Seven scams: Crypto crime in Thailand

Cryptocurrencies, Ponzi schemes, and other get-rich-quick scams

US$ crimes: The preferred currency for international fraudsters is obviously the U.S. Dollar. Crypto payments made to the Darknet reach now a quota below 1%. At least in Thailand, the Blockchain is no longer a legal vacuum.

Crypto crimes: Cryptocurrencies can be involved in crimes for two different reasons. The one reason is that Bitcoin and altcoin are the better currency and cryptorich coin owners are an easy prey for unusual offers. The other reason is that the crime requires characteristics of the coin which would not be possible through a US$ based crime. Big holders of Bitcoin and its brethren have become alluring marks for criminals.

Alleged crimes: Cryptocurrencies and digital asset businesses are widely misunderstood. Whether the loss of a crypto investment base on a scam or on a legitimate business reason is for uneducated law enforcement officers not easily to distinguished.

Red lines: This post outlines the fine lines between being a victim of a scam or a bad business decision. It highlights that illegitimate actions do not always base on a criminal mind, but sometimes on naive and ill-advised behavior. In other words: Bad choices make good stories.

A brief history of high-profile crypto crime in Thailand

Crypto crimes are typically investigated by the Crime Suppression Division (CSD), a department of the Royal Thai Police (RTP). Another agency involved is the Anti-Money Laundry Office (AMLO).

June 2017: As reported in August 2018, a 22 years old Finnish millionaire has been conned out of 5,564.4 BTC by offering a fake investment into Thai property and Dragon Coins.

The case includes Thai actor Jiratpisit ‘Boom’ Jaravijit, who was arrested in July, and two of his siblings, one of which has left the country. The siblings face money laundering charges and, potentially, fraud charges.

July 2017: A joint law enforcement operation between the FBI, DEA, and officials from Canada and Thailand brought down two of the biggest hidden drug markets, AlphaBay and Hansa, instantly wiping out a huge portion of the illicit activity conducted on the dark web.

January 2018: In the beach resort of Phuket, Thailand, the assailants pushed their victim, a young Russian man, into his apartment and kept him there, blindfolded, until he logged onto his computer and transferred about $100,000 worth of Bitcoin to an online wallet they controlled.

“We asked the victim how to track it since they know Bitcoin better than us,” one investigator said. “We asked them how to check the receiver. They said there is no way.” (Chalong Police station)

February 2018: One of the biggest darknet kingpins has been arrested in Thailand by a large team of police officers. Sergey Sergeyevich Medvedev, the co-founder of Infraud, one of the biggest online crime bazaars, had over 100,000 BTC seized in the process.

At present: Currently, there is no law allowing the Anti-Money Laundering Office (AMLO) agency to freeze or seize digital currency, nor anywhere to keep it. As a result, Thai authorities can jail or extradite cybercriminals and confiscate their physical assets – but they cannot touch their digital assets.

 

The top seven criminal schemes involving cryptocurrencies or other digital assets

#1. Non-licensed digital asset business: Under Thailand’s regulations, a public offering of digital tokens (ICO) and (ii) operating any business relating to Digital Assets (exchange, broker, dealer requires a license. Criminal sanctions include a fine and/or imprisonment for a maximum term of 5 years. Civil sanctions include a fine, trading bans and a ban from being a director or an executive of any digital asset business operator.

The infringer against the new crypto regulations might not be aware that his actions fall under the regulations because of his choice for a foreign legislation, because he considers a pre-sale is not subject to the regulations or for other reasons.

Starting in August 2018, Thailand’s SEC sends out warning letters to website owners promoting unlicensed ICO and digital asset businesses.

#2. Unlicensed securities: The issuance of coins which do not qualify as utility token opens the door to the strict civil and criminal liability under Thailand’s SEC Act. This might apply not only for an unlicensed business but also if the crypto license has been granted under a misleading application.

#3. Exit scams: Leaving too soon – if the ICO or digital asset business is discontinued, the possible qualification as exit scam has always taken into consideration. Fake initial coin offerings have international a predominant history.

#4. Crypto exchange thefts: Mt. Cox and other cases show the easiness to steal cryptocurrencies from an exchange business. This can be accomplished by international hackers or as an inside job.

Crypto debit card fraud: Several providers offer Visa and MasterCard debit cards that can be directly loaded through cryptocurrency transfers. The holder of such debit cards uses fake ID documents bought with cryptocurrencies from the dark net. Subsequently, the debit card is used to buy goods and services from unaware sellers and service providers. Alternatively, fake transactions with huge volumes are made with naïve individuals and the deducted amounts split into one portion for such fake customer and the other portion for the debit card holder. After the scam is disclosed, the fake customer has to refund the debit card company, while the card holder is typically untraceable.

#5. Investment scams: Virtual currencies can be easily transferred to an anonymous address set up by a criminal. While banks can stop or reverse large electronic transactions made under duress, there is no Bitcoin bank to halt or take back a transfer, making the chances of a successfully armed holdup frighteningly enticing.

Therefore, traditional, old-fashioned crime can utilize the anonymity of cryptocurrencies to facilitate investment scams, blackmailing or similar criminal behavior.

#6. Internet scams: The theft of passwords, the preparation of fake wallets and apps, phishing schemes, cryptojacking malware, Internet blackmailing scams and other traditional types of Internet fraud are perfectly applicable to well understood the benefits of cryptocurrencies.

However, yellow press reports resulted in a sense of paranoia among crypto vendors and buyers. Growing concerns about bitcoin’s security also happened to coincide with a rapid rise in the cryptocurrency’s price.

#7. Ponzi scheme: A Ponzi game is a form of fraud in which a purported businessman lures investors and pays profits to earlier investors using funds obtained from newer investors. In Thailand, Ponzi scheme is a general accusation in complex business transactions. No wonder that cryptocurrencies are frequently linked with Mr. Ponzi.

Professional services in Thailand’s Fin-Tech sector

PUGNATORIUS Ltd. does not offer criminal defense services and does not employ criminal defense lawyers. However, the firm provides legal opinions on the legality of cryptocurrency businesses and supports cybercrime prevention. Mainly, these seven legal and tax services are provided:

  • Thai crypto-compliant company formations
  • Regulatory-avoiding and tax-efficient cross-border structuring
  • Digital asset and financial services licensing
  • Blockchain and ICO advisory services
  • Thai and cross-border tax structuring
  • Cryptotransaction support services
  • Legal opinions and professional statements

Details can be found at “Legal advice, tax structuring, transaction support services and business matchmaking on Fintech, cryptocurrency and digital asset ventures“.


Disclaimer: A little knowledge is a dangerous thing. This low-resolution high-level outlook constitutes neither legal advice nor an attorney-client relationship.

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