Law enforcement also warned that scam groups announcing their retirement could be strategic. Meanwhile, South Korea’s Haru Invest has been declared bankrupt after a $1 billion fraud that affected more than 16,000 investors. YouTube star Logan Paul is also facing new allegations that he misled investors for personal gain. In a win for justice in the crypto industry, the IRS agent’s laptop that was used to recover 120,000 stolen Bitcoin from Bitfinex will be displayed at the Smithsonian.
Crypto Scams Thrive Even as Top Drainers Retire
The crypto space has seen a growing wave of draining scams, and major players like Inferno and Pink Drainer grabbed headlines by announcing their retirements. These crypto drainers employ tactics that deceive users into connecting their wallets and approving transactions, which ultimately leads to major financial losses.
In October alone, more than $20 million was lost to phishing schemes, according to Scam Sniffer. This number was still down 56% from September. Alarmingly, the number of victims surged by 20% and reached 12,058.
On the bright side, law enforcement and cybersecurity firms stepped up their efforts to fight against these crimes, and their growing capabilities and expertise could explain why some of these notorious drainers are opting to shut down. Some experts suggest that these retirements could be proactive moves to avoid legal repercussions.
For instance, Tether recently froze three wallets that were linked to draining operations at the request of law enforcement. Investigations revealed connections between these wallets and Konpyl, which is a suspicious entity that has been tied to multiple scams, including the fake Rabby wallet scheme that drained $1.6 million. Konpyl’s operations seem to be intertwined with Inferno Drainer.
Crypto draining operations function as businesses, and they even offer their tools to illicit actors through a “scam-as-a-service” model. Developers take a commission from stolen funds which acts as an incentive for them to continue their criminal activities.
Over the years, brands like Inferno, Pink, Angel and Monkey Drainer gained notoriety, and their announcements of shutdowns were accompanied by a lot of skepticism. Monkey Drainer ceased operations in early 2023, but paved the way for successors like Inferno and Pink. Pink Drainer was allegedly developed by a former security community member, and amassed an estimated $85 million from over 21,000 victims before announcing its retirement in May of 2024. Inferno’s shutdowns have been short-lived as the drainer resurfaced after previous announcements.
On-chain investigations suggest that Konpyl could be a big player in the draining ecosystem, either as a user or through deeper involvement. Some experts suspect that Konpyl could be an over-the-counter trader used by threat actors to launder stolen funds, which is a common tactic in the crypto world. Analysis of fund movements linked to Konpyl reveals a web of transactions that complicates law enforcement’s attempts to pinpoint accountability.
Cybersecurity firms like MistTrack and Scam Sniffer are making it a priority to blacklist illicit addresses, while tools like Kerberus and integrated wallet security services are improving user protection.
Unfortunately, despite these advancements, some experts still warn that shutdowns by these drainers could actually be strategic rather than definitive. Criminal groups could simply rebrand and restart operations under new identities, which has been the case in the past.
Haru Invest Bankrupt After $1B Fraud
Crypto criminals do not always end on top. Haru Invest, a South Korean crypto yield platform that was accused of orchestrating a $1 billion fraud, has been declared bankrupt by the Seoul Rehabilitation Court, according to local reports.
The platform was operated by Haru Management Limited, and attracted more than 16,000 investors with promises of guaranteed principal safety and high returns on crypto deposits. The scheme started to collapse in June of 2023 when the company abruptly suspended withdrawals, which created panic among investors.
Subsequent investigations uncovered that Haru Invest defrauded investors of 1.4 trillion won, which is worth roughly $1 billion. Although incorporated in the British Virgin Islands, the platform operated mainly out of South Korea. This also means that the South Korean court has jurisdiction over the case.
In February of 2024, some key executives like CEO Hugo Hyungsoo Lee, were arrested on charges of fraud and laundering the misappropriated funds. Now, the bankruptcy ruling sets the stage for the liquidation of Haru Management’s assets to facilitate recovery for the affected investors. A creditors’ meeting is also scheduled for Feb. 11 of 2025, where a bankruptcy administrator will evaluate the company’s finances and start distributing any remaining assets.
The bankruptcy process offers a structured framework for reclaiming funds, and it allows the trustee to seize the company’s accounts, coins, and bonds. While it is still possible that investors may not recoup their entire losses, the liquidation is a critical step toward restitution.
Logan Paul Faces New Crypto Misconduct Allegations
Logan Paul, the American YouTube star, is under scrutiny yet again for his cryptocurrency activities. This time, allegations suggest that he misled followers for personal gain. According to a BBC investigation, Paul promoted investments while concealing his financial stakes, and potentially influenced token prices for profit. Evidence also reportedly connects an anonymous wallet to Paul’s known wallet, with transactions involving Elongate, a meme coin. The wallet allegedly bought $160,000 worth of tokens shortly before Paul’s promotional tweet and sold most of them just hours later. This earned the YouTuber over $120,000.
The BBC’s latest reports were made after similar accusations from Time Magazine involving another cryptocurrency and anonymous wallet. Paul initially avoided addressing the allegations, but later invited the BBC for an interview at his gym in Puerto Rico. However, the crew reportedly met with a lookalike and harassment from a crowd. Paul’s attorneys also sent legal warnings to the BBC against publishing their findings.
Additionally, Paul faces a class-action lawsuit over CryptoZoo, which is a failed NFT project accused of being a “rug pull.” Investors allege the game was never functional, and claim the project was abandoned after funds were collected. In response to this, Paul filed a defamation lawsuit against YouTuber Coffeezilla, and argued that reports on CryptoZoo falsely characterized him as defrauding his audience.
IRS Bitcoin Investigation Laptop Becomes a Smithsonian Artifact
The crypto community is celebrating another win against crime as a MacBook Pro that was used by an Internal Revenue Service agent to trace and seize 120,000 Bitcoin stolen from the crypto exchange Bitfinex in 2016 became part of the Smithsonian Institution’s National Museum of American History. The laptop belongs to former IRS Special Agent Chris Janczewski, and it played a major role in uncovering the keys to the stolen Bitcoin that was valued at $3.6 billion at the time of its recovery.
The Bitcoin was stolen by Ilya Lichtenstein, who was recently sentenced to five years in prison for the hack. His wife, Heather Morgan, is also known as rapper “Razzlekhan,” and was sentenced to 18 months for her role in laundering the stolen funds. Janczewski is now leading investigations at TRM Labs.
Ilya Lichtenstein and Heather Morgan
The idea to feature Janczewski’s laptop came from Magistrate Judge Zia Faruqui, who believes in the importance of the Bitfinex case. The laptop will be displayed in the museum’s “The Value of Money” gallery, which is set to reopen in late 2024.
This article was originally Posted on Coinpaper.com
