TLDR
- Michael Lauchlan from Las Vegas was charged for running a fake crypto recovery scam called Coin Dispute Network (CDN).
- CDN claimed to offer blockchain analysis and crypto recovery services but didn’t actually recover any funds for customers.
- Over 175 CDN customers were interviewed and none recovered any cryptocurrency.
- This is the first time a crypto recovery site has been taken down by the Manhattan District Attorney’s Office.
- The scam had been operating for at least two years before Lauchlan’s arrest in July 2023.
A Las Vegas resident, Michael Lauchlan, has been charged with running a fraudulent cryptocurrency recovery business called Coin Dispute Network (CDN).
The charges come after an investigation by the United States Homeland Security Investigations (HSI) New York task force.
CDN claimed to offer services such as blockchain analysis, tracing, and recovery of lost cryptocurrency. Customers paid fees for these services, hoping to recover their lost digital assets.
However, according to the HSI investigation, Lauchlan did not actually recover any funds for his clients.
Instead, Lauchlan allegedly kept the fees paid by customers. In some cases, he even extracted additional Ether cryptocurrency from clients using false promises and fake blockchain tracing reports.
The Department of Homeland Security reported that over 175 CDN customers were interviewed during the investigation. None of these customers were able to recover any cryptocurrency using CDN’s services.
The HSI team also discovered that around $14,000 worth of cryptocurrency belonging to CDN users was traced to the CoinEx crypto exchange. This suggests that some of the funds entrusted to CDN for recovery may have been misappropriated.
Lauchlan, who also used the alias Max Handler, has been charged in a Manhattan Criminal Court with grand larceny and two counts of scheme to defraud. The case marks the first time a crypto recovery site has been taken down by the Manhattan District Attorney’s Office.
Ivan J. Arvelo, HSI New York special agent in charge, commented on the case:
“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.”
The CDN website was seized by law enforcement in July 2023 following a year-long investigation. Lauchlan was arrested on July 9, 2023.
However, the scam appears to have been operating for at least two years prior to his arrest. Posts on Reddit from as early as 2021 show victims questioning CDN’s legitimacy and reporting losses.
In an ironic twist, CDN launched a database in March 2023 that claimed to allow users to report online scams. This move may have been an attempt to appear legitimate and attract more potential victims.
The charges against Lauchlan come at a time when cryptocurrency-related scams are on the rise.
In November 2022, the U.S. Federal Trade Commission posted a warning about crypto recovery services following a surge in scams after the collapse of the FTX cryptocurrency exchange.
The cryptocurrency sector faced significant losses in July 2023, with hackers stealing approximately $266 million through 16 separate breaches. The largest of these was an attack on Indian crypto exchange WazirX, accounting for over $230 million in losses.
