This week, CoinFire reported that the US Securities and Exchange Commission (SEC), the Internal Revenue Service, FinCEN, Department of Homeland Security, and other government agencies have officially launched multiple investigations into Cryptsy International LTD, a Belize-based bitcoin exchange headquartered in the US and Canada.
Cryptsy under fire
Cryptsy allegedly engaged in fraudulent operations with GAW Miners, a defunct exchange founded and operated by Josh Garza, the creator of a multi-million dollar cryptocurrency investment scam PayCoin. Government agencies and law enforcements including the SEC have filed complaints for inappropriately gained licenses, market manipulation, selling unlicensed securities, money laundering, and many other financial violations, according to the publication.
Furthermore, the purported documents filed by FinCEN and obtained by CoinFire demonstrate a clear and close connection between Cryptsy staff and the Garza brothers of PayCoin. The report alleged that one staff member of Cryptsy allowed several fraudulent transactions for PayCoin and the Garza brothers.
Another document specifically portrays an attempt to disguise funds and payments transacted by Josh Garza on the Cryptsy platform. According to the report provided by CoinFire, Cryptsy was aware of Garza and GAW Miners’ movements, and helped the PayCoin team to make fraudulent transactions and transfers, engaging in market manipulation.
Representative of the SEC have reportedly told CoinFire:
“[We’re] looking at the worst offenders in cryptocurrency and would be closing in further on our unofficial ‘top ten’ list of which Cryptsy and Project Investors will find itself to be in the Top 5.”
‘Never gotten any letters’
However, Cryptsy refuted all of these allegations:
‘We have never been investigated for anything, period. We have never gotten any letters from any of the agencies that they have stated in their article, nor have we been contacted via phone or any other method.”
The Cryptsy team believes that one of the writers at CoinFire has personal reasons to “attack” the company, and is targeting it intentionally. This may be related to the prolonged dispute between CoinFire and Garza’s GAW Miners who caught the attention of the SEC and other regulators back in March.
“It’s safe to say that this article and their reporting are completely false,” the Cryptsy team continued. “My guess is that whoever wrote this article has personal reasons for writing it and are attempting to hurt our business and reputation.”
Over the past few years, there have also been allegations of Cryptsy’s involvement with various pump and dump schemes, obscuring movements of stolen bitcoin and hosting several altcoins, which turned out to be a scam. Many former users of the Cryptsy exchange state that the company has secret connection to GAW Miners, which is much bigger than the PayCoin controller exchange that the government agencies are currently investigating.
“Cryptsy also have a huge unpublicized connection to GAW (bigger than the PayCoin controller quid pro quo) that hasn't come out in this article, but by now the FinCEN people must know about it. It will come up soon. Think hashrate,” one Redditor wrote.
Thus, while Cryptsy refutes these claims by CoinFire, previous links with fraudulent operations could undermine the exchange’s position. Cointelegraph will continue to monitor and update this developing story.