Daily fraud update: 29th April

Chris Lee
Someone drawing over the bitcoin logo with a permanent marker

Consulting group launches legal battle against crypto firm

An online consulting firm has announced that it will commence a legal battle against a crypto investment firm.

KDH Consulting Group said that it would bring the action against Iterative Capital Management over claims that the latter was dishonest about the extent to which they had had crypto trading success.

KDH had worked with Iterative to manage its investments.

The firm had hired Iterative for this purpose in late 2017, at a time when cryptocurrencies were popular due to an approaching peak in their value.

However, KDH now claims that Iterative did not actually intend to invest its cash in crypto due to fears over the viability of that plan.

Instead, KDH alleges, it was planning to use the cash to fund a crypto mining project.

It is believed that KDH made an investment of around $1m.

This led to it becoming a limited partner, although it later asked Iterative to take the cash out of the investment vehicle once the price crash occurred.

Iterative supposedly responded by saying that the investment was safe, although it allegedly continued to put the fund in a mining-specific fund.

According to a filing made in court, KDH claimed it was “rushed” into the investment plan.

“They first rushed Plaintiff into subscribing to a ‘hedge fund-like’ cryptocurrency investment and trading fund by misrepresenting prior performance history and liquidity options”, the documents read.

“…then, intentionally diverted from the fund’s stated investment objective and utilized the fund and its resources as their personal piggybank to build out mining operations and, separately, profit from a related over-the-counter cryptocurrency trading business”, they add.

Iterative allegedly later came back with documents that did not show the full picture.

“Defendants’ offering documents were similarly misleading and failed to disclose primary investment objective and strategy, properly describe the conflict of interest with affiliated entities, or reflect Iterative’s actual prior performance”, it said.

New tracing tool from CipherTrace

Leading blockchain intelligence company CipherTrace has announced a new tool designed to help banks track and trace cryptocurrency funds which are illegal in nature.

The new tool, called Armada, is aimed at banking looking to improve their anti-money laundering plans.

It is understood that part of the tool will focus on the risks that can occur when working with virtual asset service providers (VASPs).

It will also help banks to avoid being in a situation where they are involved in fraud without realising it.

According to John Jefferies, who serves as the chief financial analyst at CipherTrace, the tool has laudable intentions when it comes to “know your customer” (KYC) rules.

“The information collected about users as part of KYC is meant to ensure the exchange is abiding by all AML and Combating the Financing of Terrorism (CFT) requirements in addition to international sanctions”, he said.

“Without collecting some information on users, exchanges would have no ability to decipher whether a criminal is using their services to launder money”, he added.


Chris Lee

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