It’s been a tough six months to be a crypto investor. Whipsawing markets, faltering assets and economic pressures have all combined to shock the nascent market.
The price of crypto’s best-known coin, bitcoin, has slumped since November and currencies that were touted as safe and secure because they were pegged to the dollar and monitored via exchanges have seen their valuations crumble.
There were some high points.
Crypto evangelists began seeing a thaw in how the market is regulated, as international and domestic authorities began steps to understand and oversee the sector’s potential.
There was also an upswing during Russia’s unprovoked invasion of Ukraine. Many people were sending money in and out of Ukraine via crypto, once again proving how the currencies might eventually be used.
Despite those bright spots, the crypto sector now finds itself at a crossroads.
It has lost more than half its market value since November and remains ripe for scams, schemes and sudden plunges.
Now, regulators are adding one more swindle to that list.
$1B Ponzi Scheme Hits Crypto
Tax investigators said on May 13 that they have evidence of a $1 billion Ponzi scheme centered on the crypto market.
American tax officials said that they were following 50 separate leads into scams focused on things like nonfungible tokens and other decentralized parts of the sector.
“NFTs are one of the new modern digital ways of trade-based money laundering,” Niels Obbink of the Dutch Fiscal Information and Investigation Service said at a news conference involving the Internal Revenue Service’s announcement.
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“And since there is, comparing with more well-known classic sectors, less control and less supervision and a limited regulation that makes it vulnerable for fraud, it must have our attention.”
Crypto’s ability to move across borders largely undetected has made it a tool for scammers looking to target vulnerable investor populations.
It also has led to a large number of criminal actions, which regulators are attempting to attack and control as crypto grifters aim for bigger and richer targets.
“Some of these leads I’m talking about, they involve individuals with significant NFT transactions revolving around potential tax or other financial crimes throughout our jurisdictions,” Jim Lee, the IRS’s chief of criminal investigations, said at a news conference attended by Bloomberg.
The money involved appears to have affected investors across the globe, including crypto buyers in the U.S., the U.K., the Netherlands, Canada and Australia.
“[One] appears to be a $1 billion Ponzi scheme. That’s billion with a ‘B’ and this lead also touches every single J5 country,” Lee said.
The J5, or the Joint Chiefs of Global Tax Enforcement, is a tax-crime-fighting initiative including authorities in the five countries.
Can Regulators Keep Up With Scammers?
One of the most common complaints about the crypto sector is that it lacks transparency, ducks under regulation and is so opaque that if an investor loses money they have little recourse.
Lee said May 13 that while that has traditionally been the case, the IRS is making the tracking of crypto movements one of its primary priorities.
For now, investors who think they may have been the victim of a crypto scam can fill out a report at the Federal Trade Commission here.
They can also contact the Office of Investor Education and Advocacy via email at Help@SEC.gov or by phone at 1 (800) 732-0330, or by reporting it through an online form.
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