Eight Arrested In Tokyo For Multi-Million Crypto Pyramid Scheme


On November 14, 2018, officers from the Tokyo’s Metropolitan Police Department arrested a Minato Ward executive, 46-years-old Kazunari Shibata and his seven associates under charges of running a 7.8 billion yen ($68.42 million) pyramid fraud.

These individuals presented themselves as representatives of the US-based investment firm, Sener, and lured around 6,000 people into investing their money with promises of 3 to 20 percent monthly return.

Main suspects are accused of violating a Financial Instruments and Exchange Law, as they failed to register their activity with the authorities.

Trying to hide behind cryptocurrencies

The local media report describes how Sener seminars were organized with foreign speakers who incentivized investors to join the scheme and urged them to recruit new members, which is a classical pyramid fraud pattern of behavior.

The same source points out that the “organization” received around 500 million yen (roughly $4.9 million) in cash, as only nine individuals handed 29 million yen ($257,201) over to Shibata and his crew to invest in Bitcoin on their behalf. However, the fraudsters raised the most money in Bitcoin (BTC) as it was presented to be the center of their financial business plan.

In reality, leaders of the scheme were trying to hide behind cryptocurrencies since they considered these assets to be floating in the grey area of regulation.

Fraudsters were counting on the fact that the Financial Instruments and Exchange Law still doesn’t clearly regulate cryptocurrency transactions as digital assets aren’t considered to be securities. Nevertheless, the source from the Japanese Financial Services Agency (FSA) explains, crypto can be well regulated inside the existing set of regulations dependable on the structure of investments, and the government is counting on those existing regulations to suppress these kinds of attempts.

Victims filed the lawsuit – Shibata admits the fraud

According to the official report, 73 of 6,000 swindled already went to Tokyo District Court, demanding 370 million yen ($3.3 million) in damages.

After his arrest, Kazunari Shibata and his five accomplices from Sener allegedly already admitted to perpetrating a fraud, while the other two still deny being involved in any illegal activities.

Japanese lawmakers are still lenient

Japanese FSA obviously still counts on the ability of the cryptocurrency business to regulate itself as in October, they appointed the Japanese Virtual Currency Exchange Association (JVCEA) to serve as a form of a watchdog in the crypto space.

Still, the FSA retained the authority to issue licenses for cryptocurrency exchanges, but despite the supposedly high level of scrutiny towards those businesses, we witnessed two major hackers’ attacks on Japan’s trading platforms, Coincheck, and Zaif in 2018, depriving users of $560 million in cryptocurrencies.

How many Bitconnects are yet to come?

Looking at the presented facts, this pyramid scheme can’t be set too far apart from the infamous Bitconnect scam, which plagued the crypto space at the end of 2017 and left investors holding their bags once the exit part of the scam was triggered.

Sener is just one in the long line of such attempts, which can shake the foundation of the fragile investors’ trust towards cryptocurrencies, and quite possibly, it isn’t the only one running at the moment.

Since cryptocurrencies are an infant business, the opportunity for all kinds of fraudsters is even bigger, so investors really need to be careful who they entrust their money with since the next Bitconnect may be lurking just around the corner.

Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your own research and/or consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.

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