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Facebook Sues Bangkok 'LeadCloak' Software Developer Over Alleged Crypto Scams and Bogus COVID-19 Data

Facebook Inc has taken legal action against a Bangkok-based Indian man for developing and selling software that helps bad actors to bypass Facebook’s automated advertising review systems and deliver prohibited ads to users.

Software Cloaked Bad Actors

Facebook announced that they were taking action against Basant Gajjar for allegedly selling his “LeadCloak software” to bad actors who have been hiding the true contents of ads and delivering deceptive information involving crypto investment scams and bogus data about COVID-19. The malicious cloaking software allowed users to present deceptive ads on the surface newsfeed of the Facebook platform and prevented the social media giant’s review process from identifying the fradulent or improper ads.

Advertisers used the “LeadCloak software” to conceal websites and promote links for cryptocurrency investment scams, deceptive diet pills, pharmaceuticals, fake news, and even misinformation regarding the COVID-19 outbreak through the “cloaking” technique. Such shady ads showed on both Instagram and Facebook.

Gajjar’s unregistered business is based in California. The business has been providing cloaking services since 2016, targeting other technology companies, including WordPress, Oath, Shopify Inc, and Alphabet Inc’s Google.

With the lawsuit filed in the US district court in California, Facebook also intends to uncover the identities of Gajjar’s customers and take further legal action against them. While Facebook is currently suing one individual, it appears that the firm is attempting to make an example of ad spoofers who have attempted to manipulate the market.

Facebook Relaxed Blockchain And Crypto Ads

Facebook lifted its ban on blockchain and crypto ads in May 2019. But most of them still have to be pre-approved by moderators before they can appear on the platform. The $491 billion firm has been trying to deal with crypto scams for years. Scammers are known to use fake pages and call-to-actions as distraction tactics to trick users into giving sensitive data such as their credit card information.

Last year, Dutch billionaire John de Mol won his lawsuit against Facebook after the social media giant failed to take down fake cryptocurrency ads, which used his name for promotion. Recently, billionaire Wissam al Mana filed a lawsuit against the social media company, demanding the firm to identify individuals behind ads selling Bitcoin scams using his image. However, Facebook announced that it remains committed to using filter technologies to get rid of fake ads linked to cryptocurrency scams carrying images of prominent personalities.

Image via Shutterstock

Australia Records Over $14 Million Losses to Crypto Scams in 2019

The more the world advances in technology, so does the increase of scams. The debut of Bitcoin in 2009 and the eventual emergence of altcoins has not toned down the rate of financial scams, rather it has aggravated it. A recent study by Scamwatch, the designated Australian website for reporting scams shows a significant growth in cryptocurrency scams in Australia.

While the report claims that the actual losses are grossly underreported, their findings show a total sum of $634 million AUD with cryptocurrency scams amounting to $21 million AUD ($14 million).

Facts Behind the Figures

The cryptocurrency-related scams usually take different forms. As Scamwatch reported, about 200 scam reports were filed from an international Ponzi scheme that hit the Australian shores. The reports were about USI Tech with losses of $3.3 million, mostly involving Bitcoin. The USI tech Ponzi scheme can be tagged as one of the biggest cryptocurrency scams in the world.

The report highlights that the main victims of cryptocurrency scams are people who are keen on cryptocurrency investments. The victims “..are offered an opportunity to make high returns quickly. They trade in cryptocurrency and often communicate with the scammers on modern platforms such as Discord and Telegram. Victims will find the trading platform suddenly shuts down, the scammers can’t be contacted and their money disappears” the report read.

Some of the scam reports obtained were also presumably endorsed by “fake celebrities” to add legitimacy to false investment claims.

Will Crypto-Related Scams Ever Subside?

The anonymous nature of cryptocurrencies has in a subtle way helped proliferate cryptocurrency-related scams. The Australian scam scenario is not limited to the country as cryptocurrency-related scams are allegedly reported in Thailand and all over the world. Blockchain and cryptocurrency enthusiasts thus wonder if there is a solution to the incessant growth of cryptocurrency scams.

The giant strides of blockchain technology cannot be masked by the acts of few people. While efforts are focused on removing blockchain-related fraud, blockchain is geared to thrive on the wider adoption and integration with its numerous positive use cases.

US Senator Demands Answers from Twitter Over Massive Bitcoin Hack Incident

US senator Josh Hawley has urged Twitter to cooperate with federal agencies and take necessary measures to secure the social media site before the cyber hacking accounts of celebrities, politicians, technology moguls, and major firms in an apparent Bitcoin scam expands further.

In a letter addressed to Twitter, Hawley stated that the social media giant should collaborate with the Justice Department and FBI after hackers took over the accounts of billionaires, democratic politicians, and celebrities, including rapper Kanye West, businessman Bill Gates, former vice president Joe Biden, former president Barrack Obama, Jeff Bezos, Elon Musk, including accounts of tech companies such as Uber and Apple.

Hawley sent a number of questions asking Twitter regarding an explanation of the incident and what security measures the company undertakes to prevent system-level hacks from breaching its userbase.

Bitcoin Scam Targeted Prominent Twitter Accounts

High-profile Twitter accounts were targeted for a widespread hacking attack to offer fake Bitcoin deals. The incident was one of the most serious security breaches in a social media site. Accounts of rapper Kanye West, Microsoft co-founder Bill Gates, former president Barrack Obama, and both Apple and Uber posted similar tweets that instructed people to send cryptocurrency to the same Bitcoin address. Suspected Bitcoin scammers had control several of the accounts for more than two hours during the late afternoon.

The widespread nature of such an attack suggested unusual broad access to Twitter’s internal accounts. It was unclear how the attack originated or why the incident went for two hours. However, last night, Twitter support staff confirmed that the cyberattack was caused by “a coordinated social engineering attack by people who successfully targeted some of our employees with access to internal systems and tools.”

Twitter clarified that the hackers used that access to take control of several highly-visible and verified accounts and posted tweets about Bitcoin deals. The company said that it is looking into what other malicious activities that hackers may have conducted or information they may have accessed. Twitter finally stated that they would share more information once they get to the bottom of the matter.

Tackling DeFi Scams: Making Pre-sale Ecosystems Safer

A daunting task facing decentralized finance (DeFi) project owners is the need to raise funds for their new projects, particularly as a spate of recent “rug pull” scams have begun to negatively affect the DeFi and decentralized exchange (DEX) ecosystem and reputation.

During the ICO era, the average period that a business person had to raise funds was about 3-6 months, and it would cost the founder up to $1 million just for advertising and marketing. However, a founder would need only a few hours to list a new project on a DeFi platform and initiate a private sale announcement. DEFI is quite effective as it does not require a marketing budget to launch, the barrier of entry is low, and has no waiting time.

Anyone can list a project on DeFi even if it is an unfinished one and can invite just about anyone to participate in the raising of funds or project development. In this way, project owners need to conduct a private sale where they would list their project on a DeFi platform to gain access to the masses and contact the community.

Liquidity Protocols

However, these project founders require a solution to transform the DEX presale landscape. Liquidity protocols such as Liquidity Dividends Protocol (LID) offer presale licensing and Initial Liquidity Offering (ILO) where new projects or tokens deposit and lock liquidity are raised in a presale event. ILOs have become an important popular approach to rapidly scale and develop new tech. However, they have also attracted high cases of “rug pull” scams.

As new investors and several veterans are aware, “rug pull” scams have negatively affected the reputation of the DEFI/DEX space in recent times. But the good news is that the LID Protocol is among the leading liquidity protocols that effectively solve such problems by offering presales that trustlessly locks liquidity in DEXs, like Uniswap.

Investors need such liquidity protocols because most of the time they don’t have the time or the technical capacity to verify every and each presale contract. There is, therefore, a need for such trusted systems to streamline the presale process and improve their presale success.

First, project founders need to secure an ILO (Initial LID offering) so that they can inform the DEFI community that they are commencing a token presale that would be available to the public and then invite the community to participate in the upcoming sale.

Rug Pull Scam Problem

Decentralized exchange services such as Uniswap offers efficient and cheap ways to fund new projects as they do not impose bogus conditions, and there are no unnecessary charges.

However, such innovations always have some drawbacks. For example, illicit entities and malicious actors can take advantage of this very nature of DeFi liquidity models to scam innocent investors. Such kinds of scams are popularly identified as a “Rug Pull,” which is one of the key concerns of investors and project owners as it threatens to stifle the growth of the DeFi landscape.

A recent SushiSwap scandal is a good example of how the “rug pull” problem adversely impacted DeFi. Chef Nomi, the anonymous SushiSwap creator liquidated his share of the Sushi/ETH worth $13 million in the liquidity pool without consulting the community. The single incident caused the value of the token to decline by more than 50%. Irrational decisions and fraudulent motives are the cause of such incidents and they are a threat to DeFi markets and investors.

Media sources have reported various “rug pull” cases. For example, scammers could place liquidity into Uniswap but pull it out from unsuspecting investors and traders at some future time. Some “rug pull” scams happen as quickly as 30 minutes after the launch of a token in the DeFi landscape. Others occur over a period of several days or weeks as liquidity is quietly reduced. It is a kind of scam where hackers set up liquidity in the pool but end up pulling it after some time, thus leaving unsuspecting holders with severe losses.

As such issues are common across the DEFI system, a few crypto projects such as Liquidity Dividends Protocols (LID) have opted to offer a solution to solve the “rug pull” scams and other related liquidity problems on Uniswap and other DEX platforms to ensure that the market retains its legitimacy.

LID Protocol as A Solution to Liquidity Problems

The LID Protocol uses an enhanced locked liquidity protocol to remove losses caused by “rug pull” scams on DEFI platforms. As investors raise funds on the LID protocol, the funds are locked and only released after a certain period of time. Moreover, investors and project owners are thoroughly vetted to ensure that they have something innovative and are likely to continue working in the future.

Solving the “Rug Pull” Problem

First, the LID Protocol offers proof of liquidity that makes it impossible for scammers to pull out their liquidity as they are vested for a period of time to enhance innovation and development on the platform. This is ensured by locking the liquidity of tokens, which are pre-launched on their platform, for a particular timeframe to ensure that the DEFI ecosystem maintains a transparent and trustless mode of operation.

In other words, the protocol helps to ensure that no one – not even the owners, is allowed to prematurely withdraw money deposited in liquidity pools. This implies that the project founders cannot pull the liquidity from their project in a manner that scammers use to con investors out of their tokens or money.

Solving Cascading Collapse

LID protocol also prevents liquidity problems on Uniswap DEX by offering incentives like tax incentives and token payments to users who participate in actions which are beneficial to the community at large. Investors who use their staked tokens to participate in protocol governance are incentivized to increase their chances of remaining holders of the token, thus saving liquidity even during cascading failures. Of course, the protocol provides users with a highly safe and trusted platform to conduct frictionless financial transactions.

Crypto Scams Have Swindled At Least $1B From Nearly 50,000 People Since 2021 – FTC

Despite crypto penetrating the masses from Bitcoin ATMs to Super Bowl ads, scams in this sector have been going through the roof because more than $1 billion has been lost since 2021, according to a study by the Federal Trade Commission (FTC).

Per the report:

“Since the start of 2021, more than 46,000 people have reported losing over $1 billion in crypto to scams – that’s about one out of every four dollars reported lost, more than any other payment method.”

Some of the top cryptocurrencies preferred by scammers include Bitcoin (BTC) at 70%, Tether (USDT) at 10%, and Ethereum (ETH) at 9%.

The report acknowledged that losses from crypto scams have increased by nearly 60 times from 2018 to 2021 based on factors like people being inconversant with how cryptocurrency works and crypto transfers not having a reversal option.

Source:FederalTradeCommission (FTC)

According to the study, people who shared their stories noted that the scams were a perfect storm because they were wooed with false promises of getting easy money.

Social media has been fueling scams in the cryptocurrency sector, the FTC acknowledged:

“Nearly half the people who reported losing crypto to a scam since 2021 said it started with an ad, post, or message on a social media platform.”

The FTC added:

“The top platforms identified in these reports were Instagram (32%), Facebook (26%), WhatsApp (9%), and Telegram (7%).”

Investment scams took the lion’s share at $575 million, followed by romance-related at $185 million. The FTC pointed out:

“These keyboard Casanovas reportedly dazzle people with their supposed wealth and sophistication. Before long, they casually offer tips on getting started with crypto investing and help with making investments.”

Source:FederalTradeCommission (FTC)

In July 2020, Silviu Catalin Balaci, a 35-year-old Romanian programmer, confessed to orchestrating the BitClub Network, a crypto mining Ponzi scheme that siphoned off investors’ funds worth $722 million.

Crypto Scam Revenue Has Dropped by 65% in 2022: Chainalysis

Illicit crypto volumes have been diminishing year-over-year, with scams making the largest drop, according to a report by blockchain analytic firm Chainalysis.

Chainalysis pointed out:

“Total scam revenue for 2022 currently sits at $1.6 billion, 65% lower than where it was through the end of July in 2021, and this decline appears linked to declining prices across different currencies.”

Source: Chainalysis

The blockchain analytic firm pointed out that the drop in scam revenue might be linked to Bitcoin’s bearish momentum, which has seen the leading cryptocurrency decline by at least 64% from its all-time high (ATH) price of $69K recorded in November last year.

Chainalysis added:

“Since January 2022, scam revenue has fallen more or less in line with Bitcoin pricing. And as we see on the chart below, it’s not just scam revenue falling — the cumulative number of individual transfers to scams so far in 2022 is the lowest it’s been in the past four years.”

Source: Chainalysis

Therefore, the report highlighted that people falling for crypto scams have nosedived. The other area that has seen illicit volume drop is the darknet market.

Nevertheless, the tale is different regarding hacking and stolen funds because this is an illegal crypto activity area that has been going through the roof. Chainalysis pointed out:

“No area of cryptocurrency-based crime is bucking the 2022 trend of declining revenue like stolen funds.”

Source:Chainalysis

The report added:

“Through July 2022, $1.9 billion worth of cryptocurrency has been stolen in hacks of services, compared to just under $1.2 billion at the same point in 2021.”

Meanwhile, Alexander Vinnik, a Russian national accused of running an illegal crypto exchange BTC-e was recently extradited to the United States to face fraud charges.

Following a 21-count superseding indictment charge in January 2017, Vinnik, with his co-conspirators, administered, operated and owned BTC-e, a significant online money laundering and cybercrime entity that permitted Bitcoin trading among users.

Australian Scammers Prefer Crypto than Credit Cards: Report

Scammers in Australia notably prefer payments in digital currencies more than credit cards, as the anonymity in offers gives them some level of protection.

According to a report from The Sydney Morning Herald, a total loss of $84 million was reported to the ScamWatch website in 2021, a figure that is reasonably higher than the $27 million reported in 2020 and $19 million in 2019.

Per the report, the tilt towards crypto payments by scammers targeting Australian residents is growing by the day, and the losses may be significantly higher than the figure quoted. This is likely because victims of this cybercrime do not report the events, and those who do often report it to other government-backed websites other than ScamWatch.

Considering the year-on-year growth in crypto scams in Australia, the government has been making targeted efforts to tighten its scrutiny on cryptocurrency exchanges operating in the country. To license exchanges, there will be a requirement to get a good system to prevent Anti-Money Laundering (AML) activities.

“In March 2022, the Australian government began consultation on approaches for licensing digital currency exchanges and custody requirements for crypto assets,” said Delia Rickard, ACCC deputy chair “While ongoing, I am hopeful that this and other regulatory measures will slow the growth of cryptocurrency scams.”

Globally, experts have advocated for the digital currency ecosystem players to accept thoughtful regulations. In the case of Australia, the payments industry association, AusPayNet, wants every player in the financial services industry to be regulated in the same way.

Andy White, the Chief Executive Officer of AusPayNet, says reputable exchanges want to be regulated and that a uniform regulation “will help every player in the ecosystem – the consumer can have more trust of dealing with a reputable exchange, as it is licensed, and banks will be able to better assess the exchanges.”

FBI Warns Crypto Ecosystem Investors of DeFi Scams

The United States Federal Bureau of Investigation (FBI) has issued a public warning to investors, especially those fond of the cryptocurrency ecosystem to be aware of scams specifically targeting the Decentralized Finance (DeFi) ecosystem.

According to the government watchdog, cybercriminals are known to now deliberately exploit the vulnerabilities in the smart contracts of DeFi protocols to cart away with users’ hard-earned money.

The FBI cited data from Chainalysis which revealed that as much as $1.3 billion was lost to scams in the crypto space in the first quarter of this year with 97% of the targeted platforms being linked to DeFi.

The FBI revealed that there are three major attack models which include initiating a flash loan that can trigger an exploit in the DeFi platform’s smart contracts, exploiting a signature verification vulnerability in the DeFi platform’s token bridge, and manipulating cryptocurrency price pairs by exploiting a series of vulnerabilities, including the DeFi platform’s use of a single price oracle.

Having noted the problem and how susceptible investors could be if they give in to the tricks of the fraudsters, the FBI is recommending that investors should take their time to research platforms, and business models before committing their funds.

With most DeFi protocols highly susceptible to scams, the FBI is urging investors who would want to pitch tents with these platforms to at least ensure that they have conducted a thorough audit from an independent blockchain security firm. Other red flags that the FBI advised to watch out for include investment offerings that come with limited time frames and those with links to crowdsourced solutions.

The DeFi ecosystem has recorded such exploits that range from direct protocol breaches to those perpetrated through phishing links. Either way, most DeFi exploits are a function of the gullibility of the investor, and this has fueled calls for more robust crypto education across the board.

XRP staking scam

The cryptocurrency community has raised flags about a new fraud targeting XRP (XRP) investors via a phoney staking scheme.

Online fraudsters are mimicking big cryptocurrency organisations like Ripple and Binance by constructing phoney websites and email imposters promising to provide staking services for XRP.

One of these websites has a blog post with the headline “XRP staking slated to debut January 2023 for retail customers,” in which users are invited to “stake” their XRP in exchange for returns on investment (ROI) that are implausibly high and range from 12 to 27 percent.

By claiming that a better return on investment (ROI) would be given to just the first 10,000 accounts, the fraudulent scam makes an effort to hasten the decision-making process of XRP investors.

The phoney website offers an accurate clone of Ripple’s website, ripple.com, by reproducing the actual website’s style and typefaces and connecting to some of Ripple’s earlier blog articles.

The impersonators also sought to add more credibility to their postings by including information on the significance of self-custody utilising major hardware wallets, such as Ledger or Trezor. This was done in an effort to make the posts seem more legitimate.

The fraudulent website has a large number of mirror domains, many of which finish in “.org.th” or “.com.ve,” and it is designed to defraud users of XRP from all over the globe.

Imposter letters purporting to be from Binance and claiming a return on investment (ROI) of up to 31% can be seen accompanying the fraudulent XRP staking website.

On January 21, a member of the industry who goes by the handle RipplePandaXRP came to Twitter to alert the XRP community of a fraud. ” Do not transmit your XRP to an unknown address, and always verify the address to determine if it is a legitimate site,” RipplePandaXRP said in a post on its website.

Having said that, the genuine Binance exchange does, in fact, include decentralised finance (DeFi) staking for XRP into its Binance Earn programme.

On the other hand, the XRP DeFi staking scheme that Binance offers only enables users to make up to 1.4% annually.

It is essential to keep in mind that XRP does not employ a proof-of-stake (PoS) method like other prominent proof-of-stake cryptocurrencies, such as Ether. As a result, XRP cannot be staked (ETH).

Instead, the processing of XRP transactions is dependent on a network of “unique nodes” that reach a consensus over which transactions may be executed inside the network.

Kevin Rose, co-founder of Moonbirds, falls victim to phishing attack

Kevin Rose, who is also the co-founder of the nonfungible token (NFT) collection Moonbirds, has been a victim of a phishing scam, which has resulted in the loss of nonfungible tokens with a combined value of over $1.1 million that were individually owned by Kevin Rose. Moonbirds was a collection of nonfungible tokens that were named after birds.

On January 25, the news was made to the 1.6 million people who follow the person who created the NFT and a co-founder of PROOF on Twitter. He advised those people to refrain from collecting any Squiggles NFTs until his team was able to have them marked as stolen until his team could do so. Until they could do so, he urged them to wait to acquire any Squiggles NFTs.

Following that, sometime in the neighbourhood of two hours later, he revealed it in a following tweet.

It is believed that Rose’s non-financial assets were depleted when he authorised a bogus signature that transferred a significant amount of his non-financial assets to the exploiter. This theory is based on the fact that Rose may have been the victim of financial exploitation. This was the occurrence that resulted in Rose’s NFTs being used up completely. Because of this, Rose’s natural defence mechanisms (NFTs) were used to their utmost potential.

An independent investigation that was conducted by Arkham discovered that the exploiter stole at least one Autoglyph, which has a floor price of 345 Ether, at least nine OnChainMonkey items, each of which is worth at least 7.2 ether, at least 25 Art Blocks, also known as Chromie Squiggles, which are each worth at least a total of 332.5 ETH, and at least one OnChainMonkey item that is worth at least a total of 332.5 ETH

It is anticipated that a total of at least 684.7 ETH, which is equivalent to around $1.1 million, was successfully obtained.