Multi-level marketing of virtual currency: Catch and catch, lure and lure

Although the authorities have stepped in vigorously and made continuous arrests, virtual currency exchanges are still springing up in large numbers, openly attracting participants.

Disillusioned with money making money

In early December, Ninh Duc Huan (30 years old) was arrested by Duy Tien Town Police (Ha Nam) to investigate the act of using computer networks, telecommunications networks, and electronic means to commit property appropriation, according to Article 290 of the Penal Code. Huan is the founder, administrator, and operator of the virtual currency exchange TcbTrade.xxx with a server in Vietnam and has issued Tcbcoin (TCFX) since the beginning of 2020. He founded the TEAM STAR DIAMON group with the aim of attracting people.invest in virtual currency, promises big profits.

From November 2020 to now, Huan has attracted thousands of investors to invest in TCFX virtual currency with a total amount of 55 billion VND. According to the reporter's investigation, among the victims, there are many people from Nghe An. In addition to this virtual currency exchange, Huan also manages 8 other exchanges, regularly attracting people to participate. To gain the trust of players, Huan polishes virtual currency with a royal life on social networks, despite having an ordinary family background. He has rented luxury hotels and resorts many times; filmed and took photos of real estate and supercars and posted them on social networks. Many characters in videos receiving gifts and money when investing in TCFX virtual currency were also hired by Huan to "act".

An advertisement of a virtual currency exchange on social media. Photo: PV

After selling the virtual currency, Huan "placed an order to bring the value to 0", making it impossible for investors to withdraw money. According to the assessment of some websites on virtual currency data, a TCFX at its peak was worth more than 11 USD, but since February 2021 it has dropped to below 1 USD. Data in early December showed that a TCFX was worth only about 125 VND. The market capitalization of this virtual currency has always been at 0 since its inception.

This is not a new scam. There is a very popular virtual currency exchange in Nghe An called FXTradingMarkets, run by a group calling itself Lion Group. This group lured investors to buy a package of 1,000 USD in exchange for 1,000 FXT coins, so 1 FXT coin = 1 USD. After attracting tens of thousands of investors across the country, the management board of this exchange brought the value of the currency to 0, leaving investors empty-handed. "We have been bankrupt for half a year now. But the operators of the exchange are still at large," said an indignant victim of this virtual currency exchange in Vinh City.

Tricks to lure prey

Although authorities have continuously arrested, exchanges have collapsed one after another, and the media has continuously reported warnings, virtual currency exchanges are still bustling to attract investors. On social networking sites, it is not difficult to come across advertisements to lure players. The operators of these exchanges even call their “prey” directly to advise and entice them to participate. “Every time one exchange collapses, another one springs up, only with different names. The form of operation remains almost unchanged. They are all scams,” said an official from the Nghe An Department of Industry and Trade who regularly monitors virtual currencies.

Many investors lost everything because of virtual currency. Photo: Quang Vinh

Currently, incomplete statistics show that there are about 300 illegal foreign exchange exchanges, attracting hundreds of thousands of investors. Usually, to attract investors, these exchanges invite by introducing projects of foreign origin, linked to major cryptocurrency exchanges in the world with committed interest rates of 15-30% per month. But in fact, these are exchanges established and operated by Vietnamese organizations and individuals, using a multi-level business model to attract and develop the number of participating investors; for example, the operating model of the exchanges: Wefinex, Raidenbo, Bitono, Pocinex, Deniex, Remitex, Ares BO, Binanex, Fxtradingmarket, GardenBO, Hitoption...

At first, these exchanges often let players win to get hooked, depositing more money into their accounts. Then, they will advise the "prey" to place large and unclear orders with high fees, leading to losing all the money in the account. When the player loses everything, the management team will introduce them to a new exchange with a commitment that if they deposit money, they will win back the lost amount. However, all of this is just a trick drawn up by the leader group to lure players. Because in reality, these exchanges will have their own functions installed to interfere with the customer's account. Admins can place orders into the customer's account, change the balance, interfere with the order placing process such as extending the delay, the buying and selling price range, or even "burn" all the money in the customer's account.

Ninh Duc Huan, the owner of the latest virtual currency exchange to be arrested. Photo: PV

According to the reporter's investigation, when participating in a virtual currency exchange, in reality, players do not invest virtual currency with exchanges around the world but play with the exchange owner himself. The exchange owner will take all the money lost. In case the investor wins a lot, the exchange owner will intervene technically such as blocking account access, placing fake orders, leading to "burning" the account and not being able to withdraw money. When earning a large amount of money, the operator will crash the exchange to avoid being tracked by players and the police.

In the context of the complicated epidemic as in the recent past, localities have had to practice social distancing, virtual currency exchanges have rushed to "herd chickens". In particular, Nghe An is considered one of the localities with the largest number of virtual currency investors in the country. This is a "fertile market" for virtual currency exchange owners to lure and entice.

The police have repeatedly warned people to be vigilant and not to be lured or enticed into investing in exchanges to avoid being scammed or having their assets appropriated. Organizations and individuals must not advertise, broker, or assist subjects in committing illegal acts. Organizations and individuals who take advantage of the activities of virtual currency exchanges to attract and entice people to invest, and individuals who encourage and assist subjects in establishing and operating advertising and payment activities may be subject to criminal prosecution.