The United States Homeland Security Investigations (HSI) has charged a Las Vegas resident for operating a fraudulent cryptocurrency recovery scheme.
On August 5, the Department of Homeland Security announced that its New York task force has charged Michael Lauchlan in connection with a scam involving a fake crypto asset recovery business.
Lauchlan ran Coin Dispute Network (CDN), which purported to offer services such as blockchain analysis, tracing, and the recovery of lost cryptocurrency for a fee.
Instead of providing legitimate recovery services, Lauchlan allegedly pocketed the fees and, in some cases, extracted additional Ether from customers through false promises and fraudulent blockchain tracing reports.
First Takedown of Crypto Recovery Site
HSI reported that more than 175 CDN customers were interviewed, none of whom successfully recovered any cryptocurrency through the service.
Approximately $14,000 worth of cryptocurrency belonging to CDN users was traced to the CoinEx crypto exchange.
The case marks the first takedown of a crypto recovery site by the Manhattan District Attorney’s Office.
Lauchlan, who also used the alias Max Handler, was charged in Manhattan Criminal Court with grand larceny and two counts of scheming to defraud.
“Michael Lauchlan allegedly exploited his customers’ lack of experience with the cryptocurrency industry and in turn fleeced them out of thousands of dollars in sham services and stolen assets,” HSI New York Special Agent in Charge Ivan J. Arvelo said.
The CDN website was seized by law enforcement in July 2023 following a year-long investigation.
Lauchlan was arrested on July 9.
The fraudulent activities reportedly date back at least two years, with victims questioning CDN’s legitimacy and reporting losses on Reddit.
In November 2022, the U.S. Federal Trade Commission issued a warning about crypto recovery services following a surge in scams in the wake of the FTX collapse.
Ironically, in March 2023, CDN launched a database purportedly allowing users to report online scams.
Hackers Steal $266M in July
The crypto sector faced significant losses in July as hackers stole approximately $266 million through 16 separate breaches.
Among the most notable incidents was the July 18 attack on Indian crypto exchange WazirX, which accounted for over $230 million, or 86.4%, of the month’s total losses.
Other significant victims of July’s crypto hacks included algorithmic protocol Compound Finance, which lost $24 million, bridging protocol Li.Fi ($10 million), decentralized AI protocol Bittensor, and liquidity provider Rho Markets, each losing $8 million.
In many instances, the stolen funds were moved to the cryptocurrency mixer Tornado Cash, a technique used by hackers to obscure the origin of the funds and evade detection.
In contrast to July, June saw a lower loss of $176 million spread across approximately 20 incidents, highlighting a sharp increase in the value of stolen assets in just one month.
A notable incident at the end of July involved the Terra blockchain, which temporarily halted operations at block height 11430400 following a hack that resulted in the theft of $6 million.
The attacker exploited a known vulnerability to steal 60 million ASTRO tokens, 500,000 USD, 3.5 million USD Coin, and 2.7 Bitcoin.
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