On June 27, 2019, a handful of leaders for a wildly popular ponzi scheme that spread across Asia were arrested by Chinese authorities after they managed to fleece unwitting customers out of roughly $3 billion.
PlusToken, as it was called, promised its “investors” monthly returns of anywhere from 10 to 30 percent in its eponymous token (PLUS), which traded on such popular exchanges as Huobi and Bithumb. This attracted more than 200,000 Bitcoin (1 percent of the outstanding supply, or the entirety of the Winklevi’s Bitcoin holdings), 789,000 ether and 26 million EOS. As of this report, the ringleader of the operation is still at large and funds are still on the move.
The racket reeks of the same chicanery and unrealistic promises of returns as the Ponzi scheme tied to now-defunct BitConnect, though to a drastically escalated scale. At its peak, BitConnect was only worth just north of $121 million. PlusToken, trading publicly across a number of popular Chinese exchanges, achieved a $17 billion valuation. With an all-time high of $340 a token, this would have made it the third-largest asset on CoinMarketCap if it were listed.
So how did PlusToken swindle even more people than BitConnect did, and where did all the money go now that the founders are facing legal consequences?
Anatomy of a Scam
“The first mention of PlusToken in my WeChat groups is July 2, 2018,” one source, whom we’ll refer to as “Tiresias” in this article out of respect for their anonymity, told Bitcoin Magazine. While the scam would be active for nearly a year before the arrest of its primary architects on the Pacific island of Vanuatu, the apparent homebase of the operation, Primitive Venture Co-Founder Dovey Wan told us that its peak operating time was March through June 2019.
Wan, who acts as an informational bridge between the space’s Eastern and Western communities and who brought the PlusToken situation to light on Twitter, mentioned that PlusToken holders began complaining that they couldn’t withdraw funds in the days following the Vanuatu arrests, as rumors began to spread that the organization was exit scamming. PlusToken’s remaining team attempted to quiet these talks by saying that the withdrawal issues were due to a hacking attempt.
The rumors, however, turned out to be true. Even as its primary orchestrators were in the custody of Chinese authorities, other PlusToken conspirators were busy fragmenting deposited funds into various wallet addresses, and the scheme’s alleged orchestrator, who goes by Leo, is still at large. Some of PlusTokens’s sullied warchest may have been offloaded onto exchanges for liquidation, though blockchain analytics firms have presented conflicting data on this front.
Much of PlusToken’s community, Wan stressed, is not comprised of typical cryptocurrency investors. Many of them were so easily duped because they are average citizens who knew little to nothing about Bitcoin, let alone the altcoins in its orbit. PlusToken’s team even “educated” these unsuspecting investors on how they could buy Bitcoin, ether and eos to contribute to the scam.
Tiresias told us that the scheme was widely advertised through WeChat, mainland China’s most popular messaging app. But, amazingly enough, its advertising wasn’t just limited to digital platforms. PlusToken hosted meet-ups (so called “salons”) to promote the scam and in-person training sessions for PlusToken users to teach them how to promote the platform to potential new users — they even advertised in grocery stores. One video shared with Bitcoin Magazine depicts hundreds of people congregated in an opulent auditorium swept by rave lights and punctuated with a background of K-pop music. In another, a young man holding flyers, his back strapped with a billboard blazoning PlusToken information, shoos away the person recording the footage.
It’s with these brazen market tactics that PlusToken defrauded an estimated 3 million people, according to PlusToken’s advertised user base (Blockchain analytics firm CipherTrace believes this number could even be as high as 4 million). While the six individuals arrested in Vanuatu were Chinese, the scam proliferated among retail investor circles in South Korea and Japan as well, along with many other countries in Southeast Asia. Wan claims to have even received direct messages from affected users from Russia, Ukraine, Germany and as far as Canada.
PlusToken also featured a sophisticated app, which allowed its users to instantly convert Chinese yen into Bitcoin, ethereum, eos, doge, litecoin and other altcoins, which they could, in turn, convert to PLUS. Proportional to their original investment and how many new users they onboarded to the scheme, users were paid out exclusively in PLUS tokens. PLUS users could graduate to…