Japan has another cryptocurrency scam to recover from. Tokyo police arrested eight men in connection with a pyramid scheme that apparently collected about 7.8 billion yen ($68.42 million) in cryptocurrency from 6000 people.
The men are suspected of violating the Financial Instruments and Exchange Law by not registering their business operations with authorities, according to the Metropolitan Police Department. People believe that the suspects tried to avoid prosecution through the use of cryptocurrencies as transactions in this area fall in the gray zone under the financial exchange law.
The suspects claimed to run a US investment company dubbed “Sener”, conducting seminars with foreign speakers. The police report that at least one of the meeting has been recorded, with a video uploaded on Youtube. During seminars, the group of suspects promised monthly returns from 3 to 20 percent for the investments. The suspects also asked the participants to pledge to invite other investors in order to get additional returns.
The investigators believe that the suspects received cash and Bitcoin (BTC) from about 6000 people in 44 prefectures. A group lawsuit was filed at the District Court by 773 victims of the fraud, seeking approximately $3.2 million in damages. Six men have already admitted to the allegations, while two others deny them. The nine people together handled 29 million yen in cash to Shibata and other men to purchase cryptocurrency, Bitcoins, on their behalf. In all, the police believe the suspects collected about 500 million yen in cash, in addition to the cryptocurrency.
As explained by the Financial Services Agency (FSA), digital currencies are not considered as securities that are under the jurisdiction of current law. However, they can be regulated depending on the structure of the investment.
Japan is known for the crypto-friendly stance, which remains relatively unchanged despite the massive hacks on the local crypto exchanges Coincheck and Zaif in 2018. The FSA issues licenses for crypto exchanges to operate in the country, gave the local crypto industry self-regulatory status in October, certifying the Japanese Virtual Currency Exchange Association (JVCEA) to monitor the space.
The perpetrators had been using cryptocurrency to fund their pyramid scheme and maintain some anonymity, Cryptocurrency transactions are not recognized by the FIEL as securities and so went unnoticed until victims began to speak up.
The lawyers representing the victims of the Ponzi scheme claim that the scammers had promised returns of between three to 20% depending on the size of the investment. Victims were promised even greater returns if they were able to convince others to join them in investing.
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