Homeland Security leads to man charged over crypto recovery scam

A United States Homeland Security Investigations (HSI) task force probe into a fake crypto recovery operation has led to charges against a Las Vegas man. 

On Aug. 5, the Department of Homeland Security reported that an investigation by its New York task force had resulted in charges against Michael Lauchlan who allran a scam crypto asset recovery business.

Lauchlan’s Coin Dispute Network (CDN) claimed to offer services such as blockchain analysis, tracing, and recovery of lost cryptocurrency in exchange for fees.

However, instead of recovering assets, Lauchlan allegedly kept the fees and in some cases, extracted additional Ether (ETH) from customers using false promises and fake blockchain tracing reports.

More than 175 CDN customers were interviewed, and none were able to recover any cryptocurrency using the service, the HSI team reported.

Additionally, around $14,000 of cryptocurrency belonging to CDN users was traced to the CoinEx crypto exchange.

The case marks the first time a crypto recovery site has been taken down by the Manhattan District Attorney's Office, said the HSI.

Lauchlan, a Las Vegas resident, has been charged in a Manhattan Criminal Court with grand larceny and two counts of scheme to defraud.

HSI New York special agent in charge, Ivan J. Arvelo, commented:

“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.”

Law enforcement officers seized the CDN website in July 2023 following a year-long investigation and Lauchlan, who went by the name Max Handler, was arrested on July 9.

The scam stretches back at least two years according to posts on Reddit from victims questioning CDN’s legitimacy and reporting losses.

In November 2022 the U.S. Federal Trade Commission posted a warning about crypto recovery services following a surge in scams in the wake of the FTX collapse.

In a twist of irony, CDN launched a database that purportedly allowed users to report online scams, in March 2023.

In July 2024, Cointelegraph interviewed several genuine white hat hackers who have been working to recover crypto assets for victims of losses.