Is The $3 Billion Ponzi Scheme To Blame For The Recent Bitcoin Slump?

Dovey Wan, the founding partner of the blockchain-based investment company Primitive Ventures, has made waves throughout the crypto industry by releasing the information which connects the China-based wallet PlusToken to the recent slump in bitcoin prices.

After the world’s biggest digital coin created an 18-month high just below the $14,000 handle in June, it started moving back lower to finally stop around the $9,000 mark in early July. Now Wan claims that the recent drop in prices may be connected to PlusToken, which had allegedly started selling their digital assets, including Bitcoin (BTC), Ether (ETH) and EOS, in early July as well. 

PlusToken was created in 2018 and bears a strong resemblance to the textbook Ponzi scheme – defined as a form of fraud that pays profits to earlier investors with funds from more recent investors. The project was initially started as a cryptocurrency wallet, but attracted attention and investors by offering a monthly interest of anywhere from 6% to 18% on all deposited cryptocurrency. In a short period of time, the project claimed to have amassed 10 million members by early 2019. The profit has been allegedly made through crypto bot trading and arbitrage opportunities.

In early July, it was reported that PlusToken users were unable to withdraw their assets as speculation started to mount that founding members disappeared with more than $3 billion worth of cryptocurrency assets. In a series of tweets, Wan also published wallet addresses connected to the scheme.

Before she called attention to PlusToken, many China-based traders had reported suspicious activities connected to a wallet, allegedly belonging to PlusToken, selling hundreds of bitcoins on major cryptocurrency exchanges. Wan added that these exchanges include Huobi, Bittrex and Binance.

“Many of their BTC addresses are started with P2SH which commonly used for mutil-sig, most likely some ppl who hold the keys are not being caught hence police can’t unlock the wallet. For EOS/ETH wallet can be diff case but so far police was not able to touch any of those,” tweeted Wan. If this is true, than the Chinese authorities have little or no control over PlusToken’s digital assets. 

In what may prove to be a connected series of events, the South China Morning Post revealed in July that authorities in Vanuatu, a South Pacific Ocean nation, arrested six Chinese nationals “following complaints from authorities in China that they were operating an internet scam from the Pacific island”. In the meantime, all six Chinese nationals were deported to China. They were charged with no crime in Vanuatu, according to the updated story from South China Morning Post.

Were activities of Chinese authorities in Vanuatu connected to alleged Ponzi scheme outlined above remains to be seen. The chances are high given that the Chinese police arrested the core team member of the scheme two months ago, according to Wan, which may have then led to follow up activities in Vanuatu.