Fintech CEO: $2.5MM Romantic Bitcoin Scam Re–Illustrates Need for Precautions

A CBS investigative report followed the tragic case of a local woman who became embroiled in a relationship with a man who eventually scammed her for over $2.5MM in cryptocurrency.

The man began to tell her how much money he was making in crypto-trading, and he helped her invest through an exchange which was actually a spoofed website that appeared to be genuine but was not. Now, her money is gone.

“The headlines on these stories are about cryptocurrency, but it is a story that could happen regardless of the spoofed investment offering. Cryptocurrency is in the news, and people’s interest is piqued in the topic. But, you always need to do your due diligence whenever you invest money. This is a cautionary tale for all people. Verify for authenticity consistently,” said Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives, and digital asset exchanges.

Matthew Giacobbi, Special Agent in Charge of the FBI’s Boston Division, says, “They’ve become very sophisticated at making these websites look real when they’re not.”

“These bad actors have really become adept at finding ways to promote their malfeasance. As soon as we get a handle on stopping a particular scam, a new scam is born. This isn’t just in the digital assets world; we see it across industries in the cybersecurity realm. Hackers are very good and very convincing. It has never been so important for people to do their due diligence whenever money is involved,” said Gardner.

Modulus is known throughout the financial technology segment as a leader in the development of ultra-high frequency trading systems and blockchain technologies. Modulus has provided its exchange solution to some of the industry’s most profitable digital asset exchanges, including a well-known multi-billion-dollar cryptocurrency exchange. Over the past twenty years, the company has built technology for the world’s most notable institutions, with a client list which includes NASA, NASDAQ, Goldman Sachs, Merrill Lynch, JP Morgan Chase, Bank of America, Barclays, Siemens, Shell, Yahoo!, Microsoft, Cornell University, and the University of Chicago.

“Even in areas where there isn’t malfeasance created by bad actors, negligence can also be a problem. While our industry must always be vigilant against hackers and those who intend to do harm, we must also hold our institutions to higher standards,” said Gardner.

For example, Fireblocks, which is among the best known digital asset custodial providers, found itself embroiled in a lawsuit with StakeHound, which alleges the custody company lost roughly $70MM of Ethereum, after the key vanished. As a result, StakeHound could not access over 38,000 ETH.

“Custodial services need better structure. We need our regulators to step-up and provide a commonsense guide book so that these companies know exactly what standards they must meet. Protecting against bad guys is important, but so, too, is protecting against human error and negligence,” said Gardner.