Ripple Trade Japan Fraud

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Ripple Trade Japan

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 was ultimately arrested, it does not appear that funds were recovered as more than 2 years had passed and they'd already been spent.

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

About Ripple Trade Japan

Established in May 2014, Ripple Trade Japan collected funds from users in exchange for IOUs, which could be traded for XRP tokens or cash. The Ripple Trade Japan website presented an opportunity to potentially turn ¥10,000 into ¥100 million due to a once-in-a-lifetime innovation. The author, a supposed Yoshihiro Yoshikawa, emphasizes the value of the information being provided and urges readers to seize the opportunity before it becomes widely known. He draws parallels between the entrepreneurial spirit of Silicon Valley and the current situation, highlighting the potential for significant wealth creation. The narrative shifts to Bitcoin, its rise in value, and the recent issues with MtGox, emphasizing the volatility and risks associated with cryptocurrencies. Despite this, the author expresses confidence in the future of digital currencies and introduces Ripple (XRP) as the next potential standard. Chris Larsen, the founder of Ripple, is highlighted for his success in the financial industry, along with the support from prominent venture capital firms. The author encourages readers to register for more information about Ripple and emphasizes the importance of making informed choices in the rapidly changing landscape of digital currencies.

RTJ, established in 2014, allowed users to deposit money to obtain digital ripple credits, which could be exchanged for other currencies or redeemed for cash.

Ripple Blockchain

"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."

Ripple Trade Japan

"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."

The Reality

"Takenaka is believe to have issued fake IOUs worth a total value of around 120 million Japanese Yen ($1.06 million USD)."

"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."

"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." Takenaka is accused of fraudulently obtaining 120 million yen worth of credits through the exchange between November 2014 and February 2015. It is believed that Takenaka redeemed the credits for cash on other exchanges and spent the funds on entertainment.

Takenaka is accused of fraudulently obtaining 120 million yen worth of credits through the exchange between November 2014 and February 2015. Police suspect Takenaka manipulated the company's systems to issue over ¥120 million ($1 million) in IOUs between November 2014 and February 2015, exchanging some for IOUs of other Ripple exchanges before converting them to cash for personal expenditure and investment. It is believed that Takenaka redeemed the credits for cash on other exchanges and spent the funds on entertainment.

RTJ, which received users' deposits and issued them digital IOUs, experienced financial decline from competition in the market, ultimately failing in January 2015. Operator Takenaka reportedly began diverting funds from user deposits around this time, ultimately leading to his arrest for swindling a Miyagi Prefecture resident out of 1.4 million yen in deposits.

What Happened

The platform continued to operate until March 2015, when the website shut down and customers found that they were unable to withdraw their deposits.

Key Event Timeline - Ripple Trade Japan Fraud

Date	Event	Description
May 2014	Ripple Trade Japan Established	The Ripple Trade Japan platform is established in Hamamatsu City, Shizuoka Prefecture.
January 7th, 2015 6:46:53 AM MST	Capture Of Homepage	The Ripple Trade Japan homepage is captured.
March 3rd, 2015	Large Bank Transfer	Yuki Tekanaka receives a 1.4 million yen bank transfer from a 41 year old male resident of Miyagi Prefecture, despite knowing that his exchange was essentially bankrupt. The site would reportedly be brought offline the same day.
October 18th, 2015	Takenaka Arrested	Ripple Trade Japan operator Takenaka is arrested for fraud.
April 11th, 2017 2:11:33 AM MDT	Brand Name Phishing Attack	There is reportedly a fraud continuing on the Ripple Trade Japan website at the same URL.
October 18th, 2017 9:42:25 AM MDT	XRP Chat Discussion	An XRP chat forum discussion on the issue. The incident has sparked discussions among Ripple enthusiasts, with some emphasizing that Ripple Trade Japan wasn't affiliated with Ripple, the company, and urging caution against associating the fraud with the legitimate Ripple network. Despite the arrest, XRP Chat, a platform for discussing Ripple and cryptocurrency-related news, emphasizes that it is not affiliated with Ripple or its subsidiaries.
October 18th, 2017 10:57:16 PM MDT	Tokyo Reporter Reports Arrest	The Tokyo Reporter reports that the Tokyo Metropolitan Police have arrested Yuki Takenaka, the 31-year-old head of Ripple Trade Japan (RTJ), on suspicion of fraud involving the virtual currency ripple. Over a span of a month, Takenaka is suspected of defrauding more than 40 customers nationwide out of approximately 17 million yen using similar methods. Takenaka is accused of fraudulently obtaining 120 million yen worth of credits through the exchange between November 2014 and February 2015. It is believed that he redeemed the credits for cash on other exchanges and spent the funds on entertainment. The fraudulent activities came to light in March 2015 when customers of RTJ reported difficulties in withdrawing their deposits and consulted with the police. Takenaka, a resident of Kyoto, has generally admitted to the allegations, according to the police.
October 19th, 2017 12:55:18 AM MDT	Mainichi Article Published	Mainichi reports that Yuki Takenaka, the 31-year-old operator of Ripple Trade Japan (RTJ), was arrested on suspicion of fraud for allegedly misappropriating users' deposits to invest in foreign exchange margin trading, according to investigative sources. RTJ, which received users' deposits and issued them digital IOUs, experienced financial decline from competition in the market, ultimately failing in January 2015. Takenaka reportedly began diverting funds from user deposits around this time, ultimately leading to his arrest for swindling a Miyagi Prefecture resident out of 1.4 million yen in deposits. This incident mirrors the collapse of bitcoin exchange Mt. Gox in 2015, which prompted Japan to revise its Payment Services Act, introducing a registration system for cryptocurrency operators in October 2017. While the registration system aims to enhance oversight and mitigate risks, it remains uncertain whether it will entirely eliminate fraudulent activities in the cryptocurrency sector.
October 19th, 2017 3:06:48 AM MDT	CCN Article Published	CCN reports that Tokyo police have arrested Yuki Takenaka, the operator of Ripple Trade Japan, a platform for trading Ripple's XRP cryptocurrency, on charges of swindling investors. Takenaka is accused of fraudulently obtaining ¥1.4 million ($12,500) from an investor in March 2015, despite the exchange being effectively bankrupt at the time. Further investigations reveal allegations of Takenaka defrauding an additional ¥17 million ($150,000) from at least 40 customers by luring them with no deposit fees for trading. Takenaka admitted to most of the charges, and the case highlights similarities to the Mt. Gox scandal, where founder Mark Karpeles faces charges of embezzling ¥341 million in customers' bitcoin and cash funds. Ripple, a San Francisco-based FinTech startup, develops blockchain solutions for the banking industry, with XRP being its digital token. As of now, XRP's total market cap stands at $8.2 billion, ranking it as the third-largest cryptocurrency globally.
June 2019	Transaction Locality Analysis	The Ripple Trade Japan node is included in a research paper by Etienne Caquot as one of the nodes which is being included for analysis of traffic. This shows that the node was largely used by users transacting in JPY (Japanese Yen).

Technical Details

RTJ, established in 2014, allowed users to deposit money to obtain digital ripple credits, which could be exchanged for other currencies or redeemed for cash. Rather than maintain credit to honour deposits, Yuki Takenaka reportedly gambled the funds on foreign exchange margin trading.

Total Amount Lost

Takenaka is accused of fraudulently obtaining 120 million yen worth of credits through the exchange between November 2014 and February 2015. Between February and March 2014, Takenaka is suspected of defrauding more than 40 customers in Japan out of approximately 17 million yen. That included 1.4 million yen which was received from a single customer despite knowing that his exchange was essentially bankrupt.

The total amount lost has been estimated at $1,000,000 USD.

Immediate Reactions

The fraudulent activities came to light in March 2015 when customers of RTJ reported difficulties in withdrawing their deposits and consulted with the police.

"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."

Ultimate Outcome

The platform operator was arrested for fraud on October 18th.

Revision To Payment Services Act

The collapse of bitcoin exchange Mt. Gox in 2015 prompted Japan to revise its Payment Services Act, introducing a registration system for cryptocurrency operators in October 2017. While the registration system aims to enhance oversight and mitigate risks, it remains uncertain whether it will entirely eliminate fraudulent activities in the cryptocurrency sector.

Takenaka Arrested For Fraud

Yuki Takenaka, the 31-year-old operator of Ripple Trade Japan (RTJ), a cryptocurrency exchange dealing in ripple (XRP), was arrested on suspicion of fraud for allegedly misappropriating users' deposits to invest in foreign exchange margin trading, according to investigative sources.

In October 2017, the Tokyo Metropolitan Police arrested Yuki Takenaka, the 31-year-old head of Ripple Trade Japan (RTJ), on suspicion of fraud involving the virtual currency ripple. Takenaka, a resident of Kyoto, has generally admitted to the allegations, according to the police.

"[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."

"According to the police, Takenaka has admitted to most of the charges."

Cryptocurrency Community Confusion

"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."

Total Amount Recovered

The total amount recovered is unknown. It is believed that most funds were already spent by the time of the arrest.

Ongoing Developments

TBD

Individual Prevention Policies

When using any third party custodial platform (such as for trading), it is important to verify that the platform has a full backing of all assets, and that assets have been secured in a proper multi-signature wallet held by several trusted and trained individuals. If this can't be validated, then users should avoid using that platform. Unfortunately, most centralized platforms today still do not provide the level of transparency and third party validation which would be necessary to ensure that assets have been kept secure and properly backed. Therefore, the most effective strategy at present remains to learn proper self custody practices and avoid using any third party custodial platforms whenever possible.

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

Platform Prevention Policies

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.

All wallets, minting functions, and critical infrastructure should be implemented with a multi-signature requirement, with a recommended minimum of 3 signatures required. This means that making important changes or approving spending will require the keys held by at least 3 separate individuals within the organization to approve. The multi-signature should be implemented at the lowest layer possible, all key holders should have security training, and all key holders should be empowered and encouraged to exercise diligence.

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

All platforms should undergo published security and risk assessments by independent third parties. Two assessments are required at founding or major upgrade, one after 3 months, and one every 6 months thereafter. The third parties must not repeat within the past 14 months. A risk assessment needs to include what assets back customer deposits and the risk of default from any third parties being lent to. The security assessment must include ensuring a proper multi-signature wallet, and that all signatories are properly trained. Assessments must be performed on social media, databases, and DNS security.

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