May 2, 2024 - Economy

Crypto crimes with no cryptocurrency

Illustration of a block with angel wings and a glowing halo.

Illustration: Shoshana Gordon/Axios

Crypto scams tend to get a lot of attention, even when they don't actually involve cryptocurrencies.

The big picture: When people discuss the risks around scams in crypto, it's often linked to digital assets' specific dangers: backdoors, anonymous founders and new ways to cover one's tracks. There are certainly scams in crypto, but there are also plain old scams that just use "crypto" as a hook.

Driving the news: On Wednesday, the Justice Department announced an indictment against Idin Dalpour, who it accused of siphoning $43 million from victims, with promises of investing in his company which ran cryptocurrency trading operations and... a hospitality business?

  • There were no operations. Instead, there were gambling debts.

There are other examples. The big one is OneCoin. Everyone loves to call OneCoin a cryptocurrency scam, including the Justice Department.

  • Here's the thing: OneCoin never had a coin. There was no blockchain. No actual coin that could be traded anywhere but on the OneCoin website.

Then there's Coin Drop Markets. Patrick McDonnell, aka Jason Flack, was indicted in 2019 on promises that he was a great crypto trader who could earn his backers outstanding returns.

  • He pled guilty and was convicted to 33 months and restitution penalties the next year.
  • He did take in cryptocurrency (including 1.3 million verge) from backers, but he just used it for himself.

Crypto again made headlines in January, when three people pled guilty to a $1.89 billion scheme known as HyperFund.

  • In this case, the accused promised to grow investors' funds through crypto mining operations, but they didn't mine anything, real or virtual.

Zoom out: There have always been con men, and they have always used attention getting tactics to lure in their marks. These days, crypto has that get rich quick allure that's helpful for attracting victims.

Yes, but: Much of the public is convinced that there's something inherently scammy about cryptocurrency, and that's exacerbated by reports describing run-of-the-mill cons as crypto crimes, just because the con artist used digital asset lingo in their pitch.

My thought bubble: When news of a new crypto scam gets announced, it's worth reading between the lines to see if any kind of blockchain was used at all.

  • If it wasn't, it's not crypto crime. It's just crime.
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