Crypto Crime Wave: Multiple Arrests Rock the Crypto Industry

The anonymity of cryptocurrencies has made the pioneering industry a very tempting opportunity for many criminals, especially over the past month.

Abishek Dharshan

Abishek Dharshan

October 2, 2018 2:14 PM

Crypto Crime Wave: Multiple Arrests Rock the Crypto Industry

Criminals value privacy, anonymity, and money, not necessarily in that order, and (un)fortunately cryptocurrencies can offer all of those to varying degrees. The anonymity of these transactions has made the pioneering industry a very tempting opportunity for many criminal organizations, utilizing these little nuggets of digital gold as an opportunity for kidnapping, money laundering and other illegal activity.

Russian Supercomputer Bitcoin Heist

Russian security agents managed to nab a group of nuclear engineers at a top-secret nuclear warhead facility who tried to use one of the country’s most powerful supercomputers to mine Bitcoin (BTC) in February.

The engineers tried to use one of the superpower’s most powerful supercomputer — a 1 petaflop giant with raw computational capacity for 1,000 trillion calculations per second — to mine Bitcoin. But things didn’t go as planned; as soon as the engineers tried to bring the system online, the security department was alerted and engineers were apprehended. They were promptly handed over to the Federal Security Service (FSB) and a criminal case was reportedly opened against them. The head of the press service for the research institute, Tatiana Zalesskaya told the Interfax news agency that that the attempt was a “technically hopeless and criminally punishable offense.”

The engineers were posted at Federal Nuclear Center in the western city of Sarov — formerly one of the Soviet Union’s closed-off cities, shrouded in secrecy and unknown to history. Sarov is infamous for being one of the “closed administrative territorial entities,” referred to as Arzamas-16, was the site of the facility that houses the center of research and production of the first Soviet atomic bomb and hydrogen bomb under Joseph Stalin. Ordinary Russians still require special permits to visit the site today.

Sarov’s rogue scientists are not the only ones to have dreamt of using former Soviet military spaces for crypto mining. Legally setting up mining operations in a former Soviet bunker located in a cave in Almaty, Kazakhstan is the Ice Rock Mining firm’s plan.

The Bitconnect Scam

Bitconnect is alleged to have run a global Ponzi investment scheme that enlisted multi-level affiliate marketing operated through a referral program that rewarded marketers for luring investors to purchase Bitconnect native tokens (BCC) on the Bitconnect BCC exchange using either Bitcoin or fiat currency. As the true extent of the heist unfolds, staggering details have been brought to light.

A former Member of the Legislative Assembly (MLA) for India’s ruling Bharatiya Janata Party (BJP) was remanded in custody earlier this month for allegedly conspiring with local police officers to kidnap and extort Bitcoin from a Bitconnect investor based in Gujarat.

Shailesh Bhatt, a Surat-based builder had complained to the Home Minister’s office in the Indian state of Gujarat in February, that he was kidnapped and extorted of 176 BTC,  worth 9.45 crore* rupee (around $1.31 million) by 10 district cops comprising even a superintendent and a local Crime Branch Inspector.

Bhatt accused one of his business aides, Kirit Paladiya of duping him into thinking that the authorities were keeping him under close watch for his crypto dealings. He alleged he had been lured by a phone call from his local Central Bureau of Investigation (CBI), and was subsequently beaten in a “torture room” and asked by a CBI official to pay a ransom in cash.

Two days later, he retracted his statements and claimed to have been kidnapped during a meeting with Paladiya near a fuel station, where he was kidnapped and  dropped off at a local farm house. There, he said, “[the police officers] beat me up inside a room and threatened to kill me […] if I did not hand over my Bitcoins.”

Bhatt then retracted his statements again this time accusing Paladiya of double-crossing him also accusing his influential uncle, the former BJP MLA Nalin Kotadiya of being the one who pressured him into paying the ransom. Things took an even uglier turn when Bhatt become embroiled in a case pertaining to an alleged earlier extortion from two colleagues of well-known local Bitconnect promoter Satish Kumbhani of a staggering 1.55 billion rupee ($215 million) worth of crypto and cash at gunpoint — including around 2,400 BTC.

However, Indian authorities nonetheless believed former lawmaker Kotadiya was not innocent and issued an arrest warrant against him in mid-May. By mid-June, Kotadiya was declared a “proclaimed offender” (absconder) by a local sessions court and demanded he appear before the court within 30 days. Kotadiya managed to lie low and evade law enforcement throughout summer, till he was finally nabbed after four months in hiding on Sept. 10. He was reportedly found “fast asleep” on the second floor of a railway quarters still under construction, after a local contractor tipped off the police.

Teenage SIM-swapping crypto hacker with a penchant for luxury cars

California Police remanded Xzavyer Narvaez who specializes in stealing cell phone numbers and using them to hijack online financial and social media accounts tied to those numbers last month month for allegedly stealing  Bitcoin worth over $1 million via a series of so-called ‘SIM-swapping’ heists — also known as ‘port-out scams.

Sim – Swap attacks operate by diverting incoming messages, thereby scammers can easily complete the text-based two-factor authentication checks that protect most sensitive accounts. Or if two-factor set up is not implemented in the first case,  they can use your phone number to trick services into providing passwords. CryptoTicker has also reported earlier on various sim-swapping scams.

Narvaez’s account on crypto exchange Bittrex reportedly saw an influx of 157 BTC between March and June 2018 alone. Charges on four counts of using personal identifying information without authorization; four counts of altering and damaging computer data with intent to defraud or obtain money, or other value; and grand theft of personal property of a value over $950,000, according to court documents were subsequently filed against him.

Prosecutors allege the 19 – year old splurged on luxury goods, including a $200,000 McLaren super car, these transactions were tracked through records obtained from Bitcoin payment provider BitPay. Krebs on Security, the cyber security firm stated that the investigators interviewed several alleged victims of Narvaez, one of whom claimed he was robbed to the tune of $150,000 in crypto after his SIM was hijacked. Narvaez’s impressive “credentials” in the SIM-swapping underworld were brought to light by VICE’s parallel investigators, with one source telling the magazine that he was considered “one of the best […] out there”.

Iceland’s Bitcoin miner heist

In February, the biggest heist in the history of Iceland was committed; powerful computing equipment worth millions were stolen in a “highly organized” Bitcoin mining heist. Three burglaries were reported to have taken place in December 2017 and a fourth in January. The burglars had allegedly taken off with 2 million krónur (around $180,000) worth of equipment — 600 graphics cards, 100 power supplies, 100 motherboards, 100 memory discs and 100 CPU processors — from a house in the municipality of Reykjanesbær. The burglars also allegedly nabbed a total of 600 computers from worth 200 million krónur from data centers across both Reykjanesbær and Borgarbyggð. The whereabouts of which remain untraced.

Police initially arrested eleven suspects reportedly — two of whom were ordered to remain in custody. Most of the stolen equipment were recovered soon save for the 600 computers remained elusive. Both suspects were reported in local media as being “uncooperative”. Then, on April 17, Sindri Thor Stefánsson, one of the detainees escaped at 1 a.m. from his custody in an “open” (low-security) prison, just a week before authorities were due to move forward with an indictment.

He vowed to return home “soon,” to challenge his two-and-a-half-month custody at the European Court of Human Rights. Days later, he was arrested in central Amsterdam. What allegedly gave him away was a photo published on Instagram with the hashtag #teamsindri.

Thai actor “Boom” arrested on set for alleged crypto fraud

27-year-old soap-opera star known as Jiratpisit “Boom” Jaravijit was arrested on money laundering charges to the tune of Bitcoin worth 797 million baht ($24.62 million) in the midst of filming at the Major Cineplex Ratchayothin in Bangkok’s Chatuchak district. The actor along with his siblings are alleged to have laundered the swindled money, after investigations revealed they had bought 14 plots of land worth 176 million baht ($5.44 million).

Prinya Jaravijit – Booms’ brother, is said to have been the ringleader of the scheme, setting off the heist after reportedly having received a tip-off from a Thai banker about the wealthy Finn. He has reportedly fled to South Korea, while Boom’s sister is said to have made contact with the CSD to turn herself in. Boom’s parents, Mr. Suwit and Ms. Lertchatkamol, are also under police watch after 90 million baht ($2.78 million) had been transferred to their accounts. Both have denied involvement. Arrest warrants for a further six suspects are sought by the CSD a total of 51 different bank accounts have been frozen in addition to the siblings’ land.

CryptoTicker advises all investors and blockchain enthusiasts to not invest more than they can afford to lose.

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Abishek Dharshan
Article By

Abishek Dharshan

Abishek is an Entrepreneur, Digital Nomad, Student, and ICO Marketing Manager currently based in Berlin & Champaign. He is actively involved in the Blockchain space and has worked in numerous projects in the Silicon Valley since 2017. His interests revolve around Finance, Consulting, and Blockchain Research.

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