CoinFlux CEO Arrested

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CoinFlux

CoinFlux was one of Romania's oldest cryptocurrency platforms, and served customers for several years without notable issue.

At the end of 2018, it was revealed that the CEO had participated in laundering funds for an American auction fraud scheme. While the CEO initially denied the allegations, he later pled guilty in American court.

As far as could be determined, the company notified the bank holding the funds that they were the property of customers, and customers who held funds on the platform were still complaining after some time that they had not received any funds back.

This exchange or platform is based in Romania, or the incident targeted people primarily in Romania.

About CoinFlux

Founded prior to October 2015, "COINFLUX SERVICES S.R.L., [is] a limited liability company incorporated in Romania with Commerce Registry number J12/3685/08.12.2015 and Company Unique Identifier 35303244, and whose registered office [was] at 199 Calea Turzii, Biroul 3, Cluj-Napoca, Cluj, Romania"

"Best service in Romania. 24 hour trading. Buy or sell digital currencies anytime. Live chat support. Fast SEPA payments. Receive EUR the next business day. We deliver digital currencies to your wallet within 15 minutes." "Over 201 million EUR exchanged in 203,147 transactions." "CoinFlux advertised itself as a 24-hour marketplace that provide a local fiat gateway for Romanian traders. The exchange had been preparing to celebrate its third anniversary with zero transaction costs."

"Digital currencies, and blockchain technology in general, are in the early stages of development; not yet consumer-ready. CoinFlux was born out of a vision; interacting with digital currencies should be easy and frictionless, and we work towards this goal every day." "[W]e assist the early adopters and enthusiasts in getting easy access to the digital currencies they believe in. We continuously upgrade our services and improve our pricing model. We started by exchanging bitcoin, then we were the first exchange service in the region to add Ether, Litecoin and Ether Classic. More currencies and tokens will follow."

"Due to a recently started, unexpected investigation, we are in the unpleasant situation of temporarily stopping any digital currency exchanges. Unfortunately, our company’s bank accounts have been frozen, situation which affects the CoinFlux wallets as well. We are doing all possible efforts, along with our legal advisers, to make sure everyone who had money deposited in CoinFlux wallets gets it back."

"Another unpleasant consequence of the investigation is the fact that our access to some parts of our platform has been restricted, thus we are unable to send this announcement through the usual communication channels: e-mail and website. Our expectation is that we will gain control back, within the next days. We are aware that this is a worrisome situation for the people who have placed their trust in our service, and we assure each and every one of them that we will do everything that’s up to us to fix this unfair situation. We will get back to you with updates on the progress."

"We have undertaken a series of actions, in order to speed-up the return of the funds left in CoinFlux wallets back to our customers." "We are aware that this is a worrisome situation for the people who have placed their trust in our service, and we assure each and every one of them that we will do everything that’s up to us to fix this unfair situation."

"We’ve sent MisterTango (the Financial Institution hosting our frozen bank account) a list of people who have money blocked in CoinFlux wallets, as well as the exact associated balances, and the instruction to transfer those funds back into the clients’ bank accounts."

"We have officially informed MisterTango that 100% of the funds within the CoinFlux bank accounts belong to our customers, thus the money should be returned to their rightful owners and this action should be treated as priority."

"[T]o me it`s clear they will not send the money back to the customers..no update/no delay..it`s been a long time and they could have give us at least some updates..they have our contact e-mails from coinflux platform."

CEO "Nistor was arrested in December 2018 on an international warrant and was extradited to the U.S." "Călin [was] reportedly arrested by the U.S. authorities after a note from a secret service agent accused him of knowingly helping to launder proceedings of criminal activity committed on the territory of the United States." "US law enforcement had been building their case against Nistor for quite some time."

"In his statement in court, Vlad Nistor said he established the trading platform after working for seven years in the financial sector. “When you try to grow a business, you don’t think of committing crimes, because the value of that business is diminished,” stated the 29-year-old Coinflux owner, as quoted by the Romanian news agency Mediafax."

"Protection Nistor believes the actions of the authorities illegal. The lawyer of businessman Anatol the Panzar has stated that the fraudsters launder the money for Coinflux without the knowledge of his client. He Nistor maintains his innocence."

"On February 18, 2016, SA Coleman sought and obtained a search warrant for, among other items, “the contents of all emails, chats, or stored communications associated with the [Google] account . . .” and “[a]ll data associated with the use of the Location History and Web History between the dates of December 11, 2015, through December 18, 2015” that could be found in Nistor’s Google account in connection with many of Google’s services, such as Google Drive, Google Docs, Google Photos, Google Maps Engine, Google Calendar, Google Wallet, Google Chrome, and Web History (among many others). Eventually, utilizing the information obtained from Warrant 1, law enforcement sought and obtained six additional warrants for targeting Nistor’s Google account, his Amazon web services account, and domain www.coinflux.com." "[T]he Supreme Court held that the Fourth Amendment protects “the people of the United States against arbitrary action by their own Government; it was never suggested that the provision was intended to restrain the actions of the Federal Government against aliens outside of the United States territory.”"

"As Judge Aldrich eloquently put it: [A] conspiracy is like a train. When a party knowingly steps aboard, he is part of the crew, and assumes conspirator's responsibility for the existing freight—or conduct—regardless of whether he is aware of just what it is composed." "The Indictment does not charge Nistor with a regulatory violation or inadequate policy implementation; it charges him with knowingly participating in a conspiracy to launder fraud proceeds."

"Such activities are not enough to charge an exchange operator of fraud, as there already are a few exchange operators who have been already banned due to such illegal activity but still move around freely." "But, if we are looking into the case of Vlad Nistor, it is totally opposite in nature as he was the only one who actually advised fraudsters on the ways and means to indulge in such illegal activities using his crypto exchange."

"On June 16th, Vlad-Călin Nistor—the owner of crypto exchange CoinFlux—and 14 of his associates entered guilty pleas for their involvement in an international cryptocurrency scam. According to the U.S. Department of Justice, this crime ring was responsible for fraudulent online auctions used to launder money through Nistor’s cryptocurrency exchange, where they would exchange cryptocurrency for fiat and then deposit the funds into bank accounts under the names of CoinFlux employees and family members." "The defendants were involved in a racketeering conspiracy and online auction fraud, defrauding millions of dollars from U.S. residents by selling goods that didn’t actually exist."

"[M]embers of the racketeering scheme would impersonate different people over the phone, including eBay customer service representatives and military members trying to sell items before deployment." "Placing fake ads on eBay and Craigslist, defendants lured victims into paying for valuable items such as cars without any intention of following through on the transaction." "To mask their true nature, the group used stolen IDs and stolen valor, pretending to be US military personnel trying to shift their gear before heading off 'on tour.'" "To maintain the appearance of legitimacy, Nedelcu created fictitious entities through which he purported to sell vehicles. Once Nedelcu and his coconspirators convinced victims to purchase falsely advertised goods, they sent the victims invoices for payment that appeared to be from legitimate sellers, such as eBay Motors." "To lull anxious buyers into a false sense of security, Nistor and his cohorts even set up a pretend call center."

"The federal authorities had identified and arrested 14 people who were indulged in such fraudulent activities, and Vlad Nistor was the one among them. He was the one person having great ties with businesses he was associated with. Also, he had been in touch with various members involved in cybercrime through Telegram. He had reportedly helped these people with solutions on how to indulge in such illegal activity without leaving the slightest of a hint to the police department for further suspicion."

"Regarding the investigation, Assistant Attorney General Brian Benczkowski of the Justice Department’s Criminal Division commented, “Today’s modern cybercriminals rely on increasingly sophisticated techniques to defraud victims, often masquerading as legitimate businesses.” He continued, “These guilty pleas demonstrate that the United States will hold accountable foreign and domestic criminal enterprises and their enablers, including crooked bitcoin exchanges that swindle the American public."

This exchange or platform is based in Romania, or the incident targeted people primarily in Romania.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - CoinFlux CEO Arrested

Date	Event	Description
December 15th, 2018	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

Technical Details

This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

Total Amount Lost

The total amount lost is unknown.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.