Russian police have initiated criminal proceedings against an undisclosed number of scammers for operating an illegal online trading scheme, local media outlet Fontanka reports, citing a local police spokesperson.
Ministry of Internal Affairs issued a statement on Tuesday confirming the arrests made on suspicion of fraud and false representation. Computers and documents were seized during the raid, which included 40 private apartments and a dozen offices.
“Fraud on an especially large scale. According to preliminary estimates, the damage from the illegal activities of pseudo-brokers exceeded 21 million rubles,” said the official representative of the Russian Ministry of Internal Affairs Irina Volk.
The fraudsters disguised themselves as the official representative of Forex broker Larson & Holtz, which is registered in the Marshall Islands but not licensed by the Russian central bank, which regulates the FX industry in the country.
The police had also named of some companies involved in their enquiries, RBC and MTS, but didn’t reveal any of the individuals arrested.
The authorities explained that dreams of a quick and easy route to financial freedom were being used to lure victims into pseudo-trading companies that exploit this hope.
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According to the police statement, the scammers had apparently operated as a high yield investment program (HYIP) with a min deposit of $5,000 and too-good-to-be-true returns. As usual, the questionable profits dried up long before the original investment amount is repaid as the Petersburgers’ deposits were stolen immediately, and they never participated in the forex markets, the authorities said.
Russia continues the hostile attitude vs. forex and cryptos
The primary objective of the arrest phase of this investigation was to stop what regulators believe was ongoing criminality and prevent people from putting their money into the scammers’ platforms that claim trading in FX, stocks, and cryptocurrencies.
Russia has sought to crack down on both crypto and FX industries in recent months, which has long flocked to other jurisdictions. Part of its crackdown, which dates back to 2018, the Russian central bank identified 140 companies it says might be illegally offering FX trading to local consumers earlier last year. As such, the recent raid was a further indication of concerns over practices within the massive online foreign exchange brokerage industry.
“Active members of the group were identified, as well as two alleged organizers – co-founders of shell companies. As it turned out, each of the accomplices was assigned a specific role: managers, client managers, accountants, instructors, as well as specialists who allegedly trade in the currency, stock, commodity and cryptocurrency markets,” the Police statement further reads.
No statement has been made by Larson & Holz. Finance Magnates contacted the firm for a response to the news but did not hear back before publication.
Larson&Holz IT Ltd is registered in Saint Vincent and the Grenadines and offers access to various OTC markets, including forex, CFDs and binary options. The broker claims that it doesn’t need to acquire any licenses since it facilitates transactions and keeps funds in a blockchain-based environment only.