Investor Warning – New Crypto Exchanges To Facilitate Fraud And Money Laundering For Illegal Broker Schemes

Since 2017, cryptocurrencies have been used by scam artists and fraudsters as a way out of the increasingly restrictive banking and financial system. Despite public blockchains and the traceability of crypto transactions, it is much easier to rip off investors via cryptocurrencies than via bank wire or credit card payments. Over the last 12 to 16 months FinTelegram has noticed that illegal broker schemes are increasingly using cryptos for deposits. Investors, on the other hand, are explicitly warned against the use of cryptocurrencies in connection with critical transactions such as online broker schemes.

Payment Service Providers As Co-Conspirators

For months FinTelegram has been reporting on payment service providers (PSP) who wilfully and knowingly or at least negligently participate in illegal broker schemes. Despite numerous warnings from the Financial Market Authority in the various countries and the respective AML/KYC obligations, these PSPs have facilitated the fraudulent broker schemes. The billions in losses suffered by retail investors in the fraudulent binary options industry are largely due to these PSP.

The PSPs involved in the area of credit card payments include:

• WireCard – Germany
• Payvision – Netherlands
• Praxis Cashier System (Praxis Pay) – Cyprus
• NetPay International – Israel
• DreamsPay (Binex Group LP) – Czech Republic, UK, and Russia
• Fondy – Austria, UK, and Ukraine
• WireCapital – Russia, Cyprus, and Israel

This list is not complete. Currently, FinTelegram evaluates several hundreds of thousands of payment transactions of various broker schemes and will update the list. However, there is no doubt that the high growth rates and profits of WireCard, Payvision and the other PSPs over the last couple of years have already been earned to a large extent through illegal brokers and the associated investor fraud and money laundering.

Follow The Money

FinTelegram, its EFRI fund recovery initiative but also investigating authorities are currently taking action against these PSPs. While the operators of the illegal broker platforms unfortunately often manage to remain hidden, PSPs can be used to track down traces. “Follow the money” is certainly the most effective strategy when searching for the perpetrators and recover funds.

PSPs are legally obliged to keep corresponding data and each payment transactions finally provides traces in the financial system (account data, banks, beneficiaries, payment references, etc.).

Against this background, it is understandable that illegal brokers are increasingly resorting to cryptos. The perpetrators deliberately separate the brokerage business from the crypto exchange. In this way, the two businesses are not connected, at least not officially. Of course, they have the same beneficial owners but they are hidden behind offshore companies. From the outside investors (traders) are dealing with to seperate legal entities. The trace of money from investor to broker and their masterminds is much more difficult to trace.

Estonian Crypto Exchanges For Money Laundering

The FinTelegram team has registered with illegal brokers like 4xFX or CCT MARKET during the last weeks. As apparently new customers, we talked to the Boiler Room staff and collected intel. Hence, we have learned that illegal brokers aim to receive their customers’ funds via cryptocurrencies.

For this purpose, shell companies are founded in Estonia and register for the easy-to-get Estonian crypto license. These new crypto exchanges such as CoinBatur or Coinbuyme are founded with the sole purpose of receiving funds from customers of the affiliated illegal brokers. We found out that the brokers and the crypto exchanges work with the same boiler rooms and share their resources.

The operators of these illegal brokers and the crypto exchanges behind them are apparently already planning the exit in advance. As it has been the case with illegal broker schemes, a wide variety of ever-changing shell companies and domains are used to confuse investors and authorities. This approach evidently is also applied for their crypto exchanges. Obviously, they want to be able to shut down and run away at any time and without leaving traces.

Here are just a few of these new brokers and their crypto exchanges:

Not only the persons acting in the different crypto exchanges in a scheme are usually the same. Technology and design are also largely identical (see image above). With the exception of the logo, these crypto exchanges look completely identical in the respective broker schemes, and the texts and procedures are also identical.

These new crypto exchanges are just clones that can be closed down at any time. Very obviously, these crypto exchanges do not have a business model on their own, but exist only the purpose of laundering funds from retail investors of the affiliated brokers and their beneficial owners. They’re not innovative ventures but simply a means to the end of rip-off.