Washington Watchdog Issues Fraud Alert

Washington state regulators are investigating Ethfinance, a crypto trading platform, after a local investor reported losing a staggering $310,000. The case raises red flags about potential crypto scams preying on unsuspecting victims through social media.

Ethfinance: Friend Request Gone Wrong

The unnamed investor, according to the Washington State Department of Financial Institutions (DFI), was introduced to Ethfinance through a “random friend request on LinkedIn.” This seemingly innocuous online interaction turned into a financial nightmare. Lured by the promise of high returns on cryptocurrency trading, the investor transferred a total of $310,000 from their DeFi wallet to Ethfinance.

However, when the investor attempted to withdraw some of their initial investment and supposed profits, things took a suspicious turn. Ethfinance’s customer service, communicating solely through Telegram messenger, demanded the investor send additional funds to complete a “smart contract” before allowing any withdrawals.

This tactic, commonly seen in advance fee scams, raises serious concerns about the platform’s legitimacy. The investor, rightfully wary, refused to send more money and has since been locked out of their account, unable to access their invested funds.

Total crypto market cap at $2.38 trillion on the daily chart: TradingView.com

Regulator Issues Warning, More Platforms Flagged

The DFI, while emphasizing they haven’t verified all the details of the complaint, issued a public warning classifying the case as a potential “Advance Fee Fraud” scheme. These schemes often lure victims by promising high returns on investments and then require the payment of fees or taxes before any supposed earnings can be withdrawn, said a DFI spokesperson, mirroring tactics used by the US Securities and Exchange Commission (SEC) to identify similar scams.

The DFI’s alert serves as a stark reminder for Washington residents, urging them to be extremely cautious before responding to any unsolicited investment offers, especially those originating from social media or messaging apps.

Social Media And Crypto: A Breeding Ground For Scams?

The department further emphasized that any investment professional offering services to Washington residents must be licensed with the DFI. This incident isn’t an isolated case. The DFI also flagged two other crypto trading platforms, WTOCoin and Foundation-coin, for exhibiting similar red flags, including difficulties with withdrawing funds for investors.

The rise of social media platforms like LinkedIn has created new avenues for scammers to target potential victims. Cryptocurrency, with its inherent complexities and lack of mainstream regulation, can further obscure fraudulent activity. Investors, especially those new to the crypto space, are particularly vulnerable to these online tactics.

Featured image from Outseer, chart from TradingView