THE FUNDS RECOVERY PROBLEMS WITH ONLINE INVESTMENTS

Funds Recovery: The global SafeMarkets scheme

Funds recovery: FinTelegram frequently receives requests from defrauded investors for support to recover their funds. We love to help and appreciate every single request. The problem to get back funds from online scams, unfortunately, is a bit more complex than in the real offline world. Investors who feel cheated by online scams such as SafeMarkets, Option888 or LottoPalace often file complaints with the local police. In most cases, however, they can only give the police their personal data and the data in their account with the relevant investment platform. They can also provide the domain and – in some cases – the scam operator’s bank account to which they transferred the money. In the case of crypto scams, there is often only a pseudonymous wallet address to which they transferred their funds.

In short – it is difficult to impossible for investors to recover their funds from scams and online fraud schemes. We give you some ideas about why this is so and what to do to avoid to be scammed.


Helpless authorities

The police have to accept the complaint but are helpless in 9 out of 10 cases because the victim falls under their jurisdiction. Usually, the perpetrator (i.e. the scam operator) does not. If the perpetrator is identifiable at all, he regularly reseides somewhere offshore behind multiple nested holdings and trusteeships and is not available to the authorities responsible for the victim. Even in the best case scenario, when the perpetrator is residing in an EU state like Bulgaria, it is difficult to get hold of him legally. Cross-border enforcement actions pose many hurdles for the involved authorities and require months of preparation. This, in turn, requires human resources, a budget, and approvals. If the perpetrator is also based in a country with which there are no extradition treaties (e.g. Turkey), the authorities usually wave the other way.

In view of the many hurdles and the low chances of success, many authorities refuse to carry out appropriate investigations. They take the complaints and file them. That may be incomprehensible for the investor, is, however, the lived practice.

As long as the perpetrator does not cheat citizens of the country of his residence, the authorities in his jurisdictions have no chance to act in the first place. If the fraudulent actions are conducted via offshore companies in other jurisdictions, it is virtually impossible for the authorities in the victim’s and the perpetrator’s jurisdiction to take action against him. Even ambitious lawyers of aggrieved parties will find this very difficult.

By law, authorities can only act within their own jurisdiction. Cross-border enforcement actions require complicated cooperations of authorities and are thus rarely carried out. In addition, the investors’ money has usually already been washed and distributed and is no longer available to the authorities. Let alone the investor. This “disappearance of the money” is even more simple in the crypto-space. The traceability of transactions in the established financial systems with banks sometimes results in the rescue of customer funds (freezing of accounts). In the area of tracing transactions on blockchains (Bitcoin, Ethereum, NEO,…), authorities are only at the beginning (although the U.S. enforcement agencies have already gained a grip on the scene).

For the purpose of recovering funds from perpetrators, we are confronted with following main issues in the cybercrime and cryptocrime area:

  • not identified perpetrators (individuals and legal entities);
  • complicated and opaque legal structures which are usually organized across several countries and jurisdictions;
  • multi-jurisdictional responsibilities and multiple enforcement agencies;
  • Money is laundered and disappears in opaque channels.

Funds Recovery: Complexity by Design

Typically, operators of unregistered / unlicensed / illegal trading platforms in the area of binary options / FOREX / crypto spread their activities over a variety of companies across different jurisdictions on this planet. There is no single individual or legal entity that can be addressed legally. Here is how an illegal trading platform may be organized:

Domain: Anonymous owners of the domain (company 1) are regularly offshore companies. Mostly different Top Level Domains (TLD) are used with .com .net .biz etc.
Technology and hosting: Most binary option / FOREX / crypto brands are operated by licensees with “turn-key” white label solutions using the licensor’s technology and hosting resources (SpotOptions, Panda, Tradologic, SoftLotto etc.).
Website: Websites are typically operated by empty shell companies headed by straw men (they call them monkeys) whereby the shell company often belongs to other shell companies in other offshore locations. The perpetrators hide behind trustee agreements and are difficult to identify.
Payment Services: The payments are handled via various bank accounts of offshore companies that are different from the website operator. To do this, they use their own Payment Services Providers (PSP) such as DreamsPay, NetPay or Payific.
Call center / Boiler Room
Surprisingly, the “client relationship managers” in the call center are again employees of another company. The typically use fake IDs and earn a commission from investors’ deposits.

Basically, the fraud at the investor is by design spread over several companies in several countries (jurisdictions). Additionally, the legal entities are switched very often. Scam operators work with the very best lawyers, auditors, and consultants to avoid being caught. They are really artists.

The structures of the various fraud schemes can only be discovered through intensive research and a portion of luck. Without inside information, the exposure of such schemes is almost impossible.

Here are a few concrete examples of those distributed scam operations:

Brand Schema
SafeMarkets

FOREX / Crypto Scheme

  • Domain: www.safemarktets.biz is registered anonymously in the Marshall Islands
  • Website: Optiumcommerce OU in Estland
  • Payments: DreamsPay s.r.o.
  • Call Center: E&G Bulgaria with Call Center in Bulgaria, Serbia, Ukraine, and Montenegro
  • Beneficial Owners: New Markets SA (Samoa) controlled by Gal BARAK (Israel/Bulgaria) and Marina ANDREEVA (Bulgaria)
Option888

FOREX / Multi-Asset Trading Scheme

  • Domains: www.option888.com is registered by Altair Entertainment N.V. in Curacao.
  • Website: Celestial Trading, Altair Entertainment, Hithcliff Ltd
  • Payments: Payific Ltd
  • Call Center: in Serbien und Montenegro
  • Beneficial Owners: Uwe LENHOFF (Deutschland/Zypern) und VELTYCO GROUP PLC (UK)
LottoPalace

Online Lottery Ticket Shop

  • Domains: www.lottopalace.com registered by SoftLotto Ltd in Malta
  • Website: Altair Entertainment N.V. (Curacao)
  • Payments: Payific Ltd (Malta)
  • Call Center: managed by E&G Bulgaria with Call Center in Bulgaria, Serbia, Ukraine, and Montenegro
  • Beneficial Owners: Uwe LENHOFF (Germany) and VELTYCO GROUP PLC (UK)

Investors Trap: Fake Reviews and Media Manipulation

Typically, online investors turn to big brother Google to learn about the quality of the various platform providers. Google Search provides them with websites that have specialized in reviews or ratings of the online investment platforms (brands). The problem with this is that many of these review websites are operated by the perpetrators and deliberately provide false information. These providers are SEO experts and thus ensure that their review websites receive a high ranking in Google Search. In this respect, caution is advised.

Sometimes, negative ratings and critical statements about providers can be found on these review sites. This leads investors to believe that this is a high-quality review page and therefore has credibility. Unfortunately, this is not true. In many cases known to us, these negative reviews are written very consciously in order to deceive the investors and pretend credibility.

In our experience, 8 out of 10 review sites are not independent but linked to scams and fraud schemes and their beneficial owners.

Paranoia is your best friend

The most important investment advise – be paranoid! The only really efficient measure against scams and online fraud is extreme caution. Investors should only invest their money after extensive research and references. Here is a short paranoia checklist:

Paranoia Question Answer
Is the investment provider (brand) registered/licensed in a recognized jurisdiction (not offshore or Montenegro)? yes
Can the persons behind the investment provider be identified and contacted (e.g. via LinkedIn)? yes
Were you able to contact the identified operator via LinkedIn or any other professional platform? You really have to! yes
Could the identified operator provide references that can also be found on LinkedIn? yes
Have you been able to contact the references and received verification? yes
Where is the registered operator of the investment platform (brand) located and does the location with the location of the identified operator? yes
Are the identified operator and the licensee identical? Typically, a license number is provided enabling you to check the license on the website of the financial supervising authority. yes
Is the bank account of the operator held with a reputable financial institution in a recognized jurisdiction? yes
Have you done a Google Search with the brand name and the term”warning” and got clearance? yes

This is just a quick first checklist. It may sound exaggerated, but unfortunately, such an exercise (due diligence) is essential to avoid losses. Anything else would be negligence in handling your money. If one of these answers is not answered with “yes”, you do not invest.

Every year, millions of investors are deprived of their hard-earned money by such online fraud systems.