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An ICO or initial coin offering is equivalent to an IPO (initial public offering), a fundraising method for crypto-centric startups. As many new cryptocurrencies are being introduced every day, ICOs have also increased alongside. It is difficult for new investors and traders to ascertain what tech projects they should be supporting. For the most part, huge corporations play the part of endorsing an ICO as a sort of warranty.
However, there are many falsified and fabricated ICOs that are targeting unsuspecting users. Last month, the US Department of Justice tried Justin Cheng for being an accessory to an ICO scam. The scammer pleaded guilty to the charges of operating a fraudulent ICO in 2017 for Alchemy coin. The cybercriminal is also charged for defrauding the government of the USA and raking 7 million through the COVID-19 relief program.
How the Criminal Managed to Fool Government Officials and Corporate Investors with Fake Documents
The central figure of this crime ring, Cheng, applied for five small business loans under the CARES Act. The CARES Act fund supports small business owners who are dealing with struggles during the COVID-19 pandemic. To get these loan applications approved, Cheng produced false documents, showing an exaggerated number of employees, fictitious tax declaration documents, and inflated asset counts. The 24-year criminal got all loan applications approved eventually.
However, a closer inspection of his documents showed that the criminal had entered names of actors, fictional characters, artists, public figures, and even some athletes as his employee. The funds were not used to support his business but rather his lifestyle. The criminal used these funds to purchase a Rolex watch, luxury condominium renting, Mercedes Benz, and designer clothes. The young criminal mastermind is sentenced to 80 years in prison for these charges.
Investing in ICOs can present a person with a chance to have ownership in a very promising blockchain service. However, it is best to conduct an audit before getting ready to pour money into any new business venture. According to the briefing produced by the Department of Justice, Cheng also spearheaded a fake ICO in 2017 that ran under the guise of Alchemy Coin Technology Limited.
Cheng managed to collect funds for his scam business and manipulated the investors by fabricating and omitting information about capital access, investor proceeds utilization, the introduction of a purported blockchain project, and using the coin registration process for conducting the false ICO operations.