QUADRIGA INITIATIVE
CRYPTO WATCHDOG & FRAUD RECOVERY PLATFORM
A COMMUNITY-BASED, NOT-FOR-PROFIT
$1 000 000 USD
MARCH 2015
JAPAN
RIPPLE TRADE JAPAN
DESCRIPTION OF EVENTS
"Ripple, a San Francisco-based FinTech startup developing enterprise blockchain solutions for the global banking industry, specifically in payments and remittances, sees its blockchains powered by its XRP digital token. At the time of publishing, the total market cap of XRP tokens currently stands at $8.2 billion, making it the third largest cryptocurrency after Bitcoin and Ethereum."
"31-year-old Yuki Takenaka, a resident of Kyoto's Yamashina Ward, ran the company behind the exchange, Ripple Trade Japan (RTJ), by himself." "RTJ was established in May of 2014 in Hamamatsu City, Shizuoka Prefecture. Users of such an exchange deposit money to obtain digital ripple credits that can be exchanged for other currencies or redeemed for cash."
"The cryptocurrency exchange, which was set up by Takenaka in Hamamatsu, Shizuoka Prefecture, in May 2014, began showing signs of distress less than a year later, ignoring customer inquiries and halting withdrawals. Prior to the exchange owner’s disappearance, he had been collecting money and exchanging it for IOUs needed for Ripple online transactions. Users were then able to exchange these IOU notes for Ripple or convert them back into fiat. Takenaka is believe to have issued fake IOUs worth a total value of around 120 million Japanese Yen ($1.06 million USD)."
"[I]nvestigations into the case have uncovered the sloppy fund management that existed at the firm." "Tokyo police also suspect that Takenaka manipulated his company’s systems for personal profit to issue over ¥120 million ($1 million) in IOUs between November 2014 and February 2015. He is alleged to have exchanged some of them with IOUs of other Ripple exchanges before converting them to cash used for personal expenditure and investment at a time when the exchange was already out of money."
"Come March 2015, the façade broke when users were unable to withdraw their deposits and the RTJ’s website shut down soon after." "The matter came to light in March of 2015 after customers of RTJ claiming that they were unable to withdraw their deposits began consulting with police." "[U]sers were unable to withdraw cash or contact him."
"[Takenaka] was arrested on Oct. 18 on suspicion of fraud, misappropriated users' deposits to invest in foreign exchange margin trading, investigative sources have told the Mainichi Shimbun." "The police will search Takenaka’s home and other places in Hamamatsu."
"The manager and operator of Japanese Ripple exchange Ripple Trade Japan [was] arrested for allegedly defrauding a customer for ¥1.4 million ($12,470) with potentially further charges pending."
"The arrested 31-year-old suspect, Yuki Takenaka, a resident of Kyoto's Yamashina Ward, ran the company behind the exchange, Ripple Trade Japan (RTJ), by himself, and investigations into the case have uncovered the sloppy fund management that existed at the firm." "According to the police, Takenaka has admitted to most of the charges."
"The news of Takenaka’s arrest brought a degree of online confusion, with some believing the arrest was directly related to the cryptocurrency and the company Ripple itself. There is, however, no evidence to suggest this other than the fact that the exchange owner was running a Ripple server, which anyone can personally do."
The Ripple Trade Japan platform was run a single individual in Tokyo. The service launched in 2014, and by March of 2015 there was no response to requests for withdrawals. Roughly $1m USD was pocketed by the CEO. While he has been arrested, it does not appear that funds were recovered as they'd already been spent.
HOW COULD THIS HAVE BEEN PREVENTED?
Funds stored in a multi-signature wallet makes it impossible for one individual to pocket without the signatures of the others. Background checks and security training can further improve the security and prevent such situations.
Arrested cryptocurrency business operator misappropriated, invested users' deposits - The Mainichi (Mar 26)
Head of ripple cryptocurrency exchange arrested in Japan - The Mainichi (May 7)
Japanese Cryptocurrency Exchange Manager Arrested For Ripple Fraud | Bitcoinist.com (May 8)
https://www.ccn.com/japanese-police-arrest-ripple-exchange-operator-fraud/ (May 8)
Manager of Ripple cryptocurrency exchange arrested for scam | The Japan Times (May 8)
@haydentiff Twitter (May 8)
https://www.epfl.ch/labs/dedis/wp-content/uploads/2020/01/report-2019-1-Etienne-Caquot.pdf (May 8)
Ripple Exchange 'Lead Head' Arrested for Swindling - Tokyo - Ethereum World News (May 8)
https://www.xrpchat.com/topic/10889-japanese-exchange-manager-arrested-for-fraud/ (May 8)
Tokyo police bust head of virtual currency exchange on suspicion of fraud (May 8)
https://www.xrpchat.com/topic/3790-japan-brand-name-used-for-phishing-attack/ (May 8)
https://web.archive.org/web/20150107134653/http://www.ripple-trade-japan.com/ (May 8)
