Security & Fraud

Scammers Launch Fake ICO; Steal $2M From Investors

Scammers were able to steal $2 million or more in cryptocurrency after launching a fake initial coin offering, reported CNBC.

According to CNBC, the scammers used a fake profile on LinkedIn and stole pictures from another Instagram account to create a fake person — and were then able to get more than 1,000 investors to invest in Giza, its so-called ICO project. Investors who fell victim to the ICO scam told CNBC that they thought they were investing in a real project until red flags started to arise — such as the fact that the company had a falling out with its only supplier, and a lack of communications from the founders of the startup. Investors were also unable to get back lost funds, leading to the revelation that they had been scammed.

Giza claimed to be creating a device that was very secure and would let people store their cryptocurrency tokens. The ICO launched in January and stayed open for several weeks as investors purchased tokens to the tune of $10,000 and $5,000, in some cases. At the start of February, CNBC said Giza had raised and had more than 2,100 etherum coins, which were valued at around $2.4 million. All of it but $16 worth are now missing, noted CNBC.

In 2017 Giza had hooked up with Third Pin, a Russian company that makes devices. Third Pin’s Chief Executive Ivan Larionov said in a post on a bitcoin forum in late January that his firm is no longer working with Giza. The CEO confirmed to CNBC that it was his post on the bitcoin forum. He said he was contacted by Giza in late December and was given a design for a device that Giza wanted to make, but no technical requirements. The firm quoted Giza $1 million for the device and even signed a contract. When questions arose from the components supplier that Giza couldn’t answer, warning bells went off in Larionov’s head. When he was asked by Giza to set up operations outside of Russia, which has strict cryptocurrency rules, Larionov got more suspicious. And when the cost increased to $1.5 million to make the device and Giza balked at making installment payments, Larionov said he severed ties with the so-called startup, reported CNBC. By the middle of February, the digital wallet address where investors were told to send the money started registering big outflows of ethereum. That went on for two weeks, with the last happening on March 2 — most of the money was sent to several wallet addresses. With investors not able to get back their money, several told CNBC they have reached out to the law enforcement in the U.K.


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