An investor claims to have lost $310,000 on a fraudulent crypto trading platform called “Ethfinance” after receiving an unsolicited LinkedIn request.
The Washington State Department of Financial Institutions (DFI) issued a consumer alert on June 13, highlighting an investor who had been using a so-called cryptocurrency trading platform called “Ethfinance.”
The investor transferred funds from a DeFi wallet to Ethfinance in the hope of profiting from crypto trading, the DFI said.
However, when attempting to withdraw part of the initial principal and reported profits, the investor was told that additional funds were needed to complete the “smart contract.”
The investor refused to send more funds and has since been unable to access the account, which has now been locked.
The DFI said the case appears to be an “advance fee fraud,” a scam that promises substantial returns in exchange for an advance payment. After payment, the scammers typically demand additional fees or disappear entirely.
The EthFinance website suspected of fraudulent transactions is still online. Source: Ethereum Finance
The Washington DFI’s cryptocurrency scam tracker shows that Ethfinance has been involved in previous complaints.
A California resident reported losing more than $165,000 to a similar scam after being approached online by a stranger who offered to teach him cryptocurrency options trading.
Washington DFI’s ETH Finance crypto scam tracking results. Source: Washington DFI
They were later asked to send 25% of their profits as "taxes" via Telegram to complete the withdrawal, which revealed the scam.
On June 13, the DFI issued three additional alerts about suspected fraudulent cryptocurrency exchanges and investment management platforms.
Fraudsters count on you not to do your research before investing. Defend against them by doing your own research. It's not enough to simply ask for more information or references - fraudsters have no incentive to correct you. Take the time to do your own independent research. For more information, see Ask Questions.
Do your research before investing. Unsolicited emails, message board posts, and company press releases should never be the sole basis for your investment decision. Learn about a company's business and its products or services before investing. Look for a company's financial statements on the SEC's EDGAR filing system. You can also view many investments by searching EDGAR.
Get to know the salesperson. Spend some time checking out the person touting the investment before investing - even if you already know the person socially. Always find out if the securities salesperson you are contacted by has a license to sell securities in your state and if they or their firm has had run-ins with regulators or other investors. You can check the disciplinary history of brokers and advisors for free using the SEC and FINRA's online databases. Your state's securities regulator may have more information.
Be wary of unsolicited offers. Be especially cautious if you receive an unsolicited pitch to invest in a company or see it praised online but can't find the latest financial information about the company from independent sources. This could be a "pump and dump" scam. Be wary if someone recommends a foreign or "offshore" investment. If something goes wrong, it can be hard to find out what happened and to track down the money that was sent abroad.
Protect yourself online. Online and social marketing sites offer plenty of opportunities for fraudsters. For tips on how to protect yourself online, see Protect Your Social Media Accounts.
Know what to look for. Educate yourself on the different types of scams and red flags that could indicate an investment fraud.
This incident highlights the ongoing risk of advance fee fraud in the cryptocurrency space. Investors should exercise caution and verify the legitimacy of a platform before transferring funds.
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