By Marcus David
Director of Professional Services
MyChargeBack
One of the ways crypto scams and broker frauds attempt to conceal their activities is to funnel their ill-gotten gains through “mules” or accomplices who assist in their money laundering.
However, on more than one occasion, suspicious brokers have actually accused their customers of money laundering.
Who’s Scamming Who?
This is precisely what happened to a New York resident who reported to the Better Business Bureau that a broker called Loboex locked down their $600,000 investment. The reason Loboex gave for not allowing them to access their funds is that they suspected money laundering.
This is highly ironic. It’s not usually the individual investors who launder funds, but unregulated, fraudulent brokers. To make this accusation seems unusual or out of line. Unfortunately, it is one of many excuses fake crypto platforms and brokers use to avoid allowing customers to use their own accounts.
Crypto Scam’s Playbook: A Fake Accusation and a Ransomed Account
The problem began when the anonymous crypto scam victim, who we will call George, decided to invest his 401(k) funds in an unregulated crypto platform called Loboex. He had a large amount to invest – $600,000, and apparently trusted Loboex not only to keep his money safe but to provide a substantial return on his investment.
However, to George’s dismay, one day he noticed Loboex had suddenly locked down his account. At first, they said he hadn’t sufficiently verified his account. After sending another copy of his photo ID and bank account information as requested, George still couldn’t access his money.
Loboex then told George they suspected him of money laundering and, to unfreeze his account, he had to pay 30% of the total funds, or $180,000, within seven days. George provided proof of the fund sources – his 401(k) and references from family and friends – but this didn’t convince Loboex. That was probably because they never thought he was laundering money in the first place and were using the scandal as an excuse to get more money from him.
At that point, George filed a complaint and has been working on his fund recovery claim to reclaim his money.
How We Know the Crypto Scam Didn’t Really Suspect George of Money Laundering
It seems weird that a crypto exchange would suspect a customer of money laundering, but we come across this excuse often. It’s especially strange because George provided sufficient transparency showing where the funds came from and didn’t show a lot of unusual activity.
First, it’s safe to say that George doesn’t fit the profile of a money launderer. A person or an organization that launders money has funds coming in from hidden sources. They may leave an account alone for a period of time and then make sudden withdrawals. George was using the account for investing and wasn’t trying to withdraw or transfer huge amounts.
Also, George was an individual investor. Usually, money launderers have alternate identities or shell companies they funnel money through. There may be a third party involved without any stated reason and overly complex transactions. George definitely didn’t fit this profile. There was no reason anyone would have suspected him of money laundering.
Would a Crypto Scam Even Demand a Money Launderer Buy Them Off?
The icing on the cake, however, was Loboex asking George to pay $180,000 to unfreeze his account after being accused of committing a financial crime.
Wait a minute. So the Loboex says they suspect George is a money launderer, but it’s all good as long as he surrenders an additional $180,000? That’s demanding a bribe, pure and simple.
Obviously, at that point, George knew this was a crypto scam operation. But think of the many people who might have given in and forked over an additional $180,000! There’s nothing like creating a false accusation and then charging the victim money to make it go away.
That isn’t to say there isn’t reason to suspect money laundering. Banks are cautious when there are sudden transfers of large amounts of money. They may require an extra few days to approve a transaction while they check it out. Usually, when they confirm the transaction is legitimate, full account access is restored promptly.
However, it makes no sense to accuse someone of money laundering for absolutely no reason and yet accept what amounts to account ransom to re-release funds. This is yet another reason to suspect the broker may be involved in wrongdoing.
Can’t Access Your Funds? MyChargeBack Can Help!
If your account on a crypto platform or with a broker has been locked down for suspicious reasons, speak to MyChargeBack professionals about fund recovery. We have extensive knowledge and working relationships with regulators and more than 450 law enforcement agencies around the world, as well as solutions that can improve your prospects of getting your funds back.
