20 Years for $73 Million Scam

Every week, Information Security Media Group rounds up cybersecurity incidents in digital assets. This week, a 20-year sentence in a $73 million Cambodia scam center fraud, SafeMoon CEO got eight years for fraud, Sam Bankman-Fried sought a new trial, Epstein’s early crypto investments, a U.K. lawsuit against HTX, a probe of a Trump-linked crypto deal, a crypto-linked home invasion and a $43 billion Bithumb error.

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A U.S. federal judge sentenced Daren Li, 42, a dual citizen of China and St. Kitts and Nevis, to the maximum 20 years in prison for his role in a cryptocurrency investment fraud operated from scam centers in Cambodia. Li, who pleaded guilty in November 2024 to conspiracy to commit money laundering, removed his electronic monitoring device and fled the United States last December. He is a fugitive.

Prosecutors said Li and his co-conspirators laundered more than $73 million stolen from American victims. The group contacted targets through unsolicited social media messages, phone calls and dating platforms, building trust through fake professional or romantic relationships. They directed victims to spoofed cryptocurrency trading websites or posed as tech support agents to persuade them to transfer funds to fraudulent accounts.

Li admitted that he helped route at least $73.6 million through shell companies and bank accounts to conceal the source of the funds. Eight co-conspirators have pleaded guilty, and restitution will be determined later.

A U.S. federal judge in Brooklyn sentenced Braden John Karony, former CEO of SafeMoon US, to more than eight years in prison for conspiring to commit securities fraud, wire fraud and money laundering tied to a scheme that defrauded investors. A jury convicted Karony in May after a three-week trial. The court also ordered him to forfeit about $7.5 million and two residential properties; restitution will be determined later.

Prosecutors said Karony misled investors about SafeMoon’s 10% transaction tax and promised that portions would fund locked liquidity pools and reward token holders. Instead, he and his co-conspirators retained access to the liquidity pools and diverted millions of dollars in cryptocurrency for personal use.

Authorities said Karony obtained more than $9 million in crypto assets and spent the proceeds on luxury homes and high-end vehicles. One co-conspirator has pleaded guilty and awaits sentencing, while another is at large.

Newly released U.S. Department of Justice documents show that Jeffrey Epstein financed early cryptocurrency ventures, including bitcoin-related research and major startups. Records indicate Epstein helped fund the MIT Media Lab’s Digital Currency Initiative, which described itself as a principal home for bitcoin research. He also invested $3 million in Coinbase in 2014 and backed bitcoin technology firm Blockstream with a $500,000 stake through a fund linked to then-Media Lab director Joichi Ito.

Coinbase co-founder Fred Ehrsam discussed the investment with Tether co-founder Brock Pierce. Filings show Epstein later sold half his Coinbase shares for $15 million. Blockstream said an affiliated fund later divested and that it has no financial ties to Epstein or his estate.

The U.K. Financial Conduct Authority has launched High Court proceedings against crypto exchange HTX, formerly Huobi, for allegedly promoting crypto services to British consumers without authorization. The action, initiated on Oct. 21, marks the agency’s first enforcement case against a crypto firm under financial promotion rules introduced in October 2023.

The FCA says HTX ignored repeated warnings and continued advertising on TikTok, X, Facebook, Instagram and YouTube, as well as through its website and mobile apps. The regulator named Huobi Global S.A., a Panama-incorporated entity, and “persons unknown” controlling the platform in the case, citing opaque ownership and non-engagement. In February, the court allowed the FCA to serve proceedings internationally.

The FCA asked social media platforms to block HTX’s UK accounts and requested app stores to remove its apps. HTX halted new U.K. registrations but existing users can still access accounts.

Former FTX CEO Sam Bankman-Fried launched a long-shot pro se motion seeking a new trial after a New York jury convicted him in November 2023 on seven counts of fraud tied to the collapse of his cryptocurrency exchange. In a motion before the U.S. District Court for the Southern District of New York, Bankman-Fried accused the Department of Justice of withholding evidence and asked that Judge Lewis Kaplan be recused.

Bankman-Fried orchestrated one of the largest financial frauds in recent years through FTX and its affiliated hedge fund, Alameda Research. Kaplan sentenced him to 25 years in prison (see: Cryptohack Roundup: Sam Bankman-Fried Gets 25-Year Sentence ).

In the new filing, Bankman-Fried argued that FTX was solvent and faced only a liquidity crisis. He also claimed potential defense witnesses felt pressured not to testify. An earlier appeal is pending before the U.S. Court of Appeals for the Second Circuit, although two of the three judges who heard oral argument appeared skeptical of arguments that he was denied a fair trial, reported Business Insider..

Rep. Ro Khanna, D-Calif., reportedly launched an investigation into World Liberty Financial, a crypto project linked to U.S. President Donald Trump. The probe focuses on a reported $500 million investment from an entity tied to the United Arab Emirates royal family. In a letter to co-founder Zach Witkoff, Khanna requested documents and details about Aryam Investment 1’s reported 49% stake in WLFI. The Wall Street Journal reported in January that the deal included a $250 million upfront payment, with significant sums directed to Trump family entities and affiliates of Steve Witkoff.

Khanna raised concerns that the investment may coincide with U.S. approvals of advanced AI chip exports to UAE-linked firms, including G42, which is overseen by Sheikh Tahnoon bin Zayed Al Nahyan. He also cited a $2 billion MGX investment in Binance using WLFI’s USD1 stablecoin. Khanna questioned whether the arrangements raise national security issues or violate the Constitution’s emoluments clause and requested responses by March 1.

Two California high school students reportedly face felony charges after authorities say they drove more than 600 miles to carry out a violent home invasion in Scottsdale, Arizona, targeting a family they believed held $66 million in cryptocurrency. According to court documents, the 16- and 17-year-olds arrived at the home on Jan. 31 wearing delivery-style uniforms, forced their way inside and restrained two adults with duct tape while demanding crypto assets. An adult son called 911, and police arrested the teens after a brief attempt to flee.

Officers recovered zip ties, duct tape, stolen license plates and a 3D-printed gun with no ammunition. Investigators say the teens communicated via Signal with individuals identified as “Red” and “8,” who allegedly supplied the address and $1,000 for materials. Both suspects will be tried as adults and face charges including kidnapping, aggravated assault and burglary.

French authorities arrested six people in connection with the abduction of a magistrate and her mother in the Drome region, where captors allegedly demanded a cryptocurrency ransom and threatened mutilation, reported Le Monde. The 35-year-old magistrate and her 67-year-old mother endured a 30-hour ordeal before escaping without paying ransom, according to prosecutors.

The magistrate’s partner, a senior executive at a cryptocurrency startup, received a text message with a photo of the victims and a crypto ransom demand. Prosecutor Thierry Dran said the suspects threatened to harm the victims if payment was not made quickly but did not disclose the amount sought.

The two women managed to free themselves by making noise in the garage where they were held, alerting a neighbor who helped them escape. Police detained four men and one woman, and later arrested a minor in connection with the case.

South Korea’s Financial Supervisory Service opened an investigation into crypto exchange Bithumb after it mistakenly distributed about 620,000 bitcoin, worth roughly $43 billion, during a promotional event.

The error occurred on Feb. 6 when a staff member reportedly entered rewards in bitcoin instead of Korean won, crediting hundreds of user accounts with far more crypto than the exchange actually held. At the time, Bithumb had about 46,000 BTC in reserves.

Bithumb said it recovered 99.7% of the wrongly distributed bitcoin and 93% of the 1,788 BTC that users sold, leaving about 125 BTC unrecovered. The exchange pledged to compensate affected users at 110% of losses and to establish a 100 billion won – about $68 million – user protection fund while strengthening internal controls.