The United States Department of Justice (DOJ) has filed a complaint against an alleged cryptocurrency Ponzi scheme to forfeit over $7 million in Bitcoin and Tether.
The administrator of the scam called the “Banana Fund” has used some of the raised funds for personal benefits, including purchasing a house.
DOJ Against Banana Fund Ponzi Scheme
According to the official complaint, the administrator of the alleged scam marketed the company to potential investors as a platform for startups to post business proposals and receive crowdfunding in multiple cryptocurrencies. The investors sent different amounts of digital assets and supposedly received shares accordingly. However, the Banana Fund never became operational.
The unnamed mastermind of the project announced publicly that the total amount raised had reached 557 bitcoins and 1.73 million Tether (USDT). In January 2018, however, he informed all investors that the Fund had failed. He promised to refund all contributions and claimed that he was in the process of transferring all bitcoins to stablecoins (such as Tether) to facilitate the refunding stage.
Yet, the complaint asserts that the administrator withdrew about 100 bitcoins from the victims’ investments and used the funds to buy a house for his personal use. Ultimately, he never actually proceeded with refunding the investors. After further suspicions grew, they reached out to the United States Secret Service (USSS) to launch an investigation.
USSS Seizes 482 BTC And 1.7M USDT
The complaint also notes that the Banana Fund Ponzi scheme was active from December 2016 to March 2018. When receiving numerous signals that the administrator of the fraudulent project may indeed be deceiving investors, the USSS began tracing his alleged operations and fund distributions.
The agency managed to locate one particular cryptocurrency account containing 482 bitcoins and 1,721,868 USDT (Tether). The bitcoins are worth nearly 5.5 million, and since one USDT equals one USD, the total amount is about $7.2 million at today’s prices.
Upon locating the digital assets, the USSS “executed a seizure warrant on those funds and commenced this action [the complaint] to begin returning these funds to the administrator’s victims.”
Although it’s unknown how long the investigation was ongoing, the Special Agent in Charge of the USSS’s San Francisco Field Office Thomas Edwards said that the “swift actions” taken by his agency have “prevented the subject from liquidating the remaining illegally obtained funds for personal gains.”
He added that while cybercriminals rely on sophisticated techniques to dupe victims to invest in suspicious operations, this particular case is a valid example of the strength of the US law enforcement agencies, the US Attorney’s Office, and the DOJ’s Computer Crime and Intellectual Property Section.