France’s financial regulator, the Autorité des Marchés Financiers (AMF), recently issued a warning in which it stated that there are a number of companies who’ve been offering services in the country without obtaining regulatory approval.
The AMF published a list of nine different firms that were operating without a license. Four of the companies identified by the French regulator were crypto-related businesses. The other potentially fraudulent firms included wine dealing services and one merchant that was reportedly selling diamonds without regulatory clearance.
Scams Involving "Trading Accounts"
As most crypto enthusiasts would know, there are digital currency scams that involve asking unsuspecting users to open “trading accounts” which the fraudsters claim can be used to purchase and sell digital assets. To open an account, the scammers tell the victim to deposit money.
However, shortly after the funds have been transferred, the user can never withdraw the money again as there was never really any trading account. The fraudsters usually stop communicating with the victim after receiving the funds. There have also been cases where the scammers ask the user to send them more money, so that they can make a withdrawal. But the user is never able to withdraw its funds, even after sending the extra payments.
AMF's Warning On Fraudulent Crypto & Diamond Investments
Diamond scams are orchestrated in a similar way. The victims are told their money will be used to buy precious stones, however the scammers say they will be holding onto the diamonds themselves for “safe-keeping.” After receiving the money, the con artists never buy any diamonds and just run away with people’s money.
The wine scam also works in a similar manner as the fraudsters tell people their money will be used to invest in highly profitable wine related businesses. But this is just another fraudulent scheme, and the victims just end up losing their money.
Although the warning message from the AMF did not specify whether the diamond and wine scams were related to other crypto-related scams, there has been at least one case where a fraudulent initial coin offering (ICOs) was conducted in which the company claimed their cryptocurrency was backed with diamond reserves. Last year, the US Securities and Exchange Commission (SEC) charged an ICO startup called ReCoin with fraud as Maksim Zaslavskiy, the company’s CEO, had been selling “unregistered securities.”
Fraudulent ICO Claimed To Have Purchased Diamond Reserves
An official statement from the SEC on the matter reads:
Zaslavskiy allegedly touted REcoin as ‘The First Ever Cryptocurrency Backed by Real Estate.’ Alleged misstatements to REcoin investors included that the company had a “team of lawyers, professionals, brokers, and accountants” that would invest REcoin’s ICO proceeds into real estate when in fact none had been hired or even consulted.
American regulators further noted that Zaslavskiy and REcoin claimed to have raised $2-4 million during their ICO but the firm only raised $300,000. Zaslavskiy had also lied to his clients as they were told their money was used to buy diamond reserves. Zaslavskiy’s company claimed that investors would be able to buy exclusive “memberships” deals involving diamonds. At the time, the SEC revealed that Zaslavskiy never bought any diamonds.