Role of Whistleblowers in Defrauding the Crypto Industry (Part 1)

Role of Whistleblowers in Defrauding the Crypto Industry (Part 1)

The world of Crypto has opened many doors for investment but not without a downside: several Ponzi-like scams & other dubious activities like money laundering, market manipulation, & tax evasion are fast spreading and strengthening their roots in the industry. And whistleblowers seem to be the only ones leading the way in cleaning up Crypto.

To answer your question, “Who are these people?”: These are persons within the business who know the tricks of the trade and understand everything that drives it. So, proverbially speaking, they know where the bodies are buried.

To sum it all, these people are best positioned to expose the wrongdoings being undertaken by those practicing nefarious activities within the Crypto industry. 

But here’s the catch.

Whistleblowers get substantial monetary rewards from the government for exposing the fraudsters. That’s because disclosing original information (with proof) enables the authorities concerned to take corrective measures and enforce new rules.

Did you know that the U.S. Securities and Exchange Commission whistleblowers can receive up to 30% of the entity’s collected monetary sanctions as a reward? Further, specific laws permit whistleblowers to report fraud anonymously. Moreover, most such reward laws protect whistleblowers against retaliation.

Types of scams in the Crypto sphere


  • Fake Initial Coin Offerings & tokens

In such cases, the cryptocurrency does not exist, or the people behind the offering company have hoax biographies. 

  • Pump and dump scheme

In this case, stock owners make false statements to create hype. This drives up the value of stocks (in this case, cryptocurrencies) artificially. 

  • Ponzi schemes

There needs to be a constant stream of new investors who pay artificial returns to older investors in these schemes.

As a rule, any company that uses high-pressure tactics or promises quick, unrealistic, or guaranteed returns should raise concerns.

The Cryptocurrency scene in the UAE

The UAE is among the most progressive Crypto countries across the world. Recently, in January 2021, the Dubai Financial Services Authority announced that it would produce a comprehensive crypto-regulatory framework as per its 2021-22 business plan.

In October 2021, the authority launched the framework wherein it defines an Investment Token as either a Security Token or a Derivative Token. These are:

  • A Derivative or Security in the form of a cryptographically secured digital representation of rights & obligations that is issued, transferred, & stored using Distributed Ledger Technology or other similar technology; or
  •  A cryptographically secured digital representation of rights & obligations that is issued, transferred, & stored using DLT or other similar technology that: (i) confers rights & obligations that are substantially similar to those conferred by a Security or Derivative; or (ii) has a substantially similar purpose as that of a Security or Derivative.

To whom does the framework apply?

The Investment Tokens regulatory framework applies to individuals interested in issuing, marketing, trading, or holding Investment Tokens in or from the Dubai International Financial Centre & Authorised Firms wishing to undertake financial services relating to Investment Tokens.

As many crypto-friendly policies are followed in the United Arab Emirates, many new & well-established firms are choosing to move their headquarters here. These include Ripple, a United States technology company.

Stay tuned to know more about the significance of whistleblowers in making the Crypto space a more refined financial avenue.