Cryptocurrency pyramid schemes: Arrests go on, but recruitment continues.

Despite rigorous efforts by authorities and numerous arrests, cryptocurrency exchanges continue to spring up in large numbers, openly luring participants.

The dream of money making money has been shattered.

In early December, Ninh Duc Huan (30 years old) was arrested by the Duy Tien Town Police (Ha Nam province) for investigation into the act of using computer networks, telecommunication networks, and electronic means to commit acts of property appropriation, according to Article 290 of the Penal Code. Huan is the founder, administrator, and operator of the TcbTrade.xxx cryptocurrency exchange, which has servers in Vietnam and has issued Tcbcoin (TCFX) since the beginning of 2020. He established the TEAM STAR DIAMON group with the aim of attracting people.cryptocurrency investment, promising high profits.

From November 2020 to the present, Huan has lured thousands of investors into investing in the TCFX cryptocurrency, totaling 55 billion VND. According to our investigation, many of the victims are from Nghe An province. Besides this cryptocurrency exchange, Huan also manages eight other exchanges, regularly enticing people to participate. To gain the trust of investors, Huan embellished the cryptocurrency with a lavish lifestyle on social media, despite having an ordinary family background. He repeatedly rented luxurious hotels and resorts; filmed and photographed real estate and supercars to post on social media. Many of the individuals in the videos receiving gifts and money after investing in TCFX were also hired by Huan to "act."

An advertisement for a cryptocurrency exchange on social media. Photo by PV.

After selling the cryptocurrency, Huan "placed an order to reset its value to zero," preventing investors from withdrawing their money. According to some cryptocurrency data websites, a TCFX coin was worth over $11 at its peak, but since February 2021 it has fallen below one dollar. Data from early December shows that a TCFX coin was worth only about 125 VND. The market capitalization of this cryptocurrency has remained at zero since its inception.

This is not a new scam. There is a very popular cryptocurrency exchange in Nghe An province called FXTradingMarkets, run by a group calling themselves Lion Group. This group lured investors into buying packages worth $1,000 USD in exchange for 1,000 FXT coins, meaning 1 FXT coin equals $1 USD. After attracting tens of thousands of investors nationwide, the exchange's management reduced the value of the currency to zero, leaving investors penniless. "We've been bankrupt for six months now. But those running the exchange are still at large," an angry victim of this cryptocurrency exchange in Vinh City said.

Tactics to lure prey

Despite repeated arrests by authorities, successive collapses of cryptocurrency exchanges, and constant media warnings, these exchanges continue to aggressively attract investors. On social media, it's easy to find advertisements designed to entice players. The operators of these exchanges even directly call potential victims to offer advice and persuade them to join. "When one exchange collapses, another pops up, differing only in name. The operating methods remain virtually unchanged. They're all scams," said an official from the Nghe An Department of Industry and Trade who regularly monitors cryptocurrency exchanges.

Many investors have lost everything because of cryptocurrencies. Photo: Quang Vinh

Currently, incomplete statistics show that there are approximately 300 illegal foreign exchange trading platforms, attracting hundreds of thousands of investors. Typically, to attract investors, these platforms entice them by promoting projects originating from abroad, linked to large global cryptocurrency exchanges, and promising returns of 15-30% per month. However, these are actually platforms established and operated by Vietnamese organizations and individuals, using a multi-level marketing (MLM) business model to attract and expand the number of participating investors; examples include platforms such as Wefinex, Raidenbo, Bitono, Pocinex, Deniex, Remitex, Ares BO, Binanex, Fxtradingmarket, GardenBO, Hitoption...

Initially, these platforms often lure players into winning, encouraging them to deposit more money into their accounts. Then, they advise their "victims" to place large, unclear trades with high fees, leading to the loss of all their funds. When players lose everything, the operators introduce them to a new platform, promising that if they deposit more money, they will win back their losses. However, this is all a trick devised by the ringleaders to deceive players. In reality, these platforms are equipped with special functions to interfere with customer accounts. Admins can place orders directly into customer accounts, change balances, interfere with the order placement process such as extending delays, adjusting buy and sell price ranges, or even completely wiping out the customer's account.

Ninh Duc Huan, the owner of the latest cryptocurrency exchange to be arrested. (Photo: PV)

According to our investigation, when participating in cryptocurrency exchanges, players are not actually investing with exchanges worldwide, but rather directly with the exchange's owner. The owner keeps all the losses. If an investor wins a lot, the exchange owner will use technical means such as blocking account access, placing fake orders, leading to account liquidation and inability to withdraw money. When a large sum of money is earned, the operator will shut down the exchange to avoid detection by players and the police.

Amidst the recent complex pandemic situation and social distancing measures implemented in various localities, cryptocurrency exchanges have been scrambling to lure unsuspecting investors. Nghe An province is considered one of the areas with the highest number of cryptocurrency investors nationwide, making it a "fertile ground" for these exchange operators to entice and recruit.

The police have repeatedly warned the public to be vigilant and not be lured or enticed into investing in cryptocurrency exchanges to avoid being scammed and having their assets stolen. Organizations and individuals should not advertise, broker, or abet these individuals in committing illegal acts. Organizations and individuals who exploit the activities of cryptocurrency exchanges to entice or lure people into investing, and individuals who encourage or assist these individuals in establishing and operating these exchanges in advertising and payment activities, may face criminal prosecution.