Binance, a popular cryptocurrency exchange, is under investigation by Pakistan regulators over a multi-million-dollar Ponzi scheme, Dawn reported Friday (Jan. 7).
The Federal Investigation Agency’s (FIA) Cyber Crime Wing has issued a notice to the company, according to the report.
Many online investment frauds are operating in Pakistan, where investors are promised a high rate of return if they signed up additional clients, the report stated.
“These schemes benefit old clients at the cost of new clients and ultimately disappear when they have made [a] substantial capital base worth billions of rupees,” the FIA said, per the report.
In addition, Pakistan residents contacted the agency Dec. 20 to say at least 11 mobile apps had stopped working and had defrauded them of billions of rupees, according to the report.
“The modus operandi of these applications was to ask people for registration at Binance Crypto Exchange … the next step was to transfer money from the Binance Wallet to the account of that particular application,” the FIA said, per the report.
Once a considerable amount of capital was raised, these apps crashed, stealing millions of dollars from investors through the so-called referral bonus process, the report stated.
“The reported range of investment per person was from $100 to $80,000 with an estimated average of $2,000 per person thus making estimated scam stand at nearly $100 million,” the FIA said, per the report.
The FIA said steps must be taken to uncover the scam and Binance must adopt a way to help Pakistan track financial crimes, according to the report.
Meanwhile, the United Arab Emirates is cracking down on promoters of online cryptocurrency scams. Cybercriminals now face five years in prison and a fine of up to more than $270,000 under wide-ranging legal reforms.
In other news, Coinbase Global, an American company that operates a cryptocurrency exchange platform, has a history of cooperating with law enforcement agencies and regulators in the U.S. and abroad, part of its strategy of being known as a compliant exchange.