Saturday, June 27, 2015

Scam Tactics: Evolution of a Scam, from Proto-Share to Investment Fund to Cryptocurrency

A scam, like a specie, must evolve in face of pressure, such as law enforcement, spreading information about how scammy it was, and so on. To this end, it will often adopt the following tactics:
  • Language barrier -- spread to an area that speaks a very different language, like from US to Asia
  • Jargon barrier -- adopt modern buzzwords and drop buzzwords out of favor 
  • Obfuscation barrier -- have multiple company names, then intentionally mistranslate them to create even more confusion. 
Today, we will document one such scam, chronologically, including various names and translations, to show you how a scam evolved.

The scam went by various names. In China it is best known as American Continental Mining Industries 美洲矿业, but it's known elsewhere as USFIA

In November 2014, Chinese media covered that several scammers were extradited from Thailand that were scammers of something called 美洲矿业 that scammed people in Changde 常德, a city in Hunan province, China, as a part of International Fugitive Apprehension program known as "Operation Foxhunt 2014 獵狐2014". Changde police after receiving word that many downlines of the scam is traveling to Thailand for a special promo event, also travelled to Thailand and received cooperation from Thai police. Changde police then infiltrated the event on October 29th, 2014 in Thailand and filmed various promoters attending and speaking at the event, all talking about earn kaboodles of money without doing anything (if you invest now). After gathering the evidence, which was handed to Thai police, Thai police then made the arrests and handed two suspects over to Chinese police who brought them back to China. 

Just to break down the title:

美洲 -- American Continent
矿业 -- Mining Industry

So again, the name of the scam is American Continental Mining Industries 美洲矿业 Searching for this term on Chinese media yielded various newspaper reports, as well as Chinese affiliate promotional material. Another Chinese coverage stated:

(2014) May 13th, Mr. Liu of Changde reported he was victim of a scam. He handed 32500 RMB to "American Continental Mining Industries" to participate in supposedly Amber fund and proto-share investment. However, after a long time, there was no returns, and realized he had been scammed. 
After receiving the report, Changde MinSec started its investigation. This (criminal) organization claimed to be started by a "China US Political Consultive Promotional Committee" and holds a Chinese "direct sales" license, and engaged in pyramid sales activities in Shandong, Liaoning, Zhejiang, Guangdong, Guangxi, Yunnan, Henan, Hunan, and various provinces, and many times using the name "American Continental Mining Industries" to hold several promotional meetings in China. 
Up to June 2014, this criminal group has developed over 180 levels of downlines of over 80000 members, and illegally solicited funds of nearly 1 billion RMB (~161 million USD)
This news item explained that 2 members, a Mr. Chen (陈某) and a Mr. Lu (陆某) left the country before the police swept up the organization and arrested 22 leaders. Mr. Lu apparently changed the organization name to American Continental Amber (美洲琥) and continue to "remote" manage from afar. As two were arrested in Thailand, we assume both were extradited back to China, but that's not the end of this scam.

Also keep in mind that the Chinese equivalent of Senate is called Chinese People's Political Consultive Conference  and scam's parent organization (中美政治协商促进会) may have been picked to be a soundalike and official-sounding.

So here we have the following events:

2014 -- scam started as American Continental Mining Industries 美洲矿业

2013-2014: American Continental Mining Industries 美洲矿业 Searching for this term on Chinese media yielded various newspaper reports, as well as Chinese affiliate promotional material. Another Chinese coverage stated:

2014 June -- arrests in Changde, China related to 美洲矿业, leader escaped (to Thailand? US?) and renamed operation to American Continental Amber 美洲琥

2014 October -- arrests in Thailand in cooperation between Thai and Chinese police related to 美洲矿业, subjects extradited to China

From here, the scam went quiet in China... Because it was apparently relaunched in the US.

Tuesday, June 23, 2015

A Common Scam Defense: Similarity Between Homeopathy Advocacy and HYIP promotion

A frequent refrain among HYIP promotion are the following points:

  • It's a conspiracy to destroy the alternative forms of income they don't want you to know
  • You should be in control of your money, not limited to what "they" want you to know
  • Various versions of _____ had been around since ______ and we do something like that
You can find this in almost every HYIP. If they were not outright stated, they were surely implied, or weasel worded like "new and profitable enterprise", often cloaked with buzzwords like cryptocurrency, penny auction, e-commerce, VOIP, and so on. 

We've seen the collapse of various scams using such cloaks. 

TVI Express, a huge international pyramid scheme that spanned several continents (India, Australia, US, most of Europe, several countries in Africa, China, Indonesia, Philippines...) claimed to be selling travel or travel club, and promoted itself as combining internet, e-commerce, working from home, and such. Little travel was provided. 

ZeekRewards, an international ponzi scheme was truly global with net winners (and victims) all over the world. It claimed to be earning huge profits through its penny auctions, but in reality it simply shifted money from last investors to the early joiners through facade of "profit sharing". It was shut down by Secret Service and forced into receivership.

Another scam was TelexFree, where owners claimed to be selling VOIP packages which lets you talk international voice calls over the Internet and avoid long distance phone fees (and for a while, they really did) but in reality is operating a Ponzi scheme based out of two separate countries: Brazil and the US, with investors form all over the world before it was shut down in Brazil, then the US, and even FBI and Homeland Security got involved in the raids.  It is estimated that company took in over 1 BILLION dollars from 1.9 million investors

In more recent news, UFUN out of Malaysia and Thailand enticed members to invest in its cryptocurrency UTOKEN, while claimed to be investing in various enterprises that will realize huge profit for its members. Thailand started a full crackdown weeks ago and had arrested more than a dozen high rankers, with wanted notices out for 200 more, with 300000 pages of evidence handed over to prosecutor's office recently, so there's obviously more to come. Its members were also arrested in Samoa and other places for fraud. 

They all implied that they are new ways to make money, that other people don't know or don't want you to know, and they can actually do what they promise. 

This sounds remarkably like homeopathy and alternative medicine advocacy to me, as they use the same arguments:
  • It's a conspiracy of "mainstream medicine" to destroy "alternative medicine"
  • You should be in control of your health, not have a limited vision forced upon you
  • Various versions of alternative medicine had been around since _____
I'll leave the debunking of the homeopathy advocacy to Michael Vagg, while I tackle the HYIP promotion.