Jamie McNeill
A man from Florida has pled guilty to a fraudulent scheme in which $100m was stolen from investors as part of a ponzi scheme that involved cryptocurrencies.
Scammer steals $100m and pleads guilty
Joshua David Nicholas, 28, is known to have been the “head trader” at EmpiresX, an exchange which promoted a fradulent trading bot that guaranteed investors without outsized returns.
The way that the Ponzi scheme worked in this case was that Nicholas and his friends at the firm claimed to have an AI trading bot that would definitely be able to consistently produce a high rate of returns.
Of course, the bot did not exist. What was actually happening was that money taken from new investors was being used to pay the old investors, in an extremely clear example of what a ponzi scheme is.
In this case, the ponzi was extremely lucrative, and Nicholas managed to scale it to such an extent that over $100m was taken in from investors. In addition, the exchange on which the ponzi scheme operated, EmpiresX, never registered with the SEC as a securities offering, meaning that was also in violation of local legislation.
For his role in the scam, Nicholas faces one count of securities fraud and is likely to spend up to five years in prison.
In this case, investors who fell for the scam ought to explain the situation to the authorities and identify themselves as victims, as they may be entitled to some form of compensation, as Nicholas decided to plead guilty to the charge.
How to protect oneself from scams
It is quite shocking to see that, despite all the warnings people receive on a daily basis about the importance of caution, they still fall for basic scams like this one – and on a large scale.
One has to wonder at times whether the victims of these scams are simply playing their role in a Darwinian story of filtration. There is little more advice and warning that can be given to people about scams, at some point they must take personal responsibility and learn not to do stupid things.
There are some things that every crypto investor ought to be doing, namely ensuring that their keys are kept hidden at all times and, if they are protecting larger sums, using a hardware wallet.
For those who want extra security, one can also set up a multi sig wallet with Gnosis Safe, which requires more signatures in order to ratify transactions.
Above all, crypto users should be careful about which links they press and which contracts they interact with in DeFi.
For ponzi schemes such as the above, where the claims are obviously ridiculous and the process completely opaque (in exactly the same way as Bitconnect), users must learn to engage their brains and think critically for a second or two. Unfortunately, for some reason, this ponzi managed to rack up $100m.
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This article was written for Business 2 Community by Jamie McNeill.
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