• September 19, 2020

Crypto Scams on the Rise and Can Still Affect Bitcoin Price

PlusToken isn’t behind the current Bitcoin price crash, but as scam action peaks amid the pandemic, they may still impact the marketplace.

Bolstered by the new coronavirus pandemic, scams persist In being uncontrolled in the cryptocurrency world. From malware to imitation investment programs and even fake donations to health organizations, scammers are famous for taking advantage of desperate times and desperate folks. Among the most obvious scams in the market, PlusToken has come under the spotlight again following rumors emerged that the March crash was due to its operators selling their stolen Bitcoin (BTC).

According To a study by Chainalysis, a blockchain analysis firm, PlusToken didn’t cause the”Black Thursday” sell-off of March 12. In a recent webinar, Chainalysis sought to bring clarity to the effect of the COVID-19 pandemic on cryptocurrency markets by assessing key factors in on-chain data like exchange inflow and much more.

During The demonstration, Philip Gradwell, the chief economist in Chainalysis, dealt with a somewhat common belief the crypto market crash, which occurred March 12 to March 13 was caused by PlusToken liquidating the Bitcoin obtained through its Ponzi scheme, which came to about $2.9 billion, according to Chainalysis. In the webinar, Gradwell said:

“We could also dispel another Theory that’s been going around, that PlusToken […] selling triggered the cost reduction. We actually do not think that is the case because PlusToken had largely cashed out before early March.”

According To Chainalysis data, PlusToken moves to exchanges decreased severely before the crash, which suggests funds were cashed out. A noticeable amount of 12,423 Bitcoin, worth $123 million at the time, was transferred into a mixer or chilly pocket on February 12, followed by a similar amount in early March. It is likely that the Bitcoin was cashed out immediately to prevent exchanges from freezing funds.

Not the ending for PlusToken

PlusToken may still have 61,229 Bitcoin, now worth around $420 million, according to a report Published by OXT Research on March 10. While some Bitcoin has been marketed following the crash, low costs appear to discourage those behind PlusToken from selling, if they’re still actually holding such large amounts of Bitcoin. It is possible that the PlusToken operators might be awaiting the Bitcoin halving to catch a higher cost.

According to Chainalysis, volumes before and throughout December 2019 were higher than those detected in 2020. The highlighted inflows were discussed in a different Chainalysis report in which it required another position on the PlusToken and Bitcoin price relation, saying that at the time, the sell-offs from PlusToken were maintaining Bitcoin prices down.

Although PlusToken has largely cashed Out, there’s still a chance that it will continue to influence Bitcoin. Based on Kim Grauer, the head of research at Chainalysis, a massive sell-off by PlusToken could bring down the cost of Bitcoin later on, particularly if liquidations are implemented irresponsibly. She advised Cointelegraph:

“We found previously that large Inflows to exchanges, such as those from PlusToken this past year, tend to raise the price volatility on exchanges. This issue could possibly be exacerbated by trading robots that pick up on these on-chain moves and execute trades, and of course, the highly leveraged positions on derivatives trades that may get liquidated fairly quickly. But overall, prices tend to bounce back fast from these one-off events.”

PlusToken: a crypto scam unicorn

PlusToken Now called the largest cryptocurrency exit scam in history — so much — was a 2019 Ponzi scheme that defrauded investors out of $2.9 billion in cryptocurrency assets by posing as a South Korea-based crypto pocket project which provided depositors interest in crypto, a practice which has become rather common in decentralized fund software, centralized banking software and exchanges offering margin trading.

PlusToken Explained that its high-interest payments could be generated by trade profits, mining, and referral programs. Shortsighted from the promising profits, more than 3 million users registered with PlusToken.The scheme even declared that it expected to rise to 10 million users by the end of 2019, soon before it exited with depositors’ money.

In China, PlusToken was quickly exposed as a Ponzi scheme when six people were detained by Chinese authorities in June 2019, with reports linking them into the PlusToken project. Cointelegraph reported about the episode at the time. Still, it had been in August 2019 the cybersecurity company CipherTrace released its next quarter Cryptocurrency Anti-Money Laundering Report, that confirmed the link to the PlusToken scam.

COVID-19: Crypto scams on the rise

Interest-generating Products have been gaining ever more popularity in the cryptosphere, such as MakerDAO’s decentralized protocol, which, based on some report by DappRadar, saw peak activity during March, and other centralized alternatives like BlockFi’s banking program or Binance’s financing services. Though crypto has always been prone to illegal activity and dishonest ventures, the comparatively large interest rates practiced in these services might have helped normalize PlusToken’s gain claims, easing unwary investors.

Similar models have been seen everywhere. In August 2019, a cryptocurrency wallet endeavor from Nigeria, known as Satowallet, allegedly made off with $1 million at a smaller-scale exit scam. This past year, another Ponzi scheme promising yields from cloud mining also made headlines after pulling off a $200 million depart scam that later led to 14 individuals being detained.

An ever-increasing number of “topical” crypto-schemes have surfaced Because of the worsening of the coronavirus outbreak, from bogus donation campaigns for the World Health Organization and the United States Centers for Disease Control and Prevention to fraudsters impersonating officials from these agencies that can sell information on active ailments for a cost, paid with Bitcoin of course.

Now More than ever, cryptocurrency holders will need to be careful of crypto scams. The U.S. Federal Bureau of Investigations recently issued a press release where it warned of the potential growth of”cryptocurrency-related fraud strategies” throughout the COVID-19 pandemic, including:

“There Are not just numerous digital asset service suppliers online but also tens of thousands of cryptocurrency kiosks located throughout the world that are exploited by criminals to facilitate their own schemes. Many conventional financial crimes and money laundering schemes are now orchestrated via cryptocurrencies.”

Although tough times make a Perfect chaotic setting for scammers to function in, it is relieving to know that despite the increased activity and publication coronavirus-related scams, earnings for crypto scammers fell by around 30 percent in March.

Despite taking on new forms, cryptocurrency scams are nearly as old as crypto itself. By way of instance, OneCoin — among the most prominent names in regards to cryptocurrency-related scams — was founded in 2014, and it’s still making headlines in crypto media. Though OneCoin has been sued, the lead plaintiff for its continuing $4 billion class-action lawsuits against the job, Donald Berdeaux, has repeatedly failed to fulfill with the court’s monthly status reports, which might lead to the case being dropped.

Can exchanges prevent illegal trades?

Based on Chainalysis, most of the funds transferred by the PlusToken scam were liquidated in two Asian exchanges: Huobi and OKEx. This has increased Some concerns about trades’ Know Your Client practices, which don’t appear to have been helpful as it came to spotting or censoring the trades from PlusToken.

Although other sources were utilized, They were small compared to the inflows into the aforementioned exchanges. Grauer said that Chainalysis had”found traces of capital at mining pools, mixers, other scams, and p2p exchanges, but the paths were too little to be interrogated.”

If cryptocurrency schemes are to Be stopped, exchanges should ideally act as the last barrier for illegal transactions. Responding to previous criticism, Huobi is aiming to enhance its safety measures by launch Star Atlas, an on-chain tracking tool that could identify”crimes like fraud, money, laundry and other problematic actions.”

Moreover, Huobi is also looking to partner with information suppliers such as Chainalysis and CryptoCompare to create a more transparent and compliant ecosystem, a step that will be necessary for institutionalization and regulatory compliance moving forward. Ciara Sun, the vice president of international business at Huobi, told Cointelegraph:

“While We may have the ability to identify illicit activities as soon as they reach our trades and stop their outflow, we can not yet prevent illegal transactions that begin beyond our platform. But, we believe that collaborative efforts among industry players, including but not limited to data sharing, are the key to success to make a friendlier ecosystem for the crypto sector to grow.”

While efforts to reduce illicit transactions are being undertaken By exchanges like Huobi and Paxful, users must always know about Possible fraud efforts and conduct purposeful diligence into any Project they’re ready to trust with their coins since it’s unlikely They will get them back after losing.

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