The majority of financial pyramids identified in 2022 used cryptocurrencies in some form, the Russian central bank said in a new report. Amid Western sanctions, Russian scams have stepped up their activities, often claiming to be licensed by foreign authorities to provide access to crypto assets.
Russian pyramid takes advantage of Western sanctions and the popularity of crypto
More than 56% of pyramid schemes in the Russian Federation in the first half of this year, or 537 entities, raised funds in various cryptocurrencies or promoted crypto investments, according to a report devoted to combating illegal activities in the country’s financial market. The paper was published by the Central Bank of Russia (CBR
Cited by RBC Crypto, regulators have said that sanctions imposed by the West over the conflict in Ukraine have dramatically changed the working conditions of legitimate Russian financial institutions and that fraudsters have benefited from this situation.
Russians are looking for alternative ways to invest, and the answer to this demand has come in the form of a new financial pyramid. Financial authorities explained that these were mostly small schemes with short life spans.
Between January and June 2022, the central bank was able to identify a staggering number of these scams. The number was over 2,200 companies, projects, and individual entrepreneurs whose operations showed signs of illegal financial activity. This number, the report noted, is three times that of the same period in 2021.
Crypto is not the only area in which such entities were interested, as 671 of them were targeting the securities market; according to the CBR, these companies often pretend to be authorized by regulatory bodies in different jurisdictions and allegedly collect money only in foreign fiat or cryptocurrencies.
In order to curb their activities, the CBR has notified relevant law enforcement agencies, the Federal Tax Administration, the communications watchdog Roskomnadzor, and domain name registrars. The CBR also regularly takes steps to block suspicious websites and maintains a blacklist of entities likely to be operating illegally in the domestic financial sector.
The Central Bank of Russia has already recorded an increase in the number of new financial pyramids exploiting cryptography in May. Another reason for that growth is financial uncertainty, which has increased interest in schemes for investment opportunities in the digital asset space.
Meanwhile, the Russian Interior Ministry suggested this week that authorities in Moscow should introduce criminal liability for those who provide money laundering services to crypto fraudsters. These so-called “droppers” are sometimes unsuspecting individuals who allow fraudsters to use their bank accounts and crypto wallets, and if lawmakers accept the ministry’s advice, they could face up to seven years in prison for their involvement.
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