Cryptocurrency Scamers Running Investor Money Worth USD 2 Million

Apparently, Scammers have successfully raised more than USD 2 million of cryptocurrency after conducting Initial Coin Offering (ICO) or commonly known as initial coin offerings, and individuals associated with the incident may be associated with recent theft. Malicious actors use fake LinkedIn profiles and copy images from Instagram to other users to create fake persona, and they have managed to attract more than 1,000 investors to the ICO project, called Giza.

Wild World ICO
ICO is a way to raise funds from the crowd. Instead of raising money from investors, and companies in control of the ICO, it allows people to invest their money into cryptocurrency markets, such as ethereum or bitcoin, in exchange for new tokens issued by start up companies.

Digital currency is not an equity. Instead, digital currencies can be used in return for future services offered by the company. Perhaps this new coin could rise to a much higher value than the initial investment. There is a lot of money gained from ICO, and most are not regulated.

Last year, the company has raised $ 3.8 billion worth of funds through ICO, and this year alone has raised $ 2.8 billion, according to data from CoinSchedule, a site that tracks space activity.

But ICO is not regulated in most countries, which means that investors have no protection from the state. But regulators continue to tighten policy and keep a closer eye on ICO activity, amid growing number of fraud reports.

What happened to Giza?
Investors who describe their experience with the ICO: They think the project is legitimate until warning signs begin to emerge, including falling into the sole supplier of the company, the lack of correspondence from the founders it ought to be, and failing to attempt to recoup the lost funds.

A fraud center that seems to be well-designed around a mysterious individual called Marco Fike, COO of Giza. Among eight investors, partners and former Giza employees interviewed by CNBC, all claimed that they had never seen Marco Fike's face.

ICO Giza claims that it will develop a super-secure device that lets people keep crypto hidden. One person who put money into the project said they invested an eter equivalent to USD 10,000 at the time, and another said they had put in about $ 5,000 worth of ether.

In early February, Giza had lifted and held more than 2,100 ethereum coins, which at the time was worth about USD 2.4 million. All coins worth USD 16 from ethereum coins are now gone. But after putting money throughout January and February, many investors who invest began to be suspicious of the project.

Supplier Fall
"Everything is fine, until the company is meant to develop their device out of the internet site and says that Giza has severed the relationship, and it appears to be a scam and they probably will not develop anything. Then everything starts looking suspicious, "said an investor named Chris.

The Giza site was removed on Friday. Late last year, Giza contracted a Russian company known as Third Pin LLC to create a device that would eventually be sold. Third Pin LLC website explains that it makes hardware for a number of industries. But on January 30, Third Pin CEO Ivan Larionov declared that his company had severed ties with Giza.

Larionov confirmed to Giza has contracted Third Pin and his post is his. CEO Third Pin explained that he was contacted by Giza representatives before the new year. He was given a design for the device that Giza wanted to create, but not a technical requirement.

After the Third Pin engineers managed to determine the device specifications, they gave the price of USD 1 million to Giza and signed the contract. Larionov contacted STMicro, a component supplier, to help get the parts needed for Giza devices. He said that the sales manager at the company asked basic questions, such as the amount needed and when the product would become a product, which Larionov could not answer.

The CEO of Third Pin deals with Fike, who responds that Larionov is ill-defined. It was a red flag, Larionov said. Fike asked Larionov if he was willing to conduct a new operation outside Russia and set up ties with Giza from there, Larionov said.

CEO Third Pin suspects that Fike wants to break away from Russia's strict cryptocurrency rules but rejects the request. Next Third Pin went on to assess the cost of production, the company found that it would be higher than originally forecasted.

The cost for Giza rose to USD 1.5 million. Larionov suggested to Fike that Giza could pay the mortgage, something that Fike does not want to do. "At that time he said no, it is impossible," Larionov said. "So the next thing I say to my employees is we will cut the contract," Larionov continued.

One investor showed CNBC's exchange with Larionov via the Telegram messaging app, where he shared the same story. In his conversation, Larionov said that Giza offers to pay 60 percent of the total contract, and the rest will come later in 2018, after they do another part of ICO to raise more money.

But, at that time Larionov had a suspicion about whether the company would disappear after getting the funds so that it ended the relationship. Around mid-February, the address of a digital wallet associated with Giza, where people were asked to send money, began to show a large outflow of ethereum. It continued for about two weeks. The last money move from Giza account occurred on March 2nd.