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Crypto scheme cost investors $7m, SEC says

By Robert Davis

17:43, 3 December 2021

Securities and Exchange Commission sign at Washington headquarters
Securities and Exchange Commission sign and seal at building headquarters. Credit: Shutterstock

A cryptocurrency scheme set up by a Latvian citizen defrauded hundreds of retail investors of at least $7m (£5.3m), according to a complaint filed by the US Securities and Exchange Commission on 2 December in a New York federal court.

The complaint asserts that Ivars Auzins, who is also known as Ron Ramsey and Daniel Gaines, allegedly sold a fake digital coin known as Denaro, a purported “multi-currency debit card platform”. The complaint further alleges that Auzins told investors that Denaro was mined by a fictitious company called Innovamine.

Auzins sold investors on the promise of receiving daily pay-outs for whichever coin they mined. Instead, he misappropriated all the funds from Denaro’s initial coin offering (ICO), the complaint says.

“As we allege, Auzins was engaged in a brazen scheme to defraud retail investors under the guise of profitable digital asset opportunities,” Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit, said in a statement. "We will continue to detect and pursue those that seek to victimize investors in the digital asset space.”

Incoming crypto regulations

The complaint comes as US lawmakers are crafting regulations to adopt cryptocurrencies for mainstream use.

For example, lawmakers included a provision in President Joe Biden’s recently passed infrastructure bill that creates reporting requirements for digital assets. But the bill doesn’t take effect until January 2024.

Meanwhile, SEC chair Gary Gensler seems to be taking a more hawkish stance toward crypto than his predecessor.

During his testimony before the Investor Advisory Committee on 2 December, Gensler described the crypto markets as “rife with fraud, scams, and abuse in certain applications.”

ETH/USD

3,390.35 Price
+5.780% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00

BTC/USD

63,446.45 Price
+5.410% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

BCH/USD

389.75 Price
+4.840% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.50

DOGE/USD

0.12 Price
+6.330% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.0012872

“This leaves markets open to manipulation,” Gensler said. “This leaves investors vulnerable. If we don’t address these issues, I worry a lot of people will be hurt.”

Criminal investigation seizures

Cryptocurrency continues to make up the vast majority of the Internal Revenue Service’s (IRS) criminal investigation seizures, according to a report conducted by the agency’s criminal unit.

The IRS collected more than $3.5bn in cryptocurrency last fiscal year which accounts for 93% of the agency’s total seizures, the report says.

This total includes a seizure of more than $1bn in cryptocurrency from Ross Ulbricht, the founder of Silk Road, a dark web marketplace for illicit items.

IRS Criminal Investigation Unit Chief Jim Lee highlighted in an introductory note the “first ever” sentencing for a case of Bitcoin-related tax fraud. He added that the agency can seize billions more next year.

“Today’s criminals think we cannot catch them, but as evidenced by some of the great casework in this report, it is clear we can,” Lee wrote.

 

Read more: Binance calls for global crypto regulations

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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