The Manhattan’s district attorney, Cyrus Vance Jr., has seized and shut down 72 sites for promoting high yield investment programs (HYIP) with bitcoins. At least one of the main sites, Bitcoinhyip.org, was charged with securities fraud.
Vance revealed the news during a keynote address at the Association of Certified Anti-Money Laundering Specialists’ (ACAMS) AML Risk Management Conference on Monday, where he also warned about Bitcoin’s capabilities to enable financial crime.
HYIP scams lure investors by promising unrealistically high returns. They can take the form of Ponzi schemes where investors are paid with the principal belonging to other investors. Often, or the operator can simply make off with or squander the funds.
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An undercover agent e-mailed bitcoinhyip.org and was told he “could not lose money in the investment.” Vance continued:
“All you had to do, they said, was send them one bitcoin, and they’d send you three bitcoins in return, within 48 hours. When our undercover investigator transferred a bitcoin to the operator’s bit-address, they kept it, and he never heard from them again.”
The bitcoinhyip.org website has since been replaced by www.seizedbymanhattanda.org.
Vance participated in last year’s BitLicense hearings in New York and has played a major role in money laundering investigations involving large banks, including BNP Paribas SA and Standard Chartered.