Cryptocurrency scams are rampant
Cryptocurrency fraud is rampant. In 2023, there were 37,823 fraud cases, including 11,405 cryptocurrency-related victimization cases, accounting for nearly 30% of the total, and the amount of financial losses was as high as NT$5.345 billion.
The October 2024 "Let's Get Together" event will invite "Mao Dong Lawyer" of Yongteng International Law Firm, XREX Information Security Engineer Helen Lai, and Zhuang Mingxiong, the Anti-Fraud Center and 165 Secretary of the Criminal Police Station, to join the event Discuss why there are so many cryptocurrency scams? Crypto-criminal methods are ever-changing. How do exchanges repel criminal activities and protect user assets? And how can individual users avoid falling into the trap of fraud?
Legal Response to Cryptocurrency Scams
Lawyer Mao Dong first pointed out that the public has misunderstandings about virtual asset fraud. Many people believe that fraud arises from gaps in the law and requires new laws and regulations to regulate it. However, she emphasized that existing laws are already effective in combating fraud. For example, the crime of fraud in Article 339 (Criminal Law) covers virtual asset fraud, especially the aggravated Article 339-4, which specifically provides strict legal punishment for fraud committed using the Internet.
Lawyer Mao Dong shared that many criminal acts are often closely related to money laundering activities. For example, many fraud syndicates work with illegal traders who are not properly registered so their transactions cannot be traced by the law.
In order to deal with this situation, the Taiwan government revised Article 6 of the (Money Laundering Prevention and Control Act) in 2024, mandating registration of virtual asset operators. Those who fail to register will face imprisonment of less than two years or heavy fines.
In addition to criminal law and money laundering prevention and control laws, lawyer Mao Dong mentioned that the government regulates virtual asset fraud through multiple laws and regulations, including the (Securities and Exchange Law), (Banking Law), etc. In addition, there are self-regulatory regulations for virtual asset operators, such as the Virtual VASP Guidelines, which are similar to the internal regulatory rules of the traditional financial industry and require operators to comply with a series of legal and ethical standards during the transaction process. These regulations not only ensure the legal operation of the industry, but also minimize the chance of fraud from the source.
Yongteng International Law Firm "Mao Dong Lawyer"
How do exchanges prevent fraud?
Helen Lai, a security engineer at XREX, shared how to use anti-money laundering and asset protection measures to prevent fraud from the perspective of the exchange.
Helen pointed out that the exchange has strict anti-money laundering requirements and all users are required to pass KYC (real-name verification), which ensures that customers using the platform are real individuals with no criminal records. However, fraud syndicates often use innocent victims to transfer funds.
Fraudulent syndicates take advantage of the anonymity of virtual currency transactions to make funds difficult to trace. To this end, XREX has implemented strict monitoring of abnormal trading behaviors and cooperated with law enforcement agencies to increase the opportunity to immediately freeze suspicious accounts and prevent the outflow of funds.
Helen pointed out that the Taiwan Financial Supervisory Commission has put forward guiding principles, which not only provide specific operational standards for exchanges, but also allow industry players to extend more detailed compliance regulations. For example, when listing new currencies, you must ensure that these currencies comply with consumer rights and are monitorable assets.
Helen Lai, Security Engineer at XREX
Challenges of the Anti-Fraud Center
Zhuang Mingxiong, the Anti-Fraud Center of the Criminal Police Department and Secretary of 165, said from a law enforcement perspective that cross-border transactions of cryptocurrency are extremely fast, and it only takes a few seconds to complete the transfer of funds. This allows fraud groups to easily transfer funds from Taiwan. The transfer overseas, especially to areas such as Cambodia and northern Myanmar, makes it impossible for Taiwan's law enforcement agencies to effectively track and arrest these criminals.
Secretary Zhuang simultaneously shared common fraud techniques in the market, such as "fake celebrity" fraud. Fraudulent groups will pretend to be well-known financial experts or celebrities and set up fake investment groups to attract investors to conduct virtual currency transactions. In this type of fraud group, most of the members are members of the fraud group, and the only victims are the investors who were deceived.
The fraud group will allow the victims to obtain a small amount of income in the early stage, thereby inducing them to increase the amount of investment. In the end, the fraud group will refuse the victims to withdraw funds under various pretexts, causing monetary losses. Some fraud groups will even set up their own currency dealers to conduct face-to-face cash transactions directly with victims, and then invest the funds in the virtual currency market.
Secretary Zhuang called on the public to increase their awareness of fraud prevention in addition to relying on the government and law enforcement agencies. Especially when investing in virtual assets, they should not trust investment advice from unknown sources.
Criminal Police Fraud Center and 165 Secretary Zhuang Mingxiong
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