Seven Biggest Fintech Frauds of Recent Years: Who Got Caught?by Rebecca Oi March 6, 2023
It’s been a tough year for the fintech and crypto industry, and it has been under fire for various reasons. Among other pressures, perhaps the single most damaging aspect to come out of this year has been widespread suspicious activity perpetrated by alleged fraudsters in the industry.
Names like Sam Bankman-Fried and Gerald Cotten have unfortunately become synonymous with suspected fraudulent practices and deception. The two accused fraudsters have been alleged to have milked investors out of millions of dollars, and their stories have cast a shadow of doubt over the entire industry.
With technology and crypto space’s reputation at an all-time low since the implosion of the dotcom bubble, it’s important to remember that many decent, earnest people are still working in the industry. But it’s also essential to recognise the fraudsters that are always on the lookout to take advantage of perceived weaknesses or ‘loopholes’ of the system.
Here’s a list of some of renowned, and lesser known, alleged and convicted fraudsters.
Sam Bank Friedman – FTX fall from grace
The trial of FTX CEO Sam Bankman-Fried is set to begin in October 2023, and the case could have significant implications for the cryptocurrency industry.
Bankman-Fried was arrested in the Bahamas and charged with wire fraud, securities fraud, and money laundering, among other things. If convicted, he faces up to a 115-year sentence in prison. Bankman-Fried’s associates, fraudsters Caroline Ellison and Gary Wang, also pleaded guilty to related charges and cooperated with prosecutors’ investigation into the alleged scheme.
The case centers on the collapse of FTX, a cryptocurrency exchange that was once one of the most sought-after. FTX filed for bankruptcy on November 11, 2022, after it was revealed that Bankman-Fried had defrauded banks and other financial institutions out of millions of dollars. This was done by submitting false and inflated invoices for payment using the proceeds of the fraud to pay personal expenses and making Ponzi-type payments to earlier victims.
Markus Braun – Inflation of Wirecard’s profits
Markus Braun was the former head of Wirecard, a defunct German payments company that was once valued at over $20 billion. In June 2020, the company collapsed in one of the biggest accounting scandals in Europe’s history.
In this context, Braun and two other former executives, Oliver Bellenhaus, who headed a Wirecard subsidiary in Dubai, and Stephan von Erffa, the company’s chief accountant, have been charged with defrauding creditors of US$3.7 billion through false accounting from 2015 until Wirecard’s collapse in 2020.
The charges relate to their alleged involvement in inflating Wirecard’s revenue and profits to make the company appear more valuable than it was.
According to prosecutors, Braun and his co-accused used a complex scheme to inflate Wirecard’s revenue and profits. They allegedly created fake income from payment processing services that never took place while also forging contracts with third-party companies to make it seem like they were earning more revenue than they were.
After resigning as chief executive, Braun voluntarily surrendered to authorities in Munich and has remained in pretrial custody since then. The court has scheduled a total of 100 days of hearings that will continue until the end of 2023.
Amit Bhardwaj – King of GainBitcoin scam
Amit Bhardwaj, who orchestrated the GainBitcoin scam, died of a heart attack earlier this year.
The GainBitcoin scam is believed to be one of the largest in the Indian cryptocurrency industry, with reports suggesting that Bhardwaj may have collected up to Rs 1 lakh crore (US$15.38 billion) from investors.
The founder of GainBitcoin and other cryptocurrency companies, such as Amaze Mining and Blockchain Research Limited, was accused of running a Ponzi scheme that collected funds from investors and then used it to pay off earlier investors. Amit misrepresented the total investment and inflated the figure on the company’s website.
Ajay Bhardwaj, brother of Amit Bhardwaj is also the prime accused in the GainBitcoin fraud along with several other fraudsters.
Charlie Javice: Frank sued by JP Morgan
Charlie Javice, the young founder of Frank, a college planning startup, raised eyebrows when it was revealed that the company had been caught duping JPMorgan Chase of US$175 million.
Now, more details are emerging about how she pulled off the scheme — and they are even more damning.
The bank accused Javice and Frank’s former chief growth and acquisition officer Olivier Amar of faking nearly four million clients. It turns out duo engaged in an elaborate scheme to stuff that list of millions of customers with fakery. The con worked like this: the 30-year-old hired a data science professor to create fake information fabricating almost four million client names and emails.
Hanad Hassan – Bogus Crypto Charity Orfano
The British Broadcasting Corporation (BBC) reported that this 20-year-old man who fled war-torn Somalia to make Birmingham his home had made millions of dollars by trading cryptocurrency last year.
The British public service broadcaster made a 30-minute documentary titled We Are England: Birmingham’s Self-Made Crypto-Millionaire before it was canceled only hours before it was scheduled to run — as allegations against the purported scam piled up.
The bogus charity token set up by Hassan was dubbed Orfano and launched in April 2021. The idea behind the crypto was to allocate three percent of the money invested into the scheme to charity projects.
However, Orfano abruptly ceased operations, taking everyone’s assets with it, and there was no withdrawal option available for users. Hanad then relaunched Orfano as OrfanoX and repeated the same scam.
Gerald Cotten – Defunct cryptocurrency exchange QuadrigaCX
The late founder of QuadrigaCX, Gerald Cotten, is accused of misappropriating US$215 million of customer funds.
Gerald Cotten was the late founder of QuadrigaCX, a now-defunct cryptocurrency exchange. He was also responsible for the private keys to the firm’s cold wallets, which held most of its Bitcoin and other digital assets.
The story began when Cotten died in December 2018, leaving behind a widow and a company with no way to access or refund its customers’ funds.
In the aftermath of his death, it was revealed that Cotten had been fraudulently misappropriating funds from QuadrigaCX for his gain. He had opened fake accounts under aliases, credited himself with cryptocurrency, and made trades. When his bets went wrong, Cotten used client funds to cover his trading losses and misappropriated money to fund his lifestyle.
Ruja Ignatova – One Coin and the crypto queen
In early 2016, an enigmatic woman called Dr Ruja Ignatova took the stage at a glitzy event in London. She was there to promote her new cryptocurrency, OneCoin. But first, she had to show the crowd she was the real deal.
She called herself the Crypto queen and told people she had invented a cryptocurrency to rival Bitcoin and persuaded them to invest billions.
But there was one problem. OneCoin was never actively traded, nor could the coins be used to purchase anything. Dr Ruja was selling nothing more than hot air. But the scheme she created was so clever, and she lied so convincingly that it managed to dupe millions of people out of their savings. She went missing in October 2017 and was one of the first crypto fraudsters to be added to the FBI’s 10 Most Wanted List.