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PlusToken is not behind the recent Bitcoin price crash, but as scam activity peaks amid the pandemic they may still affect market

Because of the Coronavirus pandemic, price drops, not much work, many hackers have done nothing, causing scams to continue rampant in the cryptocurrency world. And one of the industry’s most prominent scams, PlusToken, is back again.

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PlusToken has come under the spotlight again

PlusToken, now known as the most significant cryptocurrency exit scam in history — so far — was a 2019 Ponzi scheme that defrauded investors out of $ 2.9 billion in cryptocurrency assets by posing as a South Korea-based crypto wallet project that offered depositors interest in crypto, a practice that has become reasonably common in decentralized finance applications, centralized banking applications and exchanges offering margin trading.

In China, PlusToken was quickly exposed as a Ponzi scheme when six individuals were arrested by Chinese authorities in June 2019, with reports connecting them to the PlusToken project.

According to research by Chainalysis, PlusToken did not cause the “Black Thursday” sell-off of March 12. In particular, Chainalysis sought to bring clarity to the impact of the COVID-19 pandemic on cryptocurrency markets by analyzing key points in on-chain data such as exchange inflow and more.

Philip Gradwell, the chief economist at Chainalysis, said:

“The crypto market crash that happened March 12 to March 13 was caused by PlusToken liquidating the Bitcoin acquired through its Ponzi scheme, which came to around $ 2.9 billion.”

In the webinar, Gradwell stated:

“We can also dispel another theory that has been going around, that PlusToken […] selling triggered the price falling. We don’t think that’s the case because PlusToken had purchased cashed out before early March.”

PlusToken movements for exchanges were severely reduced before the incident, indicating that money was withdrawn. A notable amount was 12,423 Bitcoin, worth $ 123 million at the time, was moved to a mixer or cold wallet on Feb. The Bitcoin might have been cashed out immediately to avoid exchanges freezing.

plustoken-is-not-behind-the-recent-bitcoin-price-crash-but-as-scam-activity-peaks-amid-the-pandemic-they-may-still-affect-the-market

Source: Chainalysis 

According to a report released by OXT Research on March 10, PlusToken may still have 61,229 Bitcoin, currently worth around $ 420 million. PlusToken operators may be waiting for Bitcoin Halving to get a higher price.

According to Chainalysis, at the time of the discount sale from PlusToken caused Bitcoin price to drop. Although PlusToken has withdrawn a lot of cash, it is still likely that it will continue to affect Bitcoin.

Kim Grauer, the head of research at Chainalysis, stated:

“We found in the past that large inflows to exchanges, such as those from PlusToken last year, tend to increase the price volatility on exchanges. This problem can potentially be exacerbated by trading bots that pick up on those on-chain movements and execute trades, not to mention the highly leveraged positions on derivatives exchanges that can get liquidated rather quickly. But overall, prices tend to bounce back quickly from those one-off events.”

PlusToken explains that:

“Its high-interest payments would be generated by exchange profits, mining, and referral programs.”

Shortsighted by the promising gains, over 3 million users registered with PlusToken.The scheme even announced that it expected to grow to 10 million users by the end of 2019, shortly before it exited with depositors’ money.

COVID-19: Crypto fraud is on the rise

According to a DappRadar report, Interest-generating products have been gaining more popularity in the cryptosphere, including MakerDAO’s decentralized protocol ever. Besides, other centralized options such as BlockFi’s banking app or Binance’s lending services. While cryptocurrencies have always tended to operate illegally and shady ventures, the relatively high-interest rates practiced in these services may have helped normalize PlusToken’s profit claims, helping ease unwilling investors.

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

The U.S. Federal Bureau of Investigations recently issued a press release in which it warned of the potential increase of “cryptocurrency-related fraud schemes” during the COVID-19 pandemic, adding:

“There are not only numerous virtual asset service providers online but also thousands of cryptocurrency kiosks located throughout the world which are exploited by criminals to diverse their schemes. Many traditional financial crimes and money laundering schemes are now orchestrated via cryptocurrencies.”

While difficult times create a perfect chaotic environment for active scammers, it’s good to know that despite the increased activity and new scams related to coronavirus, the revenue for crypto scammers dropped about 30% in March.

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Source: Chainalysis 

Can exchanges prevent illegal transactions?

According to Chainalysis, most of the funds transferred from the PlusToken scam have been liquidated at two Asian exchanges: Huobi and OKEx. This had raised some concerns about exchanges’ Know Your Customer practices, which do not seem to have been useful when it came to spotting or censoring the transactions from PlusToken.

Grauer stated that:

“Chainalysis had found traces of funds at mining pools, mixers, other scams, and P2P exchanges, but the paths were too small to be interrogated.”

Responding to past criticism, Huobi is upgrading to improve its security measures by launching Star Atlas. This on-chain monitoring tool can identify crimes like fraud, money, laundry, and other problematic activities. Besides, Huobi is also looking to partner with data providers such as Chainalysis and CryptoCompare to build a more transparent and compliant ecosystem, a measure that will undoubtedly be necessary for institutionalization and Compliance with future regulations.

Ciara Sun, the vice president of global business at Huobi, stated:

“While we may be able to identify illicit activities once they reach our exchanges and prevent their outflow, we can’t yet prevent illicit transactions that start outside of our platform. However, we believe that collaborative efforts among industry players, including but not limited to information sharing, are the key to success in creating a safer friendly ecosystem for the crypto industry to grow.”

While efforts to reduce illegal transactions are being carried out by exchanges such as Huobi and Paxful, users should always be aware of possible fraud attempts and conduct meaningful due diligence. for any project they are willing to trust with their money, because it is unlikely they will get them back once lost.

The article is referenced from Cointelegraph.

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