Ten alleged scammers were arrested today in connection with a cryptocurrency scheme that defrauded investors out of EUR 6 million ($6.60 million). Authorities in France and Belgium said today they had busted the Israel-based organized crime group who lured 85 unsuspecting investors in both countries to invest in Bitcoin and other altcoins.
The indictment describes the defendants’ use of elaborate tactics to lure victims with promises of large returns of up to 35 percent on their investments. According to Eurojust and Europol, the scheme was a classic con game with a twist; early birds were paid small yields in order to recruit new investors or invest more money.
As also charged, they used some new investors’ funds to pay back other investors in a Ponzi-like fashion, so that they would invest or refer additional money, thereby allowing the scheme to continue for a longer period of time.
Investors were encouraged to deposit their money with “fake companies,” which were then quickly transferred to bank accounts in various Asian countries and Turkey.
Four fraudsters were arrested in France in January 2019. The statement also says police seized EUR 1 million in cooperation with authorities in Luxembourg. Further, Israeli police conducted seven searches and questioned five persons.
While trading cryptocurrencies in France is legal, the country has a regulatory framework and compliance standards for the industry.
The Pacte Law encompasses a very broad range of measures covering many aspects of all crypto-active players. The current laws require cryptocurrency exchanges as well as custodian providers to undergo a mandatory AMF registration and obtain a certification to be granted by the French watchdog. The AMF confirmed that it is already involved with other crypto-related operators such as exchange platforms, custodians, and asset managers.
The new framework also comes with hefty fines for those who fail to comply, but will not reimburse investors for their losses as it happens with compensation funds that cover traditional investments.