After a local investor claimed losing an astounding $310,000, Washington state authorities are looking at the cryptocurrency trading platform Ethfinance. The instance calls attention to possible crypto frauds using social media to target gullible victims.
Ethfinance: Friend Request Gone Wrong
The Washington State Department of Financial Institutions (DFI) claims the unidentified investor was first exposed to Ethfinance via a “random friend request on LinkedIn.” This apparently benign online exchange became a financial disaster. Driven by the prospect of large profits on bitcoin trading, the investor sent $310,000 overall from their DeFi wallet to Ethfinance.
But things started to seem dubious when the investor tried to pull some of their initial outlay and expected returns. Ethfinance’s customer service—which only communicated via Telegram messenger—demanded the investor transfer extra money to finish a “smart contract” before enabling any withdrawals.
Commonly used in advance fee frauds, this strategy calls major questions about the validity of the platform. Appropriately cautious, the investor declined to transfer more money and has subsequently been locked out of their account unable to retrieve their invested money.
Total crypto market cap at $2.38 trillion on the daily chart: TradingView.com
Regulator Issues Warning, More Platforms Flagged
Emphasising they haven’t checked all the facts of the allegation, the DFI issued a public warning characterising the matter as a possible “Advance Fee Fraud” scheme. Said a DFI spokesman, these schemes often entice victims with promises of large returns on investments and then demand the payment of fees or taxes before any expected earnings can be taken out, reflecting strategies used by the US Securities and Exchange Commission (SEC) to spot similar scams.
For Washington residents, the DFI’s advisory reminds people sharply to be quite careful before answering any unwelcome investment proposals, particularly those coming from social media or messaging apps.
Social Media And Crypto: A Breeding Ground For Scams?
The government underlined furthermore that any investment professional providing services to Washington citizens has to be registered with the DFI. This episode is not an isolated one. The DFI also noted two other cryptocurrency trading sites, Foundation-coin and WTOCoin, for displaying similar red flags—including issues with fund withdrawal for investors.
The emergence of LinkedIn and other social media sites has opened fresh paths for frauds to target possible victims. With its natural complexity and lack of official control, cryptocurrencies can help to hide dishonest behaviour. Particularly vulnerable to these online strategies are investors, particularly those fresh to the crypto scene.
Featured image from Outseer, chart from TradingView