How a Finnish millionaire lost $35M worth of Bitcoin in a gambling scam

Is your cryptocurrency portfolio looking a little light lately? That’s nothing compared to one Finnish investor, who lost 5,500 Bitcoin ($35 million) to an investment scam this year.

Bangkok Post reports that businessman Aarni Otava Saarimaa was approached by a group who sought to link him up with some hot investments: shares in a few high-profile companies and a cryptocurrency called Dragon Coin.

The story reads almost like a screenplay: a young, tech-savvy international millionaire courted by a Thai criminal syndicate (run by a movie star) for Bitcoin investments – none of which eventuated.

The gang allegedly had convinced Saarimaa and an associate that Dragon Coin was to be accepted by casinos as a legitimate means of payment. The pair was even taken to a casino in Macao to convince them to ‘invest.’

That trip was apparently enough for them to part with 5,564.4 Bitcoin – over $35 million. Suspicions were only raised when Saarimaa saw none of the promised returns; all of the Bitcoin had been immediately sold and distributed amongst the gang.

The police ran investigations for six months before swooping in. Thai movie star Jiratpisit “Boom” Jaravijit was arrested on-set for his connections to the case. Police further allege that his two siblings were also involved – one had fled the country, the other is in talks with authorities, as spotted by CoinDesk.

This isn’t the first time celebrities have been caught up in dodgy cryptocurrency deals. Back in June, several high-profile Bollywood stars were implicated in a $300 million Bitcoin scam . It’s alleged that the celebrities used their influence to convince investors to throw money at a series of Bitcoin-related businesses that posted none of the returns promised.

Celebrities have also been under fire for backing shitty initial coin offerings (ICOs). Floyd Mayweather, DJ Khaled, and footballer Luis Suarez were all forced to sever ties with cryptocurrency payment platform Centra after its co-founders were arrested and charged with fraud .

China drafts regulation to stamp out blockchain anonymity

After killing all legitimate cryptocurrency businesses in the country, Chinese authorities are now turning their attention to other blockchain service providers.

The country’s apex internet regulator, Cyberspace Administration of China (CAC), released a draft policy on Friday that will require all companies to collect their users’ real names and national identification card numbers before offering them any blockchain related service.

The draft regulations are open to comments from the public until November 2, but CAC hasn’t given any timeline for when they will actually come into force.

If the policy is implemented, the companies will be required to store their users’ data — to be made available for any investigation by the authorities. In addition, they also have to censor any content “deemed to pose a threat to national security.”

Blockchain service providers will need to register with the CAC within ten days of starting the service. If they are in highly regulated fields in the country, such as education, media & publishing, or the pharmaceutical industry, they will also have to obtain licences from relevant authorities before registering with the CAC.

According to South China Morning Post (SCMP) , an anonymous open letter published on the Ethereum blockchain in April alleging sexual harassment at a top university could be the motivation behind the new regulations. While the authorities were able to remove the post from social media platforms like WeChat and Weibo, they were hopeless on the blockchain.

The new regulations come hardly as a surprise. China’s aversion to free dissemination of information isn’t exactly a secret — with media giants such as Google, Facebook, Twitter, and Youtube banned in the country. Blockchain as a concept is even more opposed to Chinese government’s totalitarian communist ideology.

China has been rigorously cracking down on “all things cryptocurrencies—” banning all exchange desks , media platforms , initial coin offerings (ICO) , and any platform promoting or trading virtual currencies in any way.  But research shows that the country’s outright bans haven’t exactly deterred illegitimate cryptocurrency businesses from operating in the country. It is likely that its blockchain regulations will end up with a similar fate.

Cryptocurrency companies realize they can’t fight the government forever

There has been a persistent cat and mouse chase between regulatory bodies and cryptocurrency businesses pretty much since the inception of the industry. But despite some initial reluctance, crypto-companies are slowly starting to show more interest in working with governments.

In the US particularly, the cryptocurrency businesses are gradually starting to align themselves with regulatory bodies. Two of the largest cryptocurrency businesses in the US, Coinbase and Circle, recently announced plans to launch licensed cryptocurrency securities trading.

The Goldman Sachs-backed Circle announced plans to seek a federal banking license in an effort to increase the services it provides, in an interview with Bloomberg on Wednesday. The company also intends to pursue registration as a brokerage and trading venue with the US Securities and Exchange Commission (SEC).

“No venture that began in the largely unchecked world of digital currencies has obtained such status with [US] regulators,” Jeremy Allaire, CEO of Circle told Bloomberg. “While getting a banking license would subject it to tough scrutiny, the move would winnow the field of regulators Circle must appease because federal laws would pre-empt a patchwork of state rules covering crypto.”

The move was closely followed by Coinbase, which announced similar plans on its blog today. The company has applied for a license with the SEC as a regulated “broker-dealer.”

Coinbase has acquired three companies — including Keystone Capital Corp., Venovate Marketplace Inc., and Digital Wealth LLC. — hoping to offer services like cryptocurrency securities trading, margin trading, and over-the-counter (OTC) trading, along with new market data products. Of course, the moves is still subject to approval from the SEC.

The willingness to work alongside each other seems to be mutual. The US authorities have also been softening their stance towards cryptocurrency related businesses.

While the regulatory bodies earlier saw the cryptocurrency industry as a blanket and preferred to stay out of it, the focus has now shifted to specifically targeting scam and illicit businesses running in the space. The SEC, particularly, has been focusing on fraudulent companies , especially initial coin offering (ICO) scams .

While the SEC is not willing to bring any changes in its rulebook to accommodate cryptocurrencies and ICOs, the agency has no problem with either as long as they abide by its existing rules.

“If you have an ICO or a stock, and you want to sell it in a private placement, follow the private placement rules. If you want to do any IPO with a token, come see us,” SEC Chairman Jay told CNBC on Wednesday. “The SEC is happy to help you do that public offering if issuers take the responsibility SEC laws require.”

As this regulatory mist clears in the US, even major Wall Street players — that were once strongly critical of cryptocurrencies — are now jumping on the bandwagon. The New York Stock Exchange (NYSE) , Nasdaq , Goldman Sachs , JP Morgan have all announced cryptocurrency projects in the recent months. Even technology giants like Facebook , Google , and IBM don’t want to be left behind.

While early regulatory challenges, particularly in Asian countries, forced cryptocurrency exchanges like Binance and OKEx to seek shelter in locations like Malta (where legislation tends to be more favorable to blockchain companies), other exchanges have figured out ways to work with the authorities and register their offices in the same countries they plan to operate in.

Cryptocurrency exchange behemoths including Bitfinex, Poloniex (which Circle recently acquired), Bithumb and Bittrex have been tightening their know-your-customer (KYC) and anti-money-laundering (AML) procedures in a bid to comply with the regulations. Bittrex recently even tied-up with a bank in the US to offer cryptocurrency trading against the US dollar.

Singapore-headquartered cryptocurrency exchange giant, Huobi announced expansion to Europe in April, after previously expanding to Asia and the US.

“ We are not afraid of regulation nor are we escaping regulation,” Peng Hu, Vice President of the Huobi Group said at the time. “Not Malta, not Switzerland. Absolutely London, more precisely Britain, is the entry point for the European market for us.”

South Korea and Japan have been giving scares to cryptocurrency exchanges , but at the same time they have been working at drafting regulations to allow cryptocurrency exchanges to function in compliance with the laws. Korean authorities have been raiding cryptocurrency exchange offices lately, but they have all been aimed at ensuring compliance with the KYC/AML laws.

In India, there were speculations that cryptocurrency businesses will have to move out of the country following the RBI directive to banks to stop associating with any business dealing in virtual currencies. But this development seems unlikely for the time being given that the Indian government is considering retrospectively taxing cryptocurrency trading instead of a ban — providing an avenue for the businesses to stay put legally.

Cryptocurrency industry and regulatory bodies are starting to get synchronized globally, perhaps with the major exception being China, which is more keen on blockchain than cryptocurrencies . While cryptocurrency industry came with the promise of decentralization and freedom from government, it is likely that these businesses are now towing the line of the government for the sake of survival.

Some argue that regulations will make the space more organized and it will be easier for consumers to make safe financial investments. But not all agree. Bitcoin proponent Andreas M. Antonopoulos argues that cryptocurrencies like Bitcoin can’t be regulated no matter what.

“The question is not whether Bitcoin should be regulated, but whether it can be regulated. The reality is “No.” The rest is nostalgia,” he said in a tweet two years ago. “Appeal to authority is the old way, not Bitcoin,” a stance that he retains till date .

He may very well be right. With more than 1,600 cryptocurrencies out there, avoiding regulation altogether doesn’t seem like a viable option — especially in light of the string of scams in the space. Establishing legislation that stimulates growth for businesses and protects consumers is no mean feat, but it is certainly a task that we can’t ignore.