Old frauds with a new sauce: digital assets and space transition

Abstract

Purpose The purpose of this study is to describe the evolution of fraud schemes with historically conducted with fiat money in physical space to the crypto-assets in digital space as follows: ransomware, price manipulation, pump and dump schemes, misrepresentation, spoofing and Ponzi Schemes. To explain how fraud schemes have evolved alongside digital asset markets, this study applies the space transition theory. Design/methodology/approach The methodology used is a review of the media regarding six digital asset fraud schemes that have evolved from physical space to virtual space that are currently operational, as well as a review of the literature regarding the space transition theory. Findings This paper finds that the digital space and digital assets may facilitate pseudonymous criminal behavior in the present regulatory environment. Research limitations/implications The field is rapidly evolving, however this study finds that the conversion from physical to virtual space obfuscates the criminal activity, facilitating anonymity of the perpetrators, and creating new challenges for the legal and regulatory environment. Practical implications This paper finds that the digital space and digital assets may facilitate pseudonymous criminal behavior in the present regulatory environment. An understanding of the six crypto-asset fraud schemes described in the paper is useful for anti-financial crime professionals and regulators focusing on deterrence. Social implications The space transition theory offers an explanation for why digital space leads criminals to be better positioned to conduct financial crime in virtual space relative to physical space. This offers insights into behavior of digital asset fraudster behavior that could help limit the social damage caused by crypto-asset fraud. Originality/value To the authors’ knowledge, this paper is the first to detail the evolution of fraud schemes with fiat money in physical space to their corresponding schemes with digital assets in physical space. This study is also the first to integrate the space transition theory into an analysis of digital asset fraud schemes.

Prospecting non-fungible tokens in the digital economy: Stakeholders and ecosystem, risk and opportunity

“…Tal es el caso de la Security and Exchange Commission -SEC en los Estados Unidos de América que supervisa los anuncios que las entidades hacen al público que puedan afectar la cotización de las acciones y en múltiples ocasiones ha impuesto multas a los directores por identificar hechos que carecen de validez y respaldo. Dupuis et al (2021) describen el caso de la multa impuesta a los directivos de Tesla por más de USD$20 millones al identificar hechos que buscaban afectar el precio público de las acciones de esa Entidad, sin embargo, en la actualidad no existe un órgano de supervisión equivalente para las criptomonedas generando la posibilidad, como ha sucedido de forma reiterada en los últimos meses, que mediante trinos o mensajes a través de las redes sociales como Twitter aumenten o disminuyan de forma considerable los precios. Gandal et al (2018) describen la forma como uno de los principales intermediarios de criptomonedas de Japón de nombre Mt.…”

“…A pesar que el objetivo fundamental de la presentación de la información financiera no es la identificación de fraudes, tanto en activos tradicionales como digitales, las entidades de supervisión como Securities Exchange Commission -SEC y el Departamento de Justicia -DOJ, han abierto investigaciones a sus vigilados por la incorrecta aplicación deliberada de los principios de contabilidad generalmente aceptados, específicamente vinculados a criptoactivos, por revelaciones que no corresponden a la realidad de las transacciones y otras prácticas fraudulentas, entre las que se encuentran: omisión de pasivos, omisión de eventos significativos, fraudes en la gestión de la administración, no revelación de cambios contables y transacciones con partes relacionadas (Dupuis et al, 2021).…”

Why Are Cryptocurrencies Vulnerable to Pump-and-Dump Schemes in Europe?

“…22 d. Final victims, these people have no knowledge about the pumping scheme. 23 These victims are urged to buy the revealed coin, dumped on the open market, because of the hype caused by pump organisers or fear of missing out. 24 As mentioned above, pump-and-dump schemes are not a new problem to the financial market, as technologies evolve fraudsters also evolve.…”

“…Although, one could argue that law enforcement could trace wrongdoers by utilising similar technologies. 36 It is unlikely to efficiently combat cryptocurrency pump-anddump activities because encryption, decentralisation, and distribution are playing a greater role against cryptocurrencies at this stage.…”

What Users Tweet on NFTs: Mining Twitter to Understand NFT-Related Concerns Using a Topic Modeling Approach

“…While some have praised the emergence and growth of NFTs as a significant advancement that brings unicity and scarcity to the digital sphere [4], [5], others have expressed serious concerns, naming NFT trading hazardous, a pyramid scheme, or even a fraud [6], [7]. Also, research has revealed that concepts of trust [8], risk [9] and concerns around blockchain-based assets or the use of tokens [10] are to some extent inherently characterizing NFTs.…”