The Federal Investigation Agency's (FIA) Cyber Crime Wing (Sindh) said on Friday that it had issued a notice to an official from Binance, a popular cryptocurrency exchange, while investigating a multi-million dollar scam.
In a press release, the FIA said that the Cyber Crime Wing had issued an order of attendance to Hamza Khan, the general manager/growth analyst at Binance Pakistan, to explain his position on the company's linkage to "fraudulent online investment mobile applications".
"A relevant questionnaire has also been sent to [the] Binance Headquarters [in] Cayman Islands and Binance US to explain the same," the handout said.
The agency said that many online investment frauds were operating in Pakistan on the pattern of Ponzi schemes where investors were promised high returns on their investment if they brought in more clients.
"These schemes benefit old clients at the cost of new clients and ultimately disappear when they have made [a] substantial capital base worth billions of rupees," the handout said.
The FIA further added that on Dec 20, 2021, people from all over the country contacted the agency and said that at least 11 mobile apps had stopped working and had "defrauded people of billions of rupees".
These apps were identified as MCX, HFC, HTFOX, FXCOPY, OKIMINI, BB001, AVG86C, BX66, UG, TASKTOK and 91fp.
"The modus operandi of these applications was to ask people for registration at Binance Crypto Exchange (Binance Holdings Limited) [...] the next step was to transfer money from the Binance Wallet to the account of that particular application.
"At the same time, all the members of the group were added in groups on Telegram where so-called expert betting signals, on the rise and fall of Bitcoin, were given by the anonymous owner of the application and admins of the Telegram groups," the FIA press release said.
These apps crashed once a considerable capital base was established, robbing people of millions of dollars through the "referral bonus process", it added.
The FIA said that according to the initial findings, each application had an average of 5,000 customers with HFC reporting the maximum number of customers at 30,000.
"The reported range of investment per person was from $100 to $80,000 with an estimated average of $2,000 per person thus making estimated scam stand at nearly $100m," the agency said.
It added that necessary steps had been taken "to reach the root of this scam", including the "debit block" of all Pakistani bank accounts linked to such apps.
It said authorities at Telegram were being contacted to provide the whereabouts of the admins of the fraudulent apps. "Social media influencers promoting these apps are being served with legal notices to explain their point of contact with the apps," the agency said.
"At least 26 suspect blockchain wallet addresses (Binance wallet address) have been identified where fraudulent amount may have been transferred. A letter has been written to Binance Holdings Limited to give the details of these blockchain wallet accounts as well as to debit block them," the statement said.
"Binance has been asked to provide with conditions, official supporting documents, integration mechanism of these API’s (applications) with Binance," it added.
The FIA also stated that Binance was the "largest unregulated virtual currency exchange" where Pakistanis had invested millions of dollars.
"FIA Cyber Crime Sindh has started steps towards keeping a close eye on peer-to-peer transactions done by Pakistanis on Binance to curb the menace of terror-financing and money laundering as Binance is the largest easy-to-go platform facilitating such activities."
The FIA said that it expected Binance to adopt a "liberal and swift approach" in helping Pakistan track financial crimes.
"In case of non-compliance, FIA Cyber Crime will be justified to recommend financial penalties on Binance through the State Bank of Pakistan," the handout said.
