Scam Involving Bitcoin Nets Criminals Posing as Government Officials $2 Million

Cryptocurrency scammers have reportedly been posing as government officials and asking people to make payments in Bitcoin (BTC) or use prepaid gift cards.

New York’s Police Department (NYPD) has issued a warning regarding the fraudulent activity and has also reported the scammers have already stolen millions of dollars by posing as Social Security Administration (SSA) officers.

Over 200 Complaints Received

As confirmed by the NYPD, cryptocurrency-related scams involving bad actors posing as government officials have increased significantly. In fact, the NYPD revealed it received over 200 complaints this year regarding losses of more than $2 million (in total). Notably, the NYPD said it only received three such complaints thrgouhout last year.

Commenting on the matter, Nilda Hofmann, the Chief of Community Affairs, remarked:

Sophisticated phone scams use the trust victims have in their own governmental and law enforcement agencies against them. Victims of this type of phone scam are not limited to senior citizens – these criminals are targeting every strata of society and every demographic is vulnerable.

“Just Hang Up If You Suspect Call To Be Fraudulent”

Hofmann added that the NYPD has been working cooperatively with its partners in the financial sector. She also noted that police officials are committed towards investigating the matter and will hold the criminals accountable for their exploitative actions.

Hoffman advised that “if you even suspect a call to be fraudulent, don’t take a chance, just hang up.”

Scammers Misleading Victims

Scammers posing as government officials have been calling unsuspecting individuals and have been telling them that their social security number was used without their consent to open various accounts. Some of the victims were also told their government-issued IDs were used to engage in illicit activities such as money laundering and drug trafficking.

After the victims have been tricked into thinking their social security number was misused, the scammers tell them to transfer large sums of money, in order to resolve the matter. According to the NYPD, the scammers pose as “law enforcement officers” or “police officials” and use intimidation and issue threats in order to get the victims to comply.

Scammers often use “spoofing” techniques to mislead people into believing that they are actually receiving phone calls from government officials. These tactics can be quite convincing at times because the victim’s caller ID actually displays the real number of the Social Security Administration (after it has been spoofed).

CME Looks to Double Bitcoin Futures Limit, but Is This Wise?

The Chicago Mercantile Exchange (CME) has a new request for its regulator, as it looks to double open position limits on bitcoin futures contracts in the face of significant interest.

Nasdaq reports that the CME has already petitioned its regulatory body, the Commodity Futures Trading Commission (CTFC), asking for an increase from 1000 contracts per spot month to 2000 per investor. Each contract represents five BTC, so essentially, at its peak,  a single investor's total position may edge towards a monumental 10,000 BTC.

This is in direct response to the contract's recent growth which is currently depicting record levels of activity, citing $370 million being traded per day. A spokesperson for the CME noted that the idea to increase limits was proposed on the continued maturity of the market:

Based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market.

However, as Nasdaq writes the increase in the upper limit of positions is somewhat superfluous. As of July, the number of open interest contracts reached an all-time high of just 6100; given this, it seems the CME may be future-proofing.

Open to Manipulation?

However, concerns remain about the limit increase, as without them, the potential for manipulation rises; often to the detriment to the underlying asset. Although, as per the CTFC website, the threat of manipulation from bitcoin futures contracts is "low":

In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low.

Instead, Nasdaq posited that this might point to a lessening on the CTFC's strict rule of bitcoin; as well as a maturing of the market in general.

Nevertheless, some believe the CME's bitcoin futures contracts do pose a significant threat to the price of BTC; with some suggesting that blatant manipulation continues unchecked within the market.

As reported, there seems to be a correlation between the expiry dates of CME bitcoin futures contracts and a lull in the price point of BTC. In several instances, a significant drop in bitcoin's price has coincided with a closure from the CME. The most recent example of this occurred on Labor Day, September 2, when bitcoin rose an extraordinary 8% shortly after the CME shut.

Crypto analyst, Alex Kruger, highlighted this, noting the large gaps which formed on the CME chart, from the price discrepancy before and after closing.

This has become a pretty accepted practice within the market. Kruger has even gone to the lengths of compiling statistics each time this phenomenon transpired:

On these occasions, bitcoin cited an average 4.6% price discrepancy following the close of the CME.

Whether this is a coincidence or the market is indeed being actively manipulated is as yet unclear. Either way, with the increase of these limits it might be only a matter of time until we know for sure.

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