Victoria Ting, associate director at Setia Law
A growing digital economy means cryptocurrency scams will continue to make headlines and investors are advised to undertake proper due diligence as they should do for all investments.
Recent charges brought against four A&A Blockchain executives show the readiness of scammers to prey on gullible investors attracted to the opportunities presented by cryptocurrencies.
“Scammers have realised that ‘crypto’ is now a buzzword that operates on two levels: first, the average retail investor would have heard of the enormous upside potential for crypto-related investments; second, that investor may not appreciate the technical aspects of the blockchain and may part with monies without asking too many questions,” Victoria Ting, associate director at Setia Law tells Regulation Asia.
Angela Ang, senior policy advisor at blockchain intelligence firm TRM Labs, adds, “Scams have become endemic in our information rich digital economy. We must remember that the scam problem is not exclusive to crypto.”
“Scams by their very nature are illicit activities that operate outside the regulatory perimeter. Hence, the most powerful tool to fight scams is really education. Teaching consumers to be vigilant against scams and spreading the word on scammers’ latest methods will help to reduce the successful perpetration of these reprehensible scams,” Ang says.
Singapore police statistics revealed 631 reports of crypto scams in 2021, up from 125 in 2019 and 397 in 2020. Ang notes these numbers are still a small fraction of the overall 23,933 overall scam cases reported that year.
A&A Blockchain
Charges were brought in a Singapore Court against four executives of A&A Blockchain Technology Innovation Pte Ltd executives last Thursday (17 August) for cheating people through a cryptocurrency mining investment scheme as well as conducting an unlicened payment services business.
The accused executives are chairman Yang Bin along with CEO Lu Huangbin, chief technology officer Wang Xinghong and director Chen Wei. Yang is a Dutch national while the rest are Chinese nationals.
The charges against them emerged after their arrest in February 2022 for suspected involvement in cheating offences linked to this case.
At that time, Singapore’s Commercial Affairs Department initiated an investigation into the business operations of A&A Blockchain due to potential cheating offences.
Between May 2021 and February 2022, A&A Blockchain offered a cryptocurrency mining investment scheme that promised investors a fixed daily return of 0.5 percent.
However, the four accused allegedly conspired to deceive 12 persons into investing with A&A Blockchain by falsely representing that the company owned a large number of machines to mine cryptocurrency.
“On a broader level, this case is inherently one of fraud; sophisticated criminals offer attractive returns above prevailing interest rates, but at the same time pegged at a level which at first blush appears to be realistic and believable, to hook would-be victims in search of yield,” explains Ting.
“The pretext in this case was crypto-mining, but could equally have been any other pretence.,” she adds.
The Singapore police have previously encouraged individuals who invested with A&A Blockchain to lodge a police report.
Between August 2021 and February 2022, A&A Blockchain also operated a cryptocurrency exchange known as “AAEX” which purportedly offered the trading of several cryptocurrencies.
A&A Blockchain did not possess a licence issued by the Monetary Authority of Singapore to carry on a business of providing payment services in Singapore.
Conspiracy to cheat
Each of the four accused persons were charged with 12 counts of engaging in a conspiracy to cheat involving a total sum of over SGD 1.8 million (USD 1.3 million), as well as one count of consenting to A&A Blockchain carrying on a business of providing payment services without a license under Singapore’s Payment Services Act 2019.
Among the 12 charges, 10 of them are categorised as ‘amalgamated charges.’
This means that an individual found guilty of these amalgamated charges would face a penalty twice as severe as what they would have received for a single incident of the offense.
Generally, an individual who is found guilty of a cheating offense under the Singapore’s penal code may be subject to a fine, imprisonment for a term not exceeding 10 years, or both.
Meanwhile, any person who is determined to be culpable of providing payment services without the requisite license could be sentenced to a period of imprisonment not exceeding three years, a fine not surpassing SGD125,000, or both.
Tightening regulations
Ting notes that Singapore already has a robust legal framework to regulate digital assets and service providers; Service providers can expect to face liability for offering digital payment services without license. The latter constitutes an offence under the Payment Services Act 2019, and is why charges were brought against A&A Blockchain.
“What we’re seeing is that some crypto-operators try to get around the reach of Singapore regulators by inserting disclaimers purporting not to accept customers from Singapore, but without actual measures to restrict such activity,” Tin says.
Ting suggests that regulators may consider tightening the framework to make such attempts at plausible deniability more difficult for unlicensed operators who merely pay lip service to the restrictions.
She also points out that the uptick of crypto-related scams naturally affects the broader legitimacy of the industry. However, rather than let a few bad apples ruin the barrel, the answer would not be to increase what is already comprehensive regulatory coverage, but to step up education and outreach on scam avoidance.
Credit: Source link