Blockchain & Cryptocurrency , Cryptocurrency Fraud , Fraud Management & Cybercrime

Cryptohack Roundup: Ray Eviscerates Bankman-Fried

Also: CryptoFX Ponzi Scheme, North Korean Hackers Gonna Hack
Cryptohack Roundup: Ray Eviscerates Bankman-Fried
Image: Shutterstock

Every week, Information Security Media Group rounds up cybersecurity incidents in digital assets. This week, FTX emergency CEO John Ray filleted previous CEO Sam Bankman-Fried, the SEC charged 17 members in a $300 million Ponzi scheme, Hong Kong warned against Bybit, reports said North Korea made half of its revenue from cyberattacks, and police rescued hundreds from a pig-butchering scam center.

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Sam Bankman-Fried's 'Life of Delusion'

FTX cleanup CEO John Ray III laid into former cryptocurrency wunderkind Sam Bankman-Fried, the man currently awaiting sentencing in U.S. federal court after a jury convicted him of essentially fraudulently running FTX into the ground.

"Mr. Bankman-Fried continues to live a life of delusion," Ray said in the victim impact statement he filed Wednesday. Ray said he was countering what he dubbed "material misstatements and omissions" in Bankman-Fried's statement asking that he spend no more than 6.5 years in prison. Bankman-Fried faces a potential maximum sentence of 110 years; federal prosecutors have asked for a sentence of between 40 and 50 years.

"The harm was vast. The remorse is nonexistent. Effective altruism, at least as lived by Samuel Bankman-Fried, was a lie," Ray said, referring to the collapse of the cryptocurrency trading platform and the ethos of "earning to give" that supposedly guided his career.

Bankman-Fried has argued that the actual harm to customers and creditors from FTX's collapse is zero, since they are expected to get their money back. But that overlooks all the hard work the company's bankruptcy caretakers have done to claw back misspent funds disbursed into Bahamas real estate and cryptocurrencies, Ray said. Making customers and creditors whole requires the U.S. federal government to defer more than $9 billion in fines and penalties. Bankman-Friedman's argument also ignores the fact that customers will receive only the value of their cryptocurrency at the moment of FTX's bankruptcy - not the current value, which is several hundreds times greater, Ray said.

"FTX was run for its very short existence by Mr. Bankman-Fried with hubris, arrogance, and a complete lack of respect for the basic norms of the law, which is all the more inexcusable given his privileged upbringing."

US SEC Charges 17 in $300 Million Ponzi Scheme

The U.S. Securities and Exchange Commission filed a lawsuit against 17 individuals allegedly involved in a $300 million Ponzi scheme orchestrated by Houston-based CryptoFX. The scheme targeted more than 40,000 predominantly Latino investors across the United States and two other undisclosed foreign countries, the agency said. CryptoFX claimed to engage in trading crypto assets and foreign exchange markets, but the 17 individuals associated with the company allegedly lured "thousands upon thousands" of investors by promising 15% to 100% returns, said Gurbir Grewal, director of the SEC's Division of Enforcement.

The 17 face charges of violating the antifraud, securities registration, and broker registration provisions of federal securities laws, as well as violating the whistleblower protection provisions. The SEC sought permanent injunctions, disgorgement with prejudgment interest, and civil penalties against each defendant. Two defendants, Mauricio Chavez and Giorgio Benvenuto, have already agreed to pay more than $68,000 combined in civil penalties, disgorgement and interest.

Hong Kong Regulator Issues Warning About Bybit

Hong Kong’s Securities and Futures Commission added crypto exchange Bybit to its list of suspicious crypto firms, cautioning the public that Bybit operates without a license. It also placed 11 solutions the company offers, including Web3 staking and wealth management, on its list of suspicious investment products.

North Korea Cyberattacks

About half of North Korea's currency revenue stems from cyberattacks, including those targeting cryptocurrency companies, South Korea's Yonhap news agency reported, citing a United Nations report. The attacks have led to losses of about $3 billion between 2017 and 2023, and North Korea used these funds to cover around 40% of the expenses related to developing weapons of mass destruction, the report says. It estimated the value based on an investigation of 58 suspected cyberattacks on crypto-linked firms over six years.

North Korea Resumes Use of Tornado Cash

North Korea's Lazarus hacking group appears to be once again using sanctioned crypto mixer Tornado Cash to launder $23 million of the $112.5 million stolen during the November attack on crypto exchange HTX, said blockchain research company Elliptic. The shift back to the decentralized mixer likely stems from the limited availability of large-scale mixers due to law enforcement actions against services such as Sinbad and Blender.

Hundreds Rescued From Pig-Butchering Scam Center

Law enforcement authorities rescued hundreds of people in the Philippines from a scam center that coerced them into assuming false identities as online lovers in pig-butchering scams, the BBC reported. The police set free 383 Filipinos, 202 Chinese and 73 other foreign nationals. The center, located approximately 100 kilometers north of Manila, operated under the guise of an online gambling company, the report said.

With reporting from Information Security Media Group's David Perera in Washington, D.C.


About the Author

Rashmi Ramesh

Rashmi Ramesh

Assistant Editor, Global News Desk, ISMG

Ramesh has seven years of experience writing and editing stories on finance, enterprise and consumer technology, and diversity and inclusion. She has previously worked at formerly News Corp-owned TechCircle, business daily The Economic Times and The New Indian Express.




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