Crypto-exchange that laundered millions in Malta was a ‘criminal organisation’

The Thodex crypto-exchange, once one of Turkey’s largest exchanges, was set up as a criminal organisation from the outset, Turkish public prosecutors have argued in court this week as a case that has implications for Malta got underway.

According to a Turkish bill of indictment, Thodex crypto exchange founder Faruk Fatih Özer defrauded thousands of customers and vanished with around €13 million of their funds.

The lion’s share of those funds, around €10 million, was stashed in crypto wallets located in Malta.

Özer is the founder of Thodex, which was one of Turkey’s largest cryptocurrency exchanges. He absconded in 2021 with millions of euros belonging to some 390,000 clients from across the country.

According to Turkish financial investigators, he hid at least €10 million of those funds in Malta-based crypto wallets. He then fled to Albania, where he was caught last year on the strength of an Interpol Red Notice.

He has now been extradited to Turkey, where the case against him, in which prosecutors are requesting an incredible prison term of thousands of years, continued this week.

In the prosecutor’s 22-page opinion submitted in court, it is stated that Thodex was established in 2017 with a share capital of just over €13,000 and that the enterprise was established with the intention of defrauding people interested in investing in cryptocurrencies.

It appears from the prosecutor’s arguments that the thousands of people who invested their money into the exchange saw the value of their holdings appearing properly but, in actual fact, the holdings had no ‘real money’ equivalents.

The Istanbul-based exchange had embarked upon aggressive advertising campaigns featuring famous Turkish models to lure investors in, at first promising them luxury cars in return for their business.

The company at first acted appropriately and fulfilled clients’ buying and selling instructions but the company soon began offering incentives such as gifts and cryptocurrency and lotteries with large prizes on offer.

According to prosecutors, the idea was to attract as many customers as possible at the beginning, before Özer absconded with around €13 million, €10 million of which was stashed away in Malta, according to Turkish investigators.

Özer and his 20 accomplices are accused of having engaged in fraudulent behaviour from the outset, claiming assets that never existed had been sold into the system.

Thousands of unsuspecting customers were defrauded by the end of the enterprise and much of their money was sent to a crypto wallet in Malta.

An Albanian judge ordered Özer’s extradition to Turkey in May ordered his extradition to Turkey, Özer made his first appearance in a Turkish court on Monday morning.

The charges follow an investigation conducted by MASAK – Turkey’s Financial Crimes Investigation Board, the country’s financial intelligence unit.

The MASAK report found that Özer transferred client crypto assets worth approximately €10 million from three separate accounts to wallets at a crypto asset service provider in Malta.

Those crypto wallets, according to MASAK’s investigations, belong to Faruk Fatih Özer and co-defendants Cem Uzunoğlu and Zuhal Özer.

But after the exchange suddenly went dark in April 2021, and when Özer and their funds vanished, a number of users soon got themselves legal representation and filed a fraud complaint against the exchange and its executives.

An incredible maximum prison sentence of 40,564 years is being sought for each of the 21 defendants for aggravated fraud and forming a criminal organisation.