Category: Cryptocurrency Frauds

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Lawyers follow blockchain developments with great interest. The underlying blockchain technology will lead to a revolution on several fronts.

From the point of view of many lawyers, blockchain will also change the legal world. Lawyers enlisted with LA Century Law (https://lacenturylaw.com) recognize these changes and thus take time to understand blockchain as a whole. Lawyers often receive questions related to bitcoin, ICO, and the AFM. Thus, it is their duty to review these questions and provide an answer based on their legality.

It is striking that the media often states that it will mainly concern virtual money (bitcoin or ethereum, or other altcoins), but little is written about the underlying technology, blockchain. Here too, the financial supervisor keeps an eye on developments and (fortunately) recognizes the possibilities.

What is Blockchain?

Blockchain is the structure behind (among other things) the bitcoin network (and now various blockchain networks). It’s a tricky subject but there’s a simple explanation. The blockchain consists of an infrastructure of transactions, which are validated by the network. These transactions are performed within a blockchain network, a decentralized database in which all transactions are registered and validated. The reliability of the transactions is continuously validated by the network itself.

Nodes (computers within a blockchain network) verify all information through algorithmic calculations and then agree on it. When all nodes together have reached consensus, then they agree to the transaction and it is added to the chain of the blockchain as a valid block. Sounds complicated, but is actually simple as it is.

Read also: The Possibility of Blockchain in Wealth Management

Blockchain: the new internet or is it just hype?

Blockchain is often difficult to handle because blockchain technology is not yet widely applied, but blockchain technology will be widely implemented in the next ten years. Sometimes a comparison is made with a ledger. Lawyers also use a third party (trusted third parties, such as a bank, notary, a broker) for a transaction, but that can change with blockchain technology.

Blockchain is a common, digital administration, in which the blockchain itself ensures the validation of every transaction. The transaction is presented online as a block and that block contains all the information about the transaction. This block is then checked by miners. The miners receive a small compensation for the work they provide. If the miners in the network decide that it is a valid transaction, the block is approved and added to the blockchain. That can be a transaction in money, but it doesn’t have to be.

The possibilities of blockchain are endless. Every transaction can take place via a blockchain; This includes providing certain services, wages, administration, everywhere that currently requires an intermediary, but broad applications can also be applied (controlling drones, robots, etc.).

The advantage of blockchain technology is that the network ensures that no fraudulent transactions can take place. These simply do not pass the control of the blockchain and the transaction does not take place. Moreover, the great advantage of a blockchain is that the transparent administration can always be found in detail. All transactions with data, balances, and properties can be found on the blockchain. That is why the term “single source of truth ” is used.

Blockchain lawyer about risks

At the moment we are still on the eve of the implementation of blockchain technology and it is regrettable that it is also being misused, but lawyers are convinced that the technology will be further evaluated and the world will have changed in ten years’ time. When applying Blockchain technology, privacy (the forthcoming European Regulation on personal data), the financial supervisor (the AFM and the DNB), errors in coding, etc. must also be considered.

 

While the U.S. SEC sees the rise in cryptocurrency a good sign, the FBI sees the increase as a sign of more cryptocurrency frauds taking place.

Only recently, Ms. Hester Peirce, the current commissioner of the U.S. Securities and Exchange Commission (SEC), was pleased to note that many investors are carrying out investment strategies by diversifying portfolios; including investing in cryptocurrency markets.

The SEC Commissioner, who has oft been described as crypto-friendly, said the COVID-19 crisis, albeit disrupting all industries, has underscored the significance of conducting work and business using virtual spaces. That being the case, many have also shown interest in diversifying their investment portfolio by way of the crypto space.

However, the Federal Bureau of Investigation (FBI) is seeing a different side when it comes to increased cryptocurrency demand. The FBI is wary that with the increase in demand for cryptocurrency, there will be a corollary increase in cryptocurrency scams and fraud schemes.

New Modi Operandi Employed by Crypto Scammers

The FBI gives advice about new cryptocurrency fraud schemes by providing details on how scammers and fraudsters carry out their crypto-malfeasances.

One of the most common is by sending out emails containing threats of blackmails. The modus operandi is to demand crypto payment in exchange for a piece of information that could embarrass you, your family or your business. Currently during the COVID-19 health crisis, blackmails come with threats of infecting you and everyone close to you, with COVID-19, regardless of whether the blackmail threat is founded on truth or conjectures. :

Some work-from-home (WFH) employees have been duped into believing that a caller is his or her employer, who is making a request to deposit crypto funds to a nonprofit organization as donation. The request is made on the pretext that the employer does not have cryptocurrency but would like to make a donation to an organization that is accepting only crypto money. The WFH employee will be given assurance that the employer will reimburse him or her as soon as the crypto donation has been confirmed.

Luring customers to buy non-existent treatments or or a piece of equipment that comes with guarantee to protect buyers from coronavirus infection. However, the seller accepts only cryptocurrency payments being a more secure form payment during the COVID-19 pandemic.

These are only some examples of cryptocurrency frauds that have surfaced ever since countries have put citizens under national lockdown due to the COVID-19 pandemic.

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