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KYC on Exchanges Powerless Against PlusToken Ponzi Scammers According to New Report

The PlusToken Ponzi scheme operators are using regulated KYC compliant exchanges to dump their cryptocurrency according to an updated report by investigative firm OXT Research.

In their first report on the PlusToken Ponzi scam, OXT Research introduced estimates for the size of the popular high yield investment scam and the depth of the market impact attributed to the accumulation and distribution of the PlusToken Bitcoin hoard – which is estimated to be an incredible 200,000 BTC.

PlusToken has been blamed for causing Bitcoin prices to fall in 2019 and as recently as March 6 when it was reported that the fraudsters had unloaded 13,000 BTC which sent the Bitcoin price plummeting by over $500.

The second edition report released on March 10, revealed the method used by PlusToken scammers to move their funds through regulated exchanges despite the strictly enforced Know Your Customer (KYC) compliance standards.

KYC Irrelevant

The report explained that the PlusToken scammers have moved their funds from the direct pile of unmixed allotments and locations to mixers like Wasabi wallet which implements a trustless coin shuffler, and then the funds would be consolidated and distributed.

While the first edition by OXT demonstrated that Huobi had been leveraged by the scammers for distribution the new edition found that while the global exchange was still the main source of distribution, a large amount of the coins have ended up on the OKEx exchange. Per the report, “OKEx is a newly labeled and significant coin destination having received nearly 50% of February distributions.”

Both Huobi and the South Korean exchange OKEx are KYC compliant in line with the global push for increased transparency and regulation in cryptocurrency exchanges.

OXT stated the most of PlusToken’s major market effects should have passed as their data reveals that about 70% of their BTC stockpile has already been distributed.

BTC Price and Safe Haven Status

As reported by Blockchain.News, Bitcoin’s status as a safe-haven asset has been under intense scrutiny as the BTC price continues to fall amidst a series of crisis events in 2020 which have continued to create the ideal environment for the digital commodity to theoretically thrive. Beginning with the Iranian – US conflict in early Jan, the coronavirus outbreak triggering a cut in interest rates by the Federal Reserve, and now the plummeting oil price following a disagreement in Vienna between Russia and the OPEC nations.

The data in the OXT reports, highlighted that the Ponzi scheme has sold around $1.3 billion worth of BTC in the past seven months noting the distribution increases into market strength and slowing with market price weakness. The continual dumps by PlusToken scammers each time the BTC price has risen has added drastically to the cryptocurrency’s volatility.

The market manipulation is frustrating as it is now an added variable for analysts to integrate into their inchoate analysis of the nascent asset and could be a huge factor into why Bitcoin has not met the expectations of its safe-haven status.

Source: https://insidebitcoins.com/cryptocurrency-exchanges

Image via Shutterstock

Bitcoin Evaporated 30 Billion Market Cap Amid Coronavirus Pandemic and Bearish Economic Outlook

There is a sea of red for stocks and cryptocurrencies this week. Bitcoin has dipped below $6000 for the first time since May 2019. The selloff of cryptocurrencies has extended to altcoins in which the price of Ethereum and Bitcoin SV have dropped 30% and 40% respectively.

Bitcoin Price on March 12, 2020

Source: CoinMarketCap

The selloff of Bitcoin has intensified since 6 pm (HKT), leading to a 23% price drop from $7268. A 30 billion dollar market capitalization of Bitcoin has been wiped out within an hour and Bitcoin once dropped to a yearly low of $5705 (as of press time).

Reasons for the massive selloff

1) Global stock market crash and Coronavirus

The plummeting oil price due to the disagreement between Russia and OPEC nations has been the catalyst for plunging equity indices this week. The New York stock exchange once halted trading for 15 minutes when the S&P 500 tanked over 7%. The US stock market suffered another blow when CME Group announced to cease trading operation at the end of the day on Friday as a precautionary measure to coronavirus.

The widespread of the coronavirus could make things worse. The World Health Organization recently declared the disease COVID-19 a pandemic, in which US President Donald Trump just announced the travel ban to 26 European countries. S&P Composite 1500 Airlines has plunged 13% following Trump’s travel ban announcement.

The coronavirus has seriously dampened the European economy, with Italy tightened its lockdown on economic activities. The shutdown of economic activities indicates economic contraction, in which companies cannot service their debts. When their debts approach maturity, companies may need to dispose of their assets to repay the debts, which in turn leads to a vicious cycle and further economic downturn.

Cboe VIX Index

Source: Cboe

The growing uncertainty of macroeconomic outlook can be reflected by the alarming increase of Cboe VIX index, which has hit a yearly high of 67.65.

2) PlusToken Ponzi Scheme

As reported by Blockchain.News, OXT research recently released the report revealing how PlusToken scammers can bypass the Know-Your-Customer (KYC) compliance standards in regulated exchanges to transfer funds. The controversy of PlusToken is likely to dampen the investor’s confidence on Bitcoin, however, this has a limited impact on the massive selloff of Bitcoin.

Will DeFi suffer even more?

It is noteworthy that the leading tokens in DeFi suffer the most among other leading altcoins. Maker (MKR) resulted in a daily price drop of 44% where the daily price of Synthetix (SNX) plunged 36%. Apart from the massive selloff of Bitcoin, this can be further explained by the recent shutdown of Paradigm Labs.

The recent stock market crash led people questioning the reliability of centralized financial institutions, which Libertarian 2020 Presidential Candidate Adam Kokesh intended to create a decentralized financial system using AmeriCoin. From current observation, however, it seems that DeFi is too vulnerable to serve as an alternative to the centralized financial system.

Crypto Project Baer Chain Has Been Classified as a Ponzi Scheme by the Chinese Police Department

The police department of the Haizhou district in Lianyungang, a coastal city in China published an announcement on ” information verification and registration of investment members of the Baer Chain case” on June 15. According to the notice, the project has been classified as a Ponzi scheme.

As shown on CoinMarketCap, the trading volume of Baer Chain (BCR) in the past 24 hours has been around $4,700. The cryptocurrency currently trades at less than a dollar.

Source: CoinMarketCap

According to local news site Hexun, Baer Chain price reached a peak of 127 Chinese Yuan (around $18) in July 2019, with a market cap of 23 billion Chinese yuan ($3 billion). The founder and CEO, Vincent successfully swept away huge amounts of money, which was pumped up to over $730 million in just half a year.

The extreme surge in Bitcoin price and altcoin prices in 2017 featured a series of stories of many of the ICO-made millionaires. The “fear of missing out” (FOMO) often prevails in these scenarios; in the meantime, certain groups of bad actors found cryptocurrency as the best fit for their scams. Another well-known crypto Ponzi scheme was the PlusToken wallet scam — which was estimated to have resulted in the loss of over $3 billion worth of crypto assets.

There is no substantial cost for creating a new cryptocurrency thanks to Ethereum’s smart contract and open-source feature. Ethereum has brought a whole realm of new possibilities in the crypto industry with its tokenization capabilities.

However, Ethereum 2.0’s upgrade to a proof-of-stake system may have an effect on the decentralized finance and decentralized apps industry. With the new improvements aiming to solve network congestion issues and low transaction times, this could mean Ethereum could see more adoption.

With Ethereum gaining more popularity, more Dapps would be rolled out and more people would be using them, meaning more resources would be needed.

Cryptos Confiscated from $4.2 Billion PlusToken Scam Likely Sold by Chinese Police, says Journalist Colin Wu

Chinese cryptocurrency and blockchain journalist, Colin Wu, has revealed that the huge amounts of Bitcoin and Ethereum seized by the Chinese government from the ongoing PlusToken Scam have been converted to fiat currency and reserved in the Central Treasury managed by the China’s central bank.

The reporter has disclosed that an official announcement appears to indicate that the government has sold the cryptocurrencies and kept the funds in the Central Treasury owned by the People of Bank of China.

Colin Wu shared screenshots of official documents of the huge amounts of Ether and Bitcoin confiscated from the PlusToken crypto scam, which is regarded as one of the largest Ponzi schemes in the cryptocurrency industry.

He said that China’s police confiscated about 190,000 Bitcoins and 830,000 Ethereum that worth $3,213,109,000 and $423,474,300 respectively.

Furthermore, crypto and Bitcoin market analyst, David Puell, tweeted that a similar kind of such sell-off was executed in 2019. This was the incident when Chinese authorities arrested Chen Bo, the mastermind of PlusToken Ponzi scheme in June 2019. Chinese police confiscated cryptocurrencies, sold them, and kept the funds in the country’s national treasury. Puell also mentioned particular cryptocurrency exchanges (OKEX and Huobi) that the government authorities used to dump the cryptocurrencies into the open market while cashing out fiat currencies.

Puell believes that the government has sold the cryptocurrencies confiscated currently via OKEX and Huobi exchanges and kept the funds in the national treasury.

Puell’s tweets also revealed to the crypto community that the current sell-off of the seized Ethereum and Bitcoin have had an impact on the cryptocurrency markets by pushing their exchange rates down.

Meanwhile, Thomas Silkjaer, the CEO and founder of blockchain analytics, forensics and AML compliance company, xrplorer.com, has also revealed that huge amounts of XRP were among the cryptocurrencies confiscated by the Chinese authorities. He disclosed that the government has sold all the XRP coins via the HBTC exchange, and now only a few tokens are left in the shuffle pool.

On November 19, a court ruling indicated that China’s police confiscated more than $4.2 billion worth of crypto assets during a massive PlusToken Ponzi scheme crackdown. The total amount of crypto assets seized include the following: 213,724 Tether, 6 billion Dogecoin, 74,167 Dash, 27.6 million EOS, 1.4 million Litecoin, 79,581 Bitcoin Cash, 487 million XRP, 833,083 Ether, and 194,775 Bitcoins. Chinese law enforcement confiscated the cryptocurrencies from seven culprits during the crackdown. The court ruling directed all the seized crypto assets to be processed and funds kept in the national treasury. The court document stated that the PlusToken scam might have taken more of such enormous funds from victims.

PlusToken Scheme Targeting Million of Investors

Authorities in China have arrested many bad actors who have been responsible for conducting PlusToken Ponzi scams. Such arrests have been made as a result of extensive investigations by local agencies including China’s Ministry of Public Security, which is the main police force agency in the country. So far, Chinese investigators have taken over 100 culprits behind the multi-billion-dollar cryptocurrency scam into custody.

Since 2019, the PlusToken scam had expanded to over 3,000 pyramid scheme type layers. The fraudulent scheme targets over 2 million investors in the country by attracting them with lucrative crypto investments. Scammers ask for payment in Bitcoin in exchange for an opportunity to invest in lucrative tokens. However, it always turns out to be a huge scam.

PlusToken Crypto Scam Masterminds to Serve 11 Years in Prison

A Chinese court in the Eastern province of Jiangsu has slapped the ringleaders of the PlusToken Ponzi scheme with 11 years of prison after they made off with cryptocurrencies worth 14.8 billion yuan, which translates to approximately $2.25 billion from investors.

One of the biggest Ponzi schemes in China

PlusToken has set the record of being one of the biggest uncovered Ponzi scams in China. Emerging in mid-2019, it expanded to over 3,000 pyramid scheme layers after targeting more than 2 million investors in the country.

Nevertheless, it caused a wide-range of panic after some Korean and Chinese investors could not withdraw Bitcoin funds from their wallets. However, this issue was dismissed as a mere hacker attack.

The Ponzi scheme lured victims with lucrative crypto investments and promised high returns based on the investment amounts and the members they recruited. Payments were channeled through cryptocurrencies like Bitcoin, and this was a classic example of a Ponzi scheme where returns for earlier investors were generated from those who joined later.

In July, 27 primary criminal suspects involved in this scam were arrested by Chinese authorities. It served as the first online Bitcoin pyramid scheme to be flagged down by Chinese security organizations.

The promise of arbitrage returns

Per the report:

“After PlusToken went bust in mid-2019, and Chinese authorities started chasing its ringleaders domestically and abroad, the price of bitcoin plunged almost 30 percent from its highest price of the year, to about US$10,000 per coin.”

It was also revealed that the masterminds deceived investors with arbitrage returns, which proved to be non-existent.

The announcement of this imprisonment sentence comes days after Colin Wu, a Chinese cryptocurrency and blockchain journalist, disclosed that the huge amounts of Bitcoin (BTC) and Ethereum (ETH) seized by the Chinese government from the PlusToken Scam had been converted to fiat currency and reserved in the Central Treasury managed by China’s central bank.