Bitcoin’s Downtrend Possibly Caused by $2B Ponzi Scheme

The descending price of Bitcoin might be induced by PlusToken scammers who are trying to keep $2 billion worth of cryptocurrency for themselves as part of a huge Ponzi scheme.

The blockchain analysis company Chainalysis recorded around 45,000 BTC ($302 million) and 800,000 ETH ($102 million) were sent to the scammers’ individual wallets from official PlusToken wallets.

As Chainalysis foresees, more than 20,000 BTC are still expected to be dumped:

“Given this analysis and the effects we’ve observed so far, liquidations of large amounts of illicitly obtained funds are likely to drive down the price of cryptocurrencies.”

How did the scheme work?

PlusToken stole cryptocurrency from investors in a Ponzi scheme by assuring high return on investments. Users only had to buy PLUS tokens with Bitcoin or Ether and the huge flow of cash was guaranteed.

When PLUS reached the climax of its price at $350 it was listed on multiple Chinese exchanges and had already collected quite the investment amount.

PlusToken presumably gathered 180,000 BTC, 110,000 USDT, 6,400,000 ETH and 53 OMG which are all worth approximately $2 billion. As Chainalysis noted:

“While we tracked $2 billion worth of various cryptocurrencies that victims sent to the PlusToken scammers, some of that money was paid out to early investors, presumably to maintain the illusion of high returns while PlusToken presented itself as a legitimate company. Nonetheless, we’ve tracked roughly 800,000 ETH [$102 million] and 45,000 BTC [$302 million] we can definitively say the scammers transferred to their own addresses to launder.”

Chainalysis assumes that a big $185 million part of these investments were ‘laundered’ via over-the-counter (OTC) crypto brokers. Brokers that were part of this scheme had low KYC requirements and sold PlusToken’s tokens through leading exchange Huobi.

These sold-over-time amounts are presumably keeping Bitcoin’s price low, effectively blocking the bulls.

As for ETH, while 10,000 ETH ($1.3 million) are already cashed out, around 790,000 ETH ($101 million) have not even been touched and stay in one wallet.

The remaining BTC on the other hand is spread over 8,700 addresses, and speaking of the stolen Bitcoin – it was transferred through 71,000 different addresses.

How is this scam affecting Bitcoin?

As Chainalysis suspects, the increase of on-chain BTC volume and in-trade volume was caused by OTC brokers who received BTC from PlusToken wallets and later exchanged it for Tether. If this hypothesis is true, the fall in price should occur right after these upticks. Chainalysis detected such events and commented:

“Above, we see that PlusToken wallets sent a steady flow of Bitcoin starting in mid-April and spiking just before the arrests in late June. After that, we see no movement until a few spikes in August, before transfers spike again and remain high throughout September. Then, we see a few more spikes in October.”

Although these PlusToken-related cases are for sure interacting with the price of Bitcoin, it is still not certain that they are the sole origin of the situation:

“Keep in mind that PlusToken cashouts are just one of many potential influences on Bitcoin’s price. Media stories, concerted market manipulation efforts, algorithmic trading errors, or any number of other factors may have contributed to volatility as well. But none of those components on their own provides a compelling explanation for the large spike in volatility in the time period we studied absent the influence of PlusToken.”

Earlier this year, six people related to the PlusToken Ponzi scheme were arrested, meaning that some of the fraudsters are still free.