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Crypto Scam Using ‘Kraken’ Moniker Bilks Victim of Over $3 Million

2 mins
Updated by Michael Washburn
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In Brief

  • A resident of Westport, Connecticut, received advice to move funds from a retirement account to a crypto platform.
  • The victim thought that the platform in question was affiliated with Kraken, and deposited more than $3 million.
  • The platform was not Kraken, but, it emerged during a police investigation, a vehicle for scammers based in Pakistan.
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Online scams are on the rise and the crypto industry is in regulators’ crosshairs. The last thing an exchange wants is for bad actors to misuse its name to steal money.

But that is exactly what happened in one of the biggest scams, in terms of losses, this year. A Connecticut resident lost more than $3 million to fraudsters claiming affiliation with Kraken.

Scam Robs Victim Through ‘Kraken’ Misappelation

According to a report by NBC News’ Connecticut affiliate, an unnamed resident of Westport followed advice to transfer funds out of a retirement account. And to re-invest the money in an account supposedly affiliated with Kraken.

The victim told police that more than $3 million promptly went into crypto wallets that the victim could not access.

Working in collusion with the state’s Organized Crime Task Force, local detectives traced the transactions and froze accounts that played a role in the ripoff.

Their investigation led to culprits residing in Pakistan. Police got back $3.2 million, but said there was no way to make any arrests in the case.

Learn more about online crypto scams, how they operate, and how to protect your assets from them.

Cyber crime is on the rise, and exchanges such as Kraken, which strive to expand their legitimate presence, do not need imposters misusing their name. Source: Statista

Bad Timing for Kraken

Besides the emotional and financial harm inflicted on the victim, this scam could not have come at a worse time for Kraken. The exchange does not need the stigma of any association with bad actors—even a fictional association. Especially not as it plans to expand its offerings in the United States and United Kingdom.

Kraken has reportedly obtained permits to begin trading UK-listed stocks. Financial Industry Regulatory Authority (FINRA) approval for trading of US-listed stocks is pending at this time.

The exchange already has reasons to want to minimize fear, uncertainty, and doubt (FUD) on the part of prospective customers. Founder Jesse Powell has been the target of a law enforcement probe.

In March, the Federal Bureau of Investigation (FBI) carried out a search warrant at Powell’s Los Angeles residence. The FBI was looking into allegations of cyberstalking and harassment on the part of Powell.

Based on the facts as we know them, the allegations are just that. Allegations, not proven facts.

Still, the last thing Kraken needs is bad actors in a foreign country stealing millions of dollars through impostor fraud using the Kraken name.

Top crypto platforms in the US | February 2024

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Michael Washburn
Michael Washburn is a New York-based managing editor who joined BeInCrypto in March 2023. Over his career, he written extensively about the corporate legal world and the intersection of finance and law, has produced thousands of articles and features, and has mentored many reporters and researchers finding their way in a fast-changing industry.
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