In one of the more ingenious scams to play on the confidence of cryptocurrency traders, the Russian-owned exchange 'Yobit' has been found to be re-using tickers and defrauding traders by selling their own homemade altcoins, marketed as well established, legitimate technologies. In fact, this has been their business model for the last three years and continues to this day.
Many traders were aghast to find that instead of purchasing the lucrative Omise_Go (OMG), they had instead purchased a scam coin entitled OMGame. Yobit listed prices plummeted in response, leaving many out of pocket and holding worthless bags of digital dust. Simple but effective, the scam is especially damaging to high volume traders or newbie punters who stand to lose thousands in potential profit. Worryingly the scam is not only limited to Omise_Go but many other well known technologies such as Binance coin (BNB), was once listed as 'Boats n' Boobs', and the scam-coin 'Phreak' is still being sold as Phore (PHR), a legitimate product that hopes to offer smart contracts on masternode technology.
They even had the cheek to list scam coin Bernie Madoff under the ticker (PROFIT).
The exchange preys on the innate trust given to exchange listings as thus:
Yobit take an established coin Omise_Go (OMG).
They then quietly create their own, useless coin, entitled OMGame.
Listing OMGame on their market using the ticker (OMG) at a handful of Satoshi cheaper than current market price they drive up hype for discount purchases (no note of OMGame is made to the consumer on the trading screen).
Volume is artificially kept high thanks to exchange wash-trading.
When people grow wise to the scam, Yobit delete the coin, leaving traders out of pocket unable to sell elsewhere.
Support emails in return claim that the coin was a 3rd party technology that no longer met the exchange's T&C and Yobit is not liable for remuneration.
Although simple in its nature, this scam plays on a fundamental psychological level of trust that exists in cryptocurrency markets. That being; exchanges are supposedly honest with their listings. While many are understandably wary of putting their money into ICO's, few seem to question the legitimacy of what they purchase on exchanges. Many traders couldn't even believe that an exchange were even capable of re-using a ticker, as this is illegal in the regulated financial sector.
Further investigation showed that this fraud is being committed for profit on a massive scale, in fact Yobit actively encourage scamming consumers by offering free altcoin listings:
- Free - 0.00 btc - no guarantee
- Premium - 0.1 btc - 4-7 business days (no guarantee in case of compilation issues)
- Exclusive - 0.5 btc - 2-3 business days (no guarantee in case of compilation issues)
Complicating this matter is that the act of making a altcoin isn't difficult; services tailored to individuals with no coding experience even allow the publishing of Ethereum style ERC20 tokens for as little as (at time of publication) £20 on the Ethereum main-net. Bitcoin (BTC) style currencies can also be published via fork or an amalgamation of home-brew technology for minimal cost by those with a modicum of technical experience.
Clearly, even though the notion of cryptocurrency has existed for almost ten years, we are still in the the lunatic investor phase. While we can agree that once one places their coins in an exchange wallet they are surrendering their private keys, investors often assume that the technology they are purchasing on the market is genuine. It must be appreciated that scams are abound and many traders are more than likely to fall victim to Ponzi-schemes, fake technologies or vanishing ICO's. Unfortunately, it is a Catch-22 situation; many advocates for cryptocurrencies enshrine a free, unregulated market and yet to protect investors regulation is necessary to prevent consumer fraud.
The information contained in this article does not constitute to financial advice.