Chinese Ponzi Scheme Worth Billions Could Be Causing Bitcoin Selloff

  • The 70,000 BTC PlusToken ponzi scheme, worth $3 billion, appears to be impacting bitcoin prices.  
  • Traders are reporting regular 100 BTC sells on Binance and other exchanges dating back to July.

The price of bitcoin and crypto-assets have continued to fall for the last week, with some now pointing to the effects of a $3 billion ponzi scheme being to blame. 

PlusToken Ponzi Scheme

On Aug. 15, the price of BTC approached $10,000 on a downward trend that has been going on for nearly a week. However, rather than being due to a lack of confidence by investors, selling from a $3 billion ponzi scheme could be to blame. 

Dovey Wan, co-founder of blockchain investment company Primitive Ventures was the first to call attention to the connection between bitcoin’s falling price and the high-profile ponzi scheme that scammed millions of investors. 

According to Wan, sell-offs generated in the aftermath of the $3 billion PLUS Token scam is leading to an ongoing price depression for the entire crypto marketplace. PLUS Token was the biggest Chinese ponzi scam in history, skimming 70,000 BTC and 800,000 ETH from millions of investors. 

The scheme began in 2018, following the typical ponzi model of offering a bitcoin wallet that would offer “high yield investment return.” Membership structure was layered so that users would receive higher returns for bringing in new clients beneath them, which led to a userbase totaling over 10 million by early 2019. 

$3 Billion Selloff

Data collected by auditing firm Peckshield shows that money began flowing from PlusToken’s wallet in early July, with about 1000 BTC going to Bittrex and Huobi. 

However, the majority of funds are being moved on to exchanges in small batches of 50 to 100 BTC, making them difficult to track. In addition, the massive amount of bitcoin being sold each day is leading to an impact on the market price, which can be seen in the ongoing downward trend for BTC. 

While arrests have been made over the ponzi scheme, it’s clear from the bitcoin addresses being used in the selling that not all of the perpetrators have been caught. 

According to Wan, 

“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.”

Other reports are surfacing saying that unknown bitcoin addresses have been dumping 100 BTC in regular batches on Binance. 

While there is little the market can do in the meantime to combat the sell-off, Wan recommends that Peckshield and analytics firm Chainalysis continue to analyze the flow of funds, which can hopefully provide authorities and exchanges more information on who is behind the PlusToken scam.