Cryptocurrency Scams a Massive Problem: 3 Men Charged for $722M Scheme

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While cryptocurrencies are but a small drop in the pond of global finance, authorities have only increased their scrutiny of this nascent industry over the past couple of months.

Case in point, U.S. authorities on Tuesday revealed that they have charged three men for their involvement in a $722 million cryptocurrency fraud that amounted to a “high-tech Ponzi scheme.”


Runners of BitClub Network Arrested

According to a report from the AFP on the matter, the U.S. Justice Department announced Tuesday that three men running “BitClub Network,” which was a Bitcoin/crypto mining Ponzi-scheme that paid participants for recruiting others in classic pyramid scheme fashion, were charged for operating a “worldwide fraudulent scheme.”

The scheme operated from April 2014 through December 2019, a statement from the Justice Department read. A statement from an authority read:

“The defendants allegedly made hundreds of millions of dollars by continuing to recruit new investors over several years while spending victims’ money lavishly.”

Two defendants remain at large.

Not Only Large-Scale CryptoIndustry Scam

BitClub Network is the most recent large-scale cryptocurrency scam to have been under scrutiny by authorities.

There’s PlusToken, a cryptocurrency scam focused on the Asian market that Primitive Ventures’ Dovey Wan claims to have stolen some 200,000 Bitcoin, 800,000 Ethereum, and a mass of other cryptocurrencies from victims.

The scam was a “wallet” that promised returns on deposits, which is obviously too good to be true. Earlier this year, a number of ringleaders of the operation were arrested in Vanuatu, though a few individuals remain missing abroad, though they are likely being pursued by global authorities due to the size of the booty stolen.

And there’s also OneCoin, a Ponzi scheme that is much similar to PlusToken. Authorities are currently pursuing the founders of the scheme, which analysts also say managed to defraud cryptocurrency industry members of millions.

Bitcoin Scams Push Prices Lower, Analysis Implies

Cryptocurrency scams don’t only affect the victims, they also affect the entire digital asset market.

White hat on-chain analyst and pseudonymous Twitter handle Ergo recently released an array of tweets under the premise: “This got me thinking… could the selling by the PlusToken scammers have had an abnormal effect on this market cycle?”

According to the over 15-part Twitter thread, there’s a high likelihood that the remaining operators of the PlusToken scheme have been liquidating and shuffling over 187,000 coins — now valued at $1.4 billion. He added that PlusToken is likely selling “a little over 1,100 BTC per day,” which is approximately 60% of the daily block rewards issued by the Bitcoin network, and has been for at least the past four months.

This analysis has been corroborated by renowned blockchain tracking firm CoinMetrics, which recently revealed that key events in the PlusToken timeline have coincided with increases in Huobi’s cold wallet balances.

Just look to the chart below, which shows that since the scam started, Huobi’s Bitcoin cold wallet balances have increased dramatically, effectively exponentially.

Of course, Huobi hasn’t really discussed how PlusToken is seemingly using its services to cash out, though many in the industry (Ergo included) have confirmed through their analysis that the Bitcoin sourced from the scams have been finding their ways into coin mixers, then exchanges, most likely to be sold for fiat currencies or U.S. stablecoins.

If PlusToken and other scams have really been liquidating millions of dollars worth of Bitcoin a day, that would explain why the leading cryptocurrency’s price has bled out by some 50% over the past six months as analysts have been calling for a pre-halving bull market.


I am a writer who has been following the cryptocurrency space since 2013. My insights and interviews have been featured in leading publications in the industry such as LongHash, NewsBTC, and Decrypt. When I am not writing, I work as a team member of the EXODUS division of HTC, a Taiwanese electronics company. I own a small amount of Bitcoin. Contact

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