Investor fraud on the Internet: Long prison time for cybercriminals

Investor fraud on the Internet: Long prison time for cybercriminals

FFor private investors, the promise of the provider with the name “KontoFX” must have been a savior in the low-interest phase a few years ago. The online platform promised its customers low-risk investments and good returns. Only 250 euros were due to open a trading account. Intensive support from a call center and an additional policy should give investors the feeling that their money is in safe hands.

In fact, at least 200 investors from all over Germany fell for the scam of an international gang of fraudsters who operated other comparable websites for trading in cryptocurrencies, forex and highly speculative differential transactions between 2014 and 2020. In the course of criminal proceedings, however, the amount of the initially assumed damage of 30 million euros had to be corrected significantly downwards. The damage should amount to at least seven million euros, according to a recent judgment by the Koblenz Regional Court. After a trial lasting more than four months, the first criminal chamber this week sentenced five men and two women to prison terms, some of them long, for investment fraud on the Internet. The two main defendants, who confessed, were sentenced to seven and five years’ imprisonment, respectively, in several cases for gang and commercial fraud. Only in two cases did the chamber suspend the execution of the prison sentences on probation (Az. 5 Js 98/20 1 KLs).

Investigators speak of a “phenomenon”

Significant prison sentences for the backers, who often come from Southeast Europe and Israel – it is just the latest example in a series of criminal proceedings into organized fraud in cyber trading. Investigators at the various special public prosecutor’s offices for the prosecution of cybercrime, which the judicial administrations of the federal states have set up, speak of a “crime phenomenon”.

Tens of thousands of private investors are said to be affected in Germany alone, and the number of victims is likely to be significantly higher, according to the Bamberg-based Central Office for Cybercrime Bavaria (ZCB). Prosecutors assume that the number of unreported cases is high, since many investors are amateurs in private wealth accumulation, realize the actual fraud too late or mistake it for the realization of a market risk.

“In the anonymity of cyberspace, criminal offenses can be better concealed, fraudulent investment products such as cybertrading can be advertised more efficiently and criminal proceeds can be generated much faster than in the analogue world,” reports the Federal Criminal Police Office in its 2021 management report on white-collar crime. In it, the federal authority also discloses the tightly organized approach of the trading platforms. The frequent start is by advertising the offers on the Internet and in social networks, often with the help of “testimonials”, i.e. celebrities, or using excerpts from well-known TV formats – as a rule, they do not know anything about improper use.

Money kept pyramid schemes going

Customers thought they were safe with the supposedly reputable financial instruments. They sometimes invested up to five-digit amounts a month. This was the only way for the operators of the fraudulent platforms, behind which pyramid schemes stood, to redistribute paid-in capital from new customers and to pay out supposed initial successes to old customers – prosecutors in numerous parallel proceedings agree that the funds entrusted to them were never invested.

For the victims of fraud, this usually means a total failure. The trail to their funds is lost: the perpetrators diverted the millions to other accounts in their corporate network, and they were often exchanged for cryptocurrencies. In the Koblenz case, the victims may still have “luck in their misfortune”. According to reports from the SWR, one of the main defendants paid back a large part of the loot obtained in the course of the criminal proceedings.

Those convicted are now expected to appear in court again in a timely manner. The ZCB has brought charges of fraud on other online platforms. The prosecution can show considerable success – they had determined in the environment of the “Wolf of Sofia”; this gang alone is said to have cheated investors by a three-digit million amount. In 2022, the Munich Regional Court sentenced a central head of the organization to six years and ten months in prison.


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