Exposing CryptoScams (Updated)

An Almost-Weekly Newsletter Featuring a Spotlight on Past, Current, and Suspected Top Ten Cryptocurrency and Blockchain-based Scams

by

W. Paul Alexander 

for The

Blog on Publish0X

REPOSTED: 

This Week's Spotlight will focus on USI Tech Limited (USI Tech), a Major Scam that Stole Millions from Users

PONZI?  Absolutely! 

First and Foremost, I would like to thank my readers and followers, the number of which has drastically increased following the publishing of some of my recent CryptoScam expose.  You all have given me the motivation to continue my research to provide a very valuable service to those who have been taken advantage of as well as those who are about to invest with a bad actor.  

I have interacted with dozens of my readers regarding their suggestions for my next scam alert post.  By far, the overwhelming suggestion was that I expose USI Tech.  

What was USI Tech? 

According to Wikipedia, USI Tech was a "Dubai-based cryptocurrency and forex platform trading provider, suspected to be a high-yield investment program and a Ponzi scheme."

As with most HYIPs, USI Tech promised returns that are unheard of, and quite frankly, unbelievable to those who perform their due diligence before investing (something that each and every one of us should do). 

As with many scams, those behind USI Tech took great care to distort and disguise ownership of the company, and to this day, the actual ownership has not been established, although it is suspected.   

USI Tech was initially promoted by a core group that included Lee Oakey, Kerry Stockton, Rodney Burton, and Michael Faust.  Oakey and Stockton are British expats living in Australia.  Rodney Burton is the infamous "Bitcoin Rodney" that famously purchased a Lamborghini with bitcoin, leading to the "lambo" memes that have since arisen.  He is a convicted felon and has served time in prison for drug dealing-related offenses.  

So, as far as my due diligence strategy goes -- if I were a potential USI investor, the people promoting the scheme would have been a major red flag to me and would've been an absolute dealbreaker.  The rule of thumb is...if the people who started the company are bad actors, then everything produced by the company will also be tainted.  This is very similar to the "fruit of the poisonous tree" concept in the legal system, which hold that if the police act in bad faith (illegal search warrant, for example), then everything that comes as a result of that bad action is inadmissible at trial.  As a paralegal myself, I extend said concept when determining what to invest in -- especially with the flood of scams that will always be a part of any unregulated industry.  

Why USI Tech was a Scam

One of USI's initial promoters was a man named Dan Putnam, who identifies as the CEO of R&D Global.  R&D Global is one of the companies that Engadget suggests could be a potential parent of USI Tech.  He was often seen boasting as to how a small, under $100 investment was guaranteed to make newcomers into crypto-millionaires.  The year was 2017 and we were in the middle of the ICO bubble.  New crypto-millionaires were being minted everyday, but at the same time, scammers were draining the life savings of those who thought that they had stumbled into the one opportunity that they had been waiting on their entire lives.  Fortunes were made but lives were destroyed.  The cryptosphere was essentially unregulated, so scams abounded.  

Enter USI.  USI pulled a similar approach to another well-known cryptoscam, BitConnect.  If you'd like know more about BitConnect and how it's Ponzi system operated, see my other post, "Naming Names," found here.  BitConnect and USI actually both crumbled in very similar manners, too -- after the Texas authoriies issued emergency orders shutting them down. 

Once those behind USI realized that the game was over, they did what all scam HYIPs and Ponzis have done in the crypto-world.  They vanished with user's deposited funds and disappeared into the night. 

In fact, the Texas authorities have went on the record stating that those behind USI Tech were able to extract hundreds of millions of dollars from all over the world from their users.  

The Big Lie -- What USI Promised to its Investors

USI sold users "packages" that were promoted as having a guaranteed 140% return on investment (ROI) over the course of 140 days.  The packages could be "bought" for around $50 USD (50 euros, actually), and then they gave users the classic, textbook Ponzi false claim that "the more [they] bought, the higher return they would receive.  Of course, this is never true, except for a very few lucky people who joined the scam early, as the early sign ups were paid their "returns" out of the revenue generated by new user sign ups.  Again, this is another textbook Ponzi move.  They build up their early targets' confidence, getting them to invest larger amounts based on the "legitimacy" demonstrated by them paying out these users' returns.  The only people who made it out without being scammed were those who said "no" to reinvesting their earnings and got the hell out of there.  

Eventually, people who joined later stopped getting paid, and basically the later you joined, the less chance you had of receiving a dime back from them.  This, again, is how ALL Ponzi schemes work. 

For example, the US Social Security system, which is the largest Ponzi scheme on earth, uses money that people are taxed in the present to pay those who are currently retired.  Many people think that, when they pay Soc. Sec. taxes, that those are applied to their own personal SS accounts, and that those funds are what they receive in retirement.  Of course, this is not so.  Current SS taxes go to pay the people currently receiving benefit -- in other words, the "early members" of the scheme. 

The promise of the system is that by doing this, those paying taxes today are guaranteed that they will receive SS benefits in their retirement age.  Unfortunately, we've all heard the studies which indicate that The SS Trust Fund will be insolvent in less than 20 years.  That is the critical point that the largest Ponzi on earth will fall in on itself, with those who paid into the system the most recent being left out in the cold. 

Because the Social Security system has this imminent point in every Ponzi scheme where the current can no longer pay the obligations made in the past, it is a true Ponzi, as opposed to MLM schemes, some of which are Ponzi's and some are not.  

USI Tech is a TRUE Ponzi scheme.  True Ponzi schemes always fail.  

Thus, every claim made by those promoting USI Tech were all a part of "The Big Lie," and even those that innocently shared their referral codes in a way to grow their earnings contributed to the harm that was done to those who lost.  The differentiation comes upon determining who contributed to the scheme intentionally and/or knowingly, as such is the standard of culpability in most criminal offenses that they are likely guilty of. 

What Happened Next? 

After it was made clear that USI Tech was over, those behind it tried to launch the same scam.  First, they attempted to pass one off as a crypto exchange called Eyeline Trading, followed by another HYIP/fake exchange known as "Wealthboss."  These have both been identified and exposed as scams, and currently, it is unknown if users will ever be able to obtain a judgment against those who ran USI, as the identities are unknown.  The only recourse would be if the SEC were to freeze and and all assets with any relation to USI in the United States and then provide partial refunds to those who lost money based on the amount there were able to recover from the sale of any seized assets.  

This would be the legal process to address the scam -- it's the same policy used for those who scam millions via infomercial scams, so it would only make sense that this would happen.  

However, it is unclear if this will ever happen.  

Those who were victims should contact an attorney that handles tort litigation to inquire about the possibility of bringing a large, public class action suit against those responsible (as well as "Doe" defendants -- those who are not known at the time of filing but that evidence proves the inclusion of them in the scheme).  Alternatives include attempting to pursue criminal litigation as well as individual civil suits.  

Current Legal History Brought Against USI Tech (List from Wikipedia)

• On 20 December 2017, the Texas State Securities Board issued an emergency cease and desist order as neither USI-Tech nor the sales agents, Clifford Thomas and Michael Rivera, were registered to sell securities in Texas.
• On 21 December 2017, the Government of New Brunswick issued a consumer alert against investing at USI-Tech, and advised consumers to contact the Commission if approached about investing in the company.
• On 12 January 2018, the Attorney General of Guam issued a statement advising people to exercise caution when investing at USI Tech.[12]
• On 26 January 2018, the Government of Saskatchewan issued a Cease Trade Order, and requested anyone contacted by USI-TECH to inform the Financial and Consumer Affairs Authority of Saskatchewan. 
• On 9 April 2018, the Spanish financial regulator Comisión Nacional del Mercado de Valores added USI-Tech to its warning list of unauthorised firms and entities.
• On 16 August 2018, the Financial Markets Authority of New Zealand updated its warning list to include USI Tech on basis that it is offering financial services and products to residents of New Zealand without authorization, while also warning that the operators have the characteristics of a scam.

Other Speculation into USI Tech

Many cryptosphere personalities have dove deep into USI to try and find out those who are ultimately responsible.  Here is some of the evidence that has been gathered to demonstrate the pattern of overt acts of fraudulent activities, thus qualifying for prosecution in the United States under the RICO Act.  

One bloggers writes: 

"What we do know is that Joao Severino and Ralf Gold founded the project. Before starting USI Tech, Severino was banned from all financial activity in Portugal because of his involvement with another scam company called AMC Invest. Even worse, Ralph Gold had been involved in all sort of Ponzi scheme companies. These included AdsProfitReward, MX Fast Money, World Consumer Alliance, HourlyRevShare, AdsProfitWiz, APR Clicks, and Upper Game."  

The company also claimed to be based in Dubai. However, the registration of the business is actually from Ras al Khaimah, another city in the United Arab Emirates that is well known for its offshore business registration services.

Other sources place the company as being Dubai based, so it's not certain if these know for certain or are just repeating what they heard elsewhere.  

Final Thoughts

I realize that pointing out the obvious signs that this was a scam is a statement that must be made with care.  It is important not to make people feel unintelligent/stupid/ignorant for not seeing these signs and being taken by a scam.  It's so easy to sit in judgment after all is said and done and exposed, looking through the 20/20 lenses upon events that have already happened.  It's not so easy to recognize these types of scams if you a). believe that the world is kind and good, by nature or b).  have never been exposed to a scam before.  People in this boat are victims, and while crypto is a "play at your own risk" world, it's not right to criticize those who have been wronged or taken advantage of.  

Thus, the case of USI Tech brings me to the final conclusion that my mission in exposing cryptoscams is a much-needed service, more now than ever.  

I hope those of you who fell victim to USI Tech were able to recover all of your funds, but I know that's not the case, so I hope you were at least able to put your hands on some restitution.  

....well, that's all I have for today. 

I wish you all the best blockchain experience possible!  Such experience does not come by chance, but by design...keep yourself safe and invest wisely, always doing your own research!