Law enforcement agencies from Austria, Cyprus and Czechia have arrested six Austrians responsible for an online cryptocurrency scam. Europol and Eurojust supported this investigation targeting the creators of a seemingly new cryptocurrency launched in December 2017. After performing six house searches, law enforcement seized over EUR 500 000 in cryptocurrencies and EUR 250 000 in fiat currency, and froze dozens of bank accounts. Furthermore, two cars and a luxury property worth EUR 1 400 000 were seized.

Between December 2017 and February 2018, the scammers pretended to have set up a genuine online trading company which had issued a new cryptocurrency. The initial coin offering (ICO) amounted to an offer of 10 million tokens – or respective rights to the new currency. Investors paid them in established cryptocurrencies such as Bitcoin or Ethereum. In order to gain credibility with investors, the Austrian fraudsters also claimed to have developed their own software and a unique algorithm for the sale of the tokens.

Suspicious behaviour and exit scam

Traditionally, an ICO will build upon transparency and communicate clearly about each team member responsible for it. In this instance, there was a lack of transparency regarding both the team members involved and the algorithm underpinning the cryptocurrency. In February 2018, the perpetrators suddenly closed all the project’s social media accounts and took the fake company’s website offline. Following this exit scam, it became apparent to investors they had been defrauded. At this stage of the investigation, not all victims of this scheme have yet been identified.

Collaborative law enforcement effort

Europol’s specialists organised five operational meetings and worked hand-in-glove with the Austrian desk at Eurojust, providing a holistic analysis picture of the investigation. Europol also deployed a specialist with mobile office to Cyprus to support the operational activities and facilitate the exchange of information.

Eurojust supported the action day with a coordination centre, enabling real time communication between all judicial authorities involved and the rapid execution of European Arrest Warrants and search warrants. Europol supported the coordination centre with a setup of our core technical operational product, the Virtual Command Post, at Eurojust. Austrian police officers were present on the ground during operations in Cyprus, providing advice on cryptocurrency seizure and supporting the interrogation of the main suspect.