More victims of bogus crypto investor scams speak to The Register • The Register
Exclusive When Ahad Shams described on Twitter how his company was scammed out of $4 million in cryptocurrency after a face-to-face meeting, Chris Hunter immediately recognized what was going on.
Just weeks ago, Hunter fell victim to the same scam apparently run by the same group. After contacting Shams after reading his story The registerHunter quickly learned that there are more victims out there.
“We are by no means the only people this has happened to,” Hunter shared Reg. “It seems to date back to 2018, but it takes slightly different forms each time.”
Shams, co-founder of the Web3 metaverse game engine Webaverse, wrote that while he was rounding up venture capital for his startup, he was approached by someone in November 2022 who represented a wannabe investor. After a few weeks of negotiations, he flew to Rome to meet the so-called investors in a hotel lobby.
The scammers convinced him to move $4 million in crypto to a Trust Wallet account he created and somehow, during the face-to-face meeting, they managed to steal the money and disappear. Shams still doesn’t know how they stole the money.
Another victim emerges
The downside was similar to what Hunter – co-founder and CEO of UK-based Coin Publishers, a crypto-focused publishing and data services company – went through over the course of a couple of weeks in January.
Like Webaverse, Coin Publishers was looking for VC backing when Hunter was contacted via LinkedIn in mid-January by someone calling himself “Stefan Fölmli” from CH Development, a company in Switzerland. “Fölmli” said he represented a wealthy person who wanted to invest.
They talked about the business model, financial projections and other aspects of the company and asked questions from “Fölmli”.
“Everything seemed to check out,” Hunter recounted The register. “We didn’t see the guy on camera at first, but he was very confident. We’re very new to the whole VC thing. The conversation eventually came down to them getting a [10 percent] commission to raise these VC funds. We thought it was a little unusual, but we were very clear that we will not pay a penny in commission until we have our promised $2.2 million in the bank.”
Eventually, “Fölmli” suggested meeting at the El Palace Hotel in Barcelona. Hunter and two other executives – brothers Jonathan (sales director) and Michael Kennedy (operations director) – flew to Spain on 27 January.
They met late that morning with a well-dressed man who called himself “Bartolomeo Moreno”, a wealth manager. After an hour discussing the business and finances, “Moreno” suggested meeting for drinks later that evening.
They sat at a table in the bar with “Moreno” and another man calling himself “Richard Janssens” on one side and Hunter and the Kennedys on the other.
This is where things went sideways.
“They brought up the subject of that commission,” Hunter said. “They wanted to know how to get it. They wanted it in Bitcoin. They wanted us to create an empty Exodus wallet, which we did.”
The bitcoin request seemed odd, but the two men said they wanted to avoid paying taxes, Jonathan Kennedy said The register. They said they wanted to run a test transaction by sending $10 in Bitcoin into the new Exodus wallet. To do that, the bad guys said they needed to get the QR code for the wallet, so Hunter turned the phone around to face the two men, one using his phone to scan the code while the other was talking to the Coin Publishers executives, a trick hunters believe was done to distract them.
Less than 30 seconds later, they returned the phone to Hunter and sent $10. Hunter and the Kennedys returned to the UK, and the following Monday the so-called investors said the deal was on and that they needed $206,000 in Bitcoin commission in the Exodus wallet, to be distributed after the papers were signed.
Hunter put the money in his wallet and 45 minutes later it was gone.
It only takes seconds
“In the 15 or 30 seconds they had my phone, it only takes five steps to get to the screen in Exodus where you can take a picture of the seed set,” giving them access to the wallet, he said. “Because it was a brand new wallet, the wallet wasn’t secured because I guess I had no reason to think it needed to be secured there and because there was nothing in it. I secured it on my phone when I got home , but by that time they had already gotten the seed phrase.”
Until this week, a shamed Hunter and Kennedy kept quiet about the fraud. However, they contacted Shams after reading his story, and he brought them into a Telegram group of other business people who have been taken in by the same scam, sometimes for millions of dollars.
“The things we’ve seen in the last 24 hours are toe-curling, absolutely shocking,” Hunter said, adding that one person talked about being drugged at the meeting and another considered suicide after losing $450,000. “We are by no means the only people this has happened to.”
Other people’s stories
It is true. As The Register notedwrote NFT entrepreneur Jacob Riglin, founder of Dream Lab, in a Twitter thread in 2021 about $90,000 in crypto stolen from him after a meeting with fake investors at the same hotel in Barcelona.
In the same year, Belgian entrepreneur Frederik Van Lierde wrote a blog about almost being scammed by a fake VC. It had all the same markings: a cold call from someone about a possible investment, a website checking out, the right questions being asked and a meeting in Barcelona.
Van Lierde wrote that warning signs went off when people started talking about being paid a “management fee” in Bitcoin ahead of the $10 million investment. He pushed back and soon got a message that the deal was off.
His conclusion: “When discussing investment deals, never, yes never, pay a management fee or any other fee up front.”
Hunter said that based on what he has seen in the Telegram group, there are probably a dozen victims coming from North and South America, Turkey, Malta and other regions. Group members exchange information and photos of the crooks, and some recognize men in the photos as the ones who took their money. They are young men, well dressed and bearded. Hunter said their accents were hard to place.
“Peace [Van Lierde] Identified the guy who defrauded us,” Hunter said. “But this is a much bigger gang. We have more pictures of individuals, but it’s definitely normal individuals doing it.”
Fraudulent accounts
He said a key problem is how easy it is for people to set up fraudulent accounts on social networking sites like LinkedIn, which can help give fraudsters a sense of legitimacy.
Last year, FBI Special Agent Sean Ragan told CNBC that fraud on LinkedIn was a “significant threat” to both users and the platform, adding that “there are many potential victims, and there are many past and present victims.”
In the same article, LinkedIn officials said there had been a recent increase in fraud on the site, and that in 2021 the Microsoft-owned company removed 32 million fake accounts from the platform.
It is unclear how many victims from the Telegram group have reported the thefts to the police. Shams said he notified Rome police and the FBI. Hunter said he eventually reported it to British authorities and had heard from others that Italian police “seem very interested.”
But until something breaks, Coin Publishers and the rest of the victims suffer heavy losses.
Some victims don’t want the negative publicity that comes with admitting they’ve been defrauded, worried it will hurt their chances of collecting money. Others are embarrassed. Hunter and Jonathan Kennedy understand that. They are still trying to raise money for the startup, but worry that VCs may see them now as a bigger risk.
They are also gun shy. They have been fooled once already. How can they trust that the next person they talk to is legitimate?
A scary part is how many of these people who are being scammed are in the tech industry, Hunter said.
“We are technical people,” he said. “There was no way anyone was going to defraud us, and yet they did… When you talk about people being defrauded, it’s usually not individuals who are as technical as us. It’s usually your everyday, non-IT -person For people who want to be fooled at this level of sophistication, we thought we had our bases covered.
– But we didn’t do that. ®
