From a 2018 low point, of just over $100 billion total market capitalization over the weekend, cryptocurrencies have rebounded nearly 14% to Tuesday's highs. Image: iStock
Image: iStock

The months-long saga of an alleged crypto Ponzi scheme has taken a new turn.

A hobbyist blockchain researcher claimed on Twitter in the last week of November that he’d tracked almost 200,000 BTC that had gone missing over the summer, when several million people invested in PlusToken – a South Korea-based exchange and a high-yield investment – found themselves unable to withdraw their money, Kirill Bryanov reported on the Cointelegraph website.

The researcher suggested that the embezzled funds have been gradually dumped on crypto exchanges, suppressing bitcoin’s price. Here’s what is known about the monumental scheme that has yet to be officially confirmed.

The story of PlusToken is a testament to the fundamental disconnect in contact between the Asian and Western crypto spaces. The platform is believed to have been holding almost $3 billion worth of assets like Bitcoin, Ethereum and EOS when it essentially went bust in June 2019 – and yet, it was not until August 13, when blockchain analytics firm Ciphertrace published its Q2 report, that the story caught the Western audience’s attention, said the Cointelegraph report.

Even after the true scale of the scheme became evident, it seemed that the collective West was getting updates through a rather narrow bottleneck. Dovey Wan, founding partner of blockchain investment company Primitive Ventures, has become a key source of information on the alleged scam.

Launched in May 2018, PlusToken offered both a wallet service to store cryptocurrencies and an investment program promising high monthly returns on stored funds – between 8% and 16%. It was primarily marketed in China and South Korea, although Wan reported that the exchange’s customers were also located in Europe and even North America. While the operation boasted a user base of 10 million, Ciphertrace estimates that up to 3 million people may have invested.

The scheme reportedly targeted a mainstream audience of people not particularly savvy about crypto, emphasizing the “educational” component of the operation, which came down to teaching new members how to deposit funds via the PlusToken app.

A telltale sign of a Ponzi scheme was also present: The size of rewards was contingent on recruiting new investors. Members could progress through the internal hierarchy accordingly, earning honorable distinctions such as “Big Boy” and “Great God.” The aggressive expansion campaign also partly relied on lively offline gatherings.

In late June, customers learned that withdrawals via the app were frozen. Around the same time, law enforcement in Vanuatu took action to detain six people involved with the scheme. An announcement immediately appeared on the PlusToken website, stating that the arrested individuals were regular users and not co-founders.

While the six allegedly high-ranking members of the operation found themselves in custody, other purported PlusToken bosses, including a Korean and a Russian, remained at large. The whereabouts of almost $3 billion worth of cryptocurrency remained opaque as well.

Money on the move

On August 14, news emerged that the funds associated with PlusToken were being moved to exchanges. Wan was the one to raise the alarm, citing research by security audit firm PeckShield. A few days later, crypto watchdog Whale Alert pointed to four transactions totaling almost 23,000 BTC that were likely PlusToken proceeds, Cointelegraph reported.

However, both claims lack conclusive evidence. Ciphertrace, for instance, refrained from publicly acknowledging that the addresses identified by PeckShield may have belonged to the operation.

On August 23, blockchain research firm Elementus suggested that large sums of ether associated with the alleged exit scam were also transferred to exchanges, mainly Huobi. Yet, after this uptick in research and media attention, the issue seemed to have gradually faded from the spotlight.

Three months later, what can be made out of the new wave of media attention to the matter? Granted, it was not until late November that members of the crypto community first came to suspect that the spoils from the PlusToken scheme could exert considerable selling pressure on the market. According to reports from sources versed in Chinese trader circles, the narrative of the swindled funds’ sell-off driving the Bitcoin price downward has been circulating since at least mid-August.

What’s new is a piece of solid-looking research that emerged in the wake of the latest downward turn in the BTC price cycle. Conducted by a crypto enthusiast who goes by Ergo on Twitter and Medium, the analysis connects some dots in the PlusToken plot by tracing the funds allegedly associated with it and estimating the average pace at which they get dumped into the market.

Ergo believes another 58,000 bitcoins from the PlusToken scam will likely be dumped on the open market in the next couple of months, reported.

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