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When we investigate crypto scams and broker frauds, we often see cases of money laundering. However, in this tail wags the dog story, a suspected crypto scam shut down $600,000 in a customer’s account and claimed they suspected the client of laundering money.
According to the Better Business Bureau, A New York resident decided to cash in on the cryptocurrency boom. They decided to use $600,000 from their 401(k) to invest in cryptocurrencies. They deposited this large amount of money with an unregulated broker called Loboex.
The client saw huge apparent returns from this investment. However, later the scam victim realized that these weren’t actual returns, but were generated by the broker on a decoy platform that was designed to mimic actual trading.
Suddenly, Loboex locked down the customer’s account and claimed they hadn’t provided enough information to verify their account. After they sent photo ID and other information, the account wasn’t unlocked.
As bad as it seemed, the situation got even worse. The suspected scam claimed that the customer’s activity was suspicious and said they were closing their account. The statement they issued was vague and the customer was confused. He didn’t understand what he had done to arouse suspicion.
It’s not uncommon for banks to take precautions if they see sudden financial activity that is unusual for that client. However, the bank will demonstrate reasons for this action and will lock down the account only temporarily.
However, the broker gave no information about what led them to take this action. Usually, a specific type of client is suspected of money laundering. They have multiple identities and involve complex transactions with several different entities. None of this was the case with the customer. Nor did they make any sudden transactions, except for the initial $600,000 deposit.
Money launderers are ambiguous about the sources of their money. However, the customer was able to easily prove that the funds came from their 401(K) as well as friends and relatives. In short, there was no real reason this person should have been suspected of suspicious financial activity.
The clincher to this story was that, after claiming they suspected the customer of money laundering and closed down their $600,000, they said they would lift this restriction if the customer sent them $180,000 in seven days.
This makes no sense. If the broker really believed this customer might have been laundering money, why were they offering to reopen their account for a $180,000 fee. This sounds like demanding a bribe. If wrongdoing is actually happening, there’s no way the broker should be asking for the customer to pay them off to reopen their account.
Fake brokers and unlicensed crypto exchanges come up with myriad excuses for not granting customers withdrawal requests. They may say they are having technical issues that never seem to be resolved. The broker could offer bonuses that restrict customers from gaining access to their funds before trading a certain amount. They could also claim security issues.
Claiming that the customer may be involved in money laundering as a reason to hold onto their funds is pretty awful, but as we can see it happens. No matter how convincingly your proofs are that you aren’t laundering money, that won’t make much of a difference if the broker is fraudulent. However, there is something you can do–seek guidance from Broker Complaint Registry.
If you have an account with a broker you suspect may be a scam, close it and request a withdrawal. If you are not given your money back, contact Broker Complaint Registry right away. We will consult with you, work to track down your funds and create investigative reports, and will assist with fund recovery efforts