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Crypto Fraud Is Becoming a Far Too Common Problem

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Cryptocurrency fraud is a massive problem that refuses to die down. Even worse is the fact that it can harm the level of legitimacy the crypto space has managed to cement for itself over the past several years.

Fraud Is Running Rampant

In a recent fraud case, a man has pled guilty to wire fraud and scheming tens of thousands of investors, many of which have ultimately lost hundreds of thousands of dollars. The man is Patrick McDonnell, who ran what’s known as the Cabbage Tech Corp. The fraud took place over a period of nearly four years from November 2014 to January 2018. During that time, McDonnell posed as an experienced trader and purchased and sold cryptocurrencies on his clients’ behalf.

Unfortunately, many traders received phony or blatantly incorrect statements that provided false data and figures. This allowed McDonnell to steal certain funds for himself, which he used for personal matters. It is estimated that McDonnell stole as much as $194,000 in regular fiat currency, though he also is alleged to have taken nearly five bitcoin units, 206 Litecoin, 620 ether classic tokens and over 1.3 million verge tokens.

Richard P. Donoghue – an attorney for the eastern district of New York – explained in a statement:

McDonnell has admitted that he used old-fashioned deception to defraud investors seeking to trade 21st century currencies.

He further stated that legal authorities and the attorney general’s office in New York would continue to “prosecute those who swindle the investing public to the full extent of the law.”

Arrested in March of this year, McDonnell now faces as many as 20 years in prison, along with restitution and forfeiture to his victims, in which he’ll be required by the state to pay back every cent he stole from his victims.

Cryptocurrency fraud occurs in all shapes and sizes. Among the most recent (and most populous) cases involve crypto-jacking and initial coin offerings (ICOs). Crypto-jacking is a process in which a hacker (or hackers) overtakes a user’s computer or other digital device without their knowledge or consent to mine cryptocurrency. Usually, the asset being mined is Monero, which is popular amongst malicious actors for its quasi-anonymous properties.

How Does All This Occur?

A hacker uses the device to extract new coins and rake in a serious profit, while the original owner receives nothing minus high energy bills each month.

ICOs are different in that they were designed to serve as legit fundraising methods, though many companies either disappear too quickly or start out with fraudulent intent and make off with whatever funds they earn before starting their operations. No longer considered trustworthy, ICOs have been banned in countries such as China and South Korea, thereby removing what could have been a solid way to build capital and revenue for crypto startups.

Nick Marinoff
Nick Marinoffhttps://www.livebitcoinnews.com/
Nick Marinoff is currently a lead news writer and editor for Money & Tech, a San Francisco-based broadcasting station that reports on all things digital currency-related. He has also written for a number of other online and print publications including Black Impact Magazine, EKT Interactive, Seal Beach USA and Benzinga.com, to name a few. He has recently published his first e-book "Take a 'Loan' Off Your Shoulders: 14 Simple Tricks for Graduating Debt Free" now available on Amazon. He is excited about the potential digital currency offers, particularly its ability to finance unbanked populations and bring nations together financially.

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