Daily fraud update: 3rd December

Chris Lee

Morgan Stanley in action against forex traders

International finance giant Morgan Stanley has announced that it has taken disciplinary action against a group of traders involved in an alleged foreign exchange scam.

The bank has targeted four traders as part of the developments.

Some have been dismissed outright, while others have been sent on leave.

Two of them were from the New York office, and have been named as Mitchell Nadel and Thiago Melzer – both of whom were involved in operating the macro trading and emerging markets desks.

In London, Rodrigo Jolig and Scott Eisner were also alleged to have been involved.

According to reports, the four are accused of telling investors that the currencies which they were trading – most of which were emerging market currencies – were performing much more profitably than they were in reality.

It is understood that this led to costs in what is known as “mismarking” – and that this may have reached as much as $40m over the course of the alleged fraud.

Latest CipherTrade report shows big losses

A quarterly report from the crypto research firm CipherTrace has revealed that fraud in the crypto sphere is on the up.

The report said that the total value of fraud and theft of crypto stood at around $4.4bn in Q3 of 2019, which is a large leap from the figure of $1.7bn seen in the previous year.

Some of this rise has been attributed to particular scams, such as that of PlusToken –which lost $3bn worth of bitcoin was harvested.

There was, however, some positive news.

The overall amount taken from crypto exchanges, for example, sat at $15.5m.

In the report, the authors explained how recent laws addressing “know your customer” and “anti-money laundering” rules were having effects on the market.

“Q3 saw an increasing regulatory clampdown on virtual asset transactions as nations, crypto exchanges, banks and financial institutions prepare for the FATF funds Travel Rule to take hold”, they said.

“In anticipation of the new FATF AML regulations, many cryptocurrency exchanges have preemptively jettisoned their privacy coins; yet, 32 percent of exchanges, including those determined to have weak KYC, still have privacy coins listed.”

They also provided more context for the overall figures – as well as a sobering warning about the potential risks of terrorism.

“Although Q3 showed the lowest quarterly cryptocurrency thefts and scams in two years, the total number for 2019 still stands at a whopping $4.4 billion”, they said.

“Terrorists, wise to blockchain forensics, are developing more sophisticated methods of obfuscating cryptocurrency funds flows for financing attacks and operations”, they added.

CipherTrace releases reports such as these on a regular basis.

It describes itself as a “leader in blockchain security” and offers a range of products and services designed to help firms avoid crypto-related problems.


Chris Lee

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