency exchanges, but as those companies increased their security, the vast majority of hacks, roughly 90% in 2022, occurred on DeFi protocols.

Recently, there was a case of a hacking exploit worth $100 million in the bridge between BNB Smart Chain and Beacon Chain. In February 2022, the Wormhole bridge lost $325 million in an exploit, in March, Axie Infinity’s Ronin bridge had a $625 million exploit.

Erin Plante, vice president of investigations at Chainalysis, told Fortune last month,

“While not foolproof, a valuable first step towards addressing security issues is for extremely rigorous code audits to become the gold standard, both for developers building protocols and investors evaluating them.”

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