Instructions:
Research and Analysis: Begin by thoroughly reviewing all the materials and media in the Securities Fraud folder and Digital Currency Folder provided. Gain a deep understanding of the various types of cryptocurrency schemes, including ICO scams, pump-and-dump schemes, market manipulation, Ponzi schemes, traditional theft, broker/dealer fraud, and unscrupulous promoters.
Case Selection: Choose a specific cryptocurrency scheme for your case study. You may consider real-life cases such as those involving FTX or the infamous “Crocodile of Wall Street” to analyze in-depth. Additionally, below are some other topic areas and cases that you may research and analyze.
Cryptocurrency Fraud:
BitConnect: BitConnect was a high-profile Ponzi scheme that promised exorbitant returns through its lending platform. Investors were encouraged to lend their Bitcoin in exchange for BitConnect tokens (BCC) with the promise of daily interest. However, the entire operation turned out to be fraudulent, leading to significant financial losses for investors.
Bitcoiin2GEN: This project, endorsed by actor Steven Seagal, was accused of being a pyramid scheme. It promised unrealistic returns and relied heavily on celebrity endorsements to attract unsuspecting investors.
Scam I.C.O.:
Forsage: Forsage was a decentralized matrix project built on the Ethereum blockchain. It operated as a pyramid scheme, promising high returns to participants who recruited others. Eventually, it faced regulatory scrutiny and was labeled a scam.
Pump-and-Dump:
Titanium Blockchain: In this case, the perpetrators artificially inflated the price of Titanium Blockchain’s token (BAR) through misleading statements and promotions. Once the price surged, they sold their holdings, leaving other investors with worthless tokens.
Market Manipulation:
Avraham Eisenberg, a 27-year-old U.S. citizen, has been charged by the Securities and Exchange Commission (SEC) for orchestrating an attack on the crypto asset trading platform Mango Markets. Eisenberg manipulated the MNGO token, a governance token offered and sold as a security, to fraudulently obtain approximately $116 million worth of crypto assets. His actions involved artificially inflating the token’s price and volume, leaving the platform at a deficit when the security price returned to its pre-manipulation level. Eisenberg is also facing parallel criminal and civil charges brought by the Department of Justice and the Commodities Futures Trading Commission (CFTC), respectively. Market manipulation, regardless of the type of security involved, remains a priority for regulatory authorities.
Ponzi Scheme:
My Big Coin: My Big Coin was marketed as a legitimate cryptocurrency but turned out to be a Ponzi scheme. The operators promised high returns and used new investors’ funds to pay off earlier investors, creating a cycle of deception.
Traditional Theft:
EmpiresX: EmpiresX claimed to be a cryptocurrency exchange but disappeared with investors’ funds. The operators behind it engaged in outright theft, leaving investors with no recourse.
Broker/Dealer Fraud:
Circle Society: Circle Society, run by a convicted felon, promised guaranteed returns through cryptocurrency trading. However, it was a fraudulent operation, and the operator misappropriated investors’ funds.
Unscrupulous Promoters:
Baller Ape Club: This project used celebrity endorsements and social media hype to attract investors. However, it lacked a viable product or utility, and investors lost money when the price collapsed.
Case Study Memorandum: Write a 4–5-page memorandum in APA format detailing the selected case. Your memorandum should include the following sections:
**Introduction:** Provide background information on the cryptocurrency scheme and its context within the broader cryptocurrency landscape.
**Scheme Descriiption:** Describe the nature of the scheme, including how it operates, targets victims, and perpetrates fraudulent activities.
**Detection Methods:** Analyze the methods used to discover the fraudulent scheme. Discuss the investigative techniques, technological tools, or regulatory measures that aided in its detection.
**Outcome:** Present the outcome of the case, including legal actions taken, penalties imposed, and any restitution provided to victims.
**Recommendations:** Propose recommendations to enhance the detection and deterrence of similar cryptocurrency fraud schemes in the future. Consider regulatory reforms, technological solutions, educational initiatives, or industry best practices.
Formatting: Follow the guidelines outlined in the document titled “How to Write a Memo” for structuring your memorandum in APA format.
**Submission:**
– Prepare your Case Study Memorandum in a PDF format.
– Submit your completed assignment by clicking on Case Study #2 in the Assignment folder and uploading it for evaluation.