Is This a Legitimate Transaction or a Crypto Scam? A Legal Perspective

Cryptocurrency investment scams are becoming increasingly sophisticated, often targeting individuals with promises of high returns and complex financial transactions. This case presents multiple red flags that suggest a high risk of fraud. Below, we analyze the legal implications and provide guidance on how to handle such situations.

Key Details of the Case

A portfolio manager claims to manage a business broker account with a profit of $352,143.05.

The manager requires a withdrawal code, for which the client must pay $1,100 upfront.

Additional requests for $300, $350, and other payments have been made, each with new justifications.

The manager guarantees the funds will be transferred to the client’s Bybit account within six hours.

A legal agreement is proposed, outlining terms of compensation and penalties if the manager fails to pay.

The client has already transferred money multiple times but has yet to receive the promised amount.

Legal Red Flags and Warning Signs

1. The "Withdrawal Code" Scam

Legitimate cryptocurrency exchanges and brokers do not require a withdrawal code. This is a well-known scam tactic used to extract additional funds from victims before vanishing. If the portfolio manager controls the account, they should be able to transfer funds without requiring extra payments.

🔴 Legal Reference: Under European Union (EU) Anti-Fraud and Anti-Money Laundering (AML) regulations, legitimate financial service providers must disclose all fees upfront. Unannounced, unexpected withdrawal fees are a hallmark of fraudulent schemes.

2. Repeated Requests for Additional Payments (Advance-Fee Scam)

The request for additional payments beyond the initial $1,100, followed by $300, $350, and more, is a classic example of an advance-fee scam. Scammers use psychological pressure, claiming that one more payment is all that’s needed to release the funds—only to demand even more later.

🔴 Legal Reference: Under the U.S. Federal Trade Commission’s (FTC) Telemarketing Sales Rule, any demand for upfront payments for guaranteed financial returns is illegal.

3. Fake Profit Claims & Manipulated Account Screenshots

The portfolio manager’s claim that there is $352,143.05 in profit should be approached with caution. Screenshots of balances can be easily manipulated using simple editing software. You should request direct access to the trading account before making further payments.

🔴 Legal Reference: Under UK Financial Conduct Authority (FCA) regulations, brokers must provide verifiable account statements upon request. Fake screenshots are commonly used in Ponzi schemes and fake investment platforms.

4. Unregulated Broker & Portfolio Manager

Have you checked if the portfolio manager or the broker is licensed? Many scam brokers operate without regulation and are based in offshore jurisdictions with no legal accountability.

✔ How to Check Legitimacy:

Look up the broker on official regulatory websites like SEC (USA), FCA (UK), CySEC (Europe), or ASIC (Australia).

If they are not registered, they are operating illegally.

If the broker is registered but has warnings from regulators, it is a high-risk platform.

🔴 Legal Reference: Under the Markets in Financial Instruments Directive (MiFID II) in the EU, all brokers and investment firms must be licensed and regulated. Operating without a license is a serious violation.

5. Legally Binding Agreement? Or Just a Cover?

The Cryptocurrency Fund Transfer and Portfolio Management Agreement attempts to outline compensation, penalties, and dispute resolution terms. However, a fraudulent party is unlikely to honor any contract. If the manager is unregulated or operates from a non-cooperative jurisdiction, legal enforcement will be extremely difficult.

🔴 Legal Reference: Under the United Nations Convention on Contracts for the International Sale of Goods (CISG), contracts are only enforceable when both parties are legally recognized and accountable. A contract cannot force a scammer to pay.

What Should You Do Now?

✔ Stop Sending Money Immediately – If the funds are truly available, the manager should deduct fees from the balance instead of requesting additional payments. ✔ Verify the Broker’s Legitimacy – Check the regulatory status of the broker and the portfolio manager. If they are unlicensed, they are likely operating illegally. ✔ Request a Small Test Withdrawal – If they refuse, it’s almost certainly a scam. ✔ Report the Incident – If fraud is suspected, file a complaint with the SEC, FCA, or local financial authorities. ✔ Seek Legal Assistance – If you’ve already lost money, consult a cryptocurrency lawyer to explore potential recovery options.

Final Verdict: This Is Almost Certainly a Scam

🚨 Multiple warning signs indicate that this is a fraudulent scheme.

There is no such thing as a withdrawal code for legitimate transactions.

Additional fees keep increasing with no explanation.

No verifiable proof of the $352K profit exists.

The broker may not be regulated.

Repeated financial pressure is being applied to extract more funds.

If you have already lost money, document all evidence and report the scam immediately. Engaging with a professional cryptocurrency lawyer can help determine the best course of action for potential recovery.

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Disclaimer

The information provided in this article is for general informational purposes only and does not constitute legal or financial advice.

Author & Crypto Consultant

Shahid Jamal Tubrazy (Crypto & Fintech Law Consultant)

Shahid Jamal Tubrazy, a certified top expert in Crypto Law from Duke University, is a leading authority in the cryptocurrency and blockchain space. As a seasoned Fintech lawyer, he offers a full spectrum of services, including licensing, legal guidance for ICOs, STOs, DeFi, and DAOs, as well as specialized expertise in crypto mediation, negotiation, and mergers and acquisitions. With a proven track record and published works on Blockchain Regulation and Cryptocurrency Laws, Shahid provides unparalleled insights into the complexities of the fintech world, ensuring compliance and strategic success. 🌐💼 #CryptoLaw #Fintech #Blockchain #LicenseServices #CryptoMediator #MergersAndAcquisitions #CryptoCompliance #FrozenAssetsrecovery.

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