[UPDATE 10 February 2019]
This post was initially posted on Medium (archived here ) on 21 January 2019 and shadow banned from Medium on 7 February 2019. I suspect my original post was been brigaded, a practice of upvoting/downvoting/reporting content to have it removed.
Since I don’t already receive back a response from Medium, let’s try again with a new post blog.
All information shared in this blog-post were collected from public sources with different OSINT tecniques not discussed in depth here. I won’t disclose all of the information collected during these months but only a significant part considered relevant for the readers.
The views expressed in this article are my own and do not necessarily reflect the view of other people.
Crypto space is insane right now and strongly unregulated so if you’re not quite confident with something, question yourself, doubts everything and DON’T EVER trust random people that promise you easy gains.
According to an article appeared on Forbes the Initial Coin Offering (ICO) market was expected to be worth more than $20 billion in 2018. In fact, in just a few years, thousands of high-tech investors have flooded the sector with cash, hoping to get in early on the next hot crypto token.
Initial Coin Offering, for people who are not familiar with, is a new form of crowdfunding where the investors can send money in order to support a project. The main difference between ICOs and crowdfunding are the money accepted from the investors: on ICOs only cryptocurrencies are allowed and the most common currency used is Ethereum, the second largest cryptocurrency in terms of market cap at the time of writing. Instead, for every Ether (or fraction thereof) sent to the company wallet, a “smart contract” would automatically send back a different type of money, typically a token (referred as ERC-20 on Ethereum blockchain), that would give people special access to the platform plus act as equity in the network.
But, as in any market growing this fast, the number of scams and fraudsters preying on unsuspecting investors are also growing by the day. Moreover, unlike an Initial Public Offering (IPO) — where stock exchanges dictate strict rules around the disclosure and the auditing a company must go through — ICO scams run rampant as the fundraising method is largely unregulated.
Moreover, a recent study revealed that approximately 78% of ICOs conducted in 2017 were identified as scams.
In this massive amount of scamming going on, in July 2018 a specific platform has been drawn to my attention: this platform was called Arbitraging.
What is Arbitraging.co?
According to their presentation video, Arbitraging.co is a revolutionary arbitrage trading platform that operates on crypto markets.
For people who are not familiar with, Arbitrage is the simultaneous purchase and sale of an asset to profit from an imbalance in the price, or better, it is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms.
This concept can be easily transferred also in the cryptocurrencies world since multiple exchanges offered the same cryptocurrencies (or token) at different prices: if you’re able to exploit this price difference you made profits. Simple as that.
So why this platform claim to be revolutionary since arbitrage is a well-known technique?
Because they implemented a piece of software, called aBOT, that can automatically find and trade Arbitrage opportunities where you can make a profit instantly and, according to their whitepaper (archived here) “you will only be paid from the revenue generated by the aBOT and this make Arbitraging a long term sustainable project.”
I think that this is not going to happen and touting these high-returns as the primary benefit of the project is also a bad sign of an unclear business going on.
Dissecting the Arbitraging bots
Arbitraging, like many other ICOs in these last years, didn’t bring any piece of innovation except an unknown mysterious trading bot that is used to exploit the crypto market price volatility through arbitrage trades.
So why an automated bot armed with big bags of cryptocurrencies on this current market will fail?
The answer is slippage.
Slippage refers to the difference between the expected price of a trade and the price at which the trade is actually executed and this difference is more noticeable in high-volatility markets, e.g. cryptocurrencies.
So a couple of scenarios of what could do Arbitraging with their investors’ money instead of filling them on a trading bot that clearly can’t be designed to “never make a loss”: (these scenarios are assumptions of the author and not confirmed by any evidence)
- they manually try to exploit some arbitraging opportunities in various cryptomarkets
- they day-trade with massive sums using whale techniques such as pump&dump scheme or flash crashes on unregulated markets
- worse things
My own thinking on this story is that the claimed bot does not exist, or it does not perform as they claim and with this blog-post and I’ll show you some evidence about this shady organization, their YouTube promoters, their members and the community correlated with evidence found.
Once you register a new account (temporary email addresses accepted and no ID required) you’re able to join the Arbitraging trading platform.
Dissecting the guaranteed passive income
Let’s have a look of the aBOT dashboard below but don’t pay too much attention to all the values shown such as “arb price in aBOT” or “stop price”. These terms are hidden fees and other mechanisms added during 2018 to trick the investors in order to lock their funds.
The most underrated values here are the indicated daily profits in the aBOT Payout History Graph, on the bottom, and it shows the average returns from the aBOT: from 0.5% up to 1.0% per day.
Why these numbers are insanely high and clearly unsustainable? Let’s clear this up with a simple example:
- put $1,000 on aBOT with 100% daily reinvest
- lock the investment for 3 years
- an average daily return set to 0.7% (it seems reasonable according to the history graph shown above)
This is the crazy result:
aBOT turns your $1,000 investment in $2,075,205.11: congrats, you’re a millionaire. ❤
Without. Doing. Nothing. Just lock your initial investment and let the aBOT do its job for you.
These pieces of evidence shown were already enough to identify a potential Ponzi scheme.
According to Wikipedia:
A Ponzi scheme (/ˈpɒnzi/; also a Ponzi game) is a form of fraud which lures investors and pays profits to earlier investors by using funds obtained from more recent investors. The victims are led to believe that the profits are coming from product sales or other means, and they remain unaware that other investors are the source of profits. A Ponzi scheme is able to maintain the illusion of a sustainable business as long as there continue to be new investors willing to contribute new funds, and as long as most of the investors do not demand full repayment and are willing to believe in the non-existent assets that they are purported to own.
But I got more.
A little bit of history: from XRPC to ARB
So why they rebranded the name to Arbitraging? What was wrong with the XRPC name? Initially, it makes nonsense until the following table extracted from the initial XRPC whitepaper was found:
That’s one of the worst marketing strategies ever.
In fact, comparing both the whitepapers of XRPC and Arbitraging, a lot of similarities can be spotted as shown:
At that time I started hearing an “hey hey heeeey” in the background.
Dissecting the whitepaper
Arbitraging whitepaper (archived here) is extremely vague, full of buzzwords and images and usually if there isn’t an in-depth explanation of how the technology works or how the project is going to be implemented, it’s a bad sign.
A couple of red flags found:
- Poor grammar
- Explicit sentences such as “We do NOT have a Multi-Level Marketing or Ponzi structures”. Is it really worth mentioning such things?
- Price prediction of the ARB token. It’s written that the ARB token in Q4 2018 will be $200 thanks to the “ARB low total supply combined with their BOT software”. How can they predict the token value in the near future? Short answer: they can’t. Don’t ever invest in an ICO simply because the company claims their coin will increase in value.
- Improper use of terms and too many buzzwords such as decentralized, sustainable, profits, complete control, transparency, etc..
- Unclear roadmap with extremely vague goals, as shown below
Dissecting the team
On one of the previous homepages of Arbitraging, the following team members were shown:
But at the end of 2018, a new homepage was deployed and the team’s members disappear without an official statement of the company:
A couple of comments on them:
- shady backgrounds (and unconfirmed by anyone trustable in the blockchain or financial areas)
- altered or stretched low-quality images
- insufficient online presence
Moreover, back in August 2018, another potential red flag was disclosed:
As you can see, the CTO changed his name from Adeel Khan to Majaz Elahiand after that, the same person was also spotted on another shady crypto platform called Visus.co.
If you need more details about these changes, check out my following tweetsabout it.
But recently, on 9th January 2019, in their official Telegram channel (t.me/arbofficial) a new photo of their dev team appeared:
As you can see, Majaz is still there with a bunch of new faces in a tiny office and I was able to track down a potential location by finding Majaz on social media: Lahore (Pakistan).
Since Arbitraging community communicate only on their Telegram groups I tried to reach them out and kindly ask a couple of questions:
- Where the office of Arbitraging is currently located? Pakistan, maybe?
- Why the team is changed? Where I can find an official statement published by Arbitraging about this changing?
In the next picture will be shown a couple of answers that I receive back. A little bit of context first: “Anna Jo” is an admin of their groups meaning that he/she can ban users, clear “uncomfortable” questions, etc..
And after a couple of minutes and a couple of more questions, I was banned from their channel.
This is how it works inside their community: if you doubt something or if you trying to get more information or transparency on something you will be called out for FUDDING and banned from the group. I saw numerous users been banned for simply asking questions.
Dissecting their BVI business licence
On 11 January 2019, Arbitraging made a huge mistake by releasing the following government document that testimony their business activities.
Since a couple of months, Arbitraging moved its registered office from Singapore (initial location) to British Virgin Island (current location) and now it seems that they are fully registered and they can operate in full compliance with local laws.
Since there’s a licence n° on this document I verified its authenticity in the official portal of the British Virgin Islands — Financial Services Commissionand this was the result:
More confirms are needed so I reached out the Financial Services Commission of British Virgin Island by email and surprisingly, a couple of hours later, they emailed me back with a clear statement:
Not only they confirm that this license is not authentic, but they’re also asking to provide them with more details about the source of this document.
I was like:
But yes, I sent them more details and they kindly appreciated it:
And after 5 days the license disappeared from the Arbitraging website and the following message came out on their Telegram groups:
But there is more.
On 18th January 2019, the British Virgin Island Financial Service Commission (the “FSC”) also made a public statement about this fake business license:
Dissecting their marketing: (paid?) YouTube promoters
During these months a lot of their YouTube promoters were analyzed in order to gain more information about them and about Arbitraging thanks to multiple errors they made. But before that, a few points shared between those promoters:
- no financial or blockchain backgrounds provided
- very misleading video titles to obtain more investors by showing Arbitraging as a sustainable passive income platform that can make everyone rich without any types of effort
- shared connections with other well-known crypto scams (e.g. DavorCoin, ETHconnect, Visus, BitBliss Coin, FineCoin, LoopX, FineCoin, Monetize.. to name a few)
The following list identifies the most influential Arbitraging promoters.
But, from time to time, he also posts videos about his disappointment when things were not going as he wanted to (e.g. withdraws delays, new updates not correctly announced, …). The point is that he also changes his mind very frequently and when it happened, he used to delete immediately those uncomfortable videos.
During one of this “negative” video, I was able to reach out one of their Telegram admin called Marcus Mitchell and ask him why Crypto Batman was very aggressive against Arbitraging. Clearly, the day after this video was gone. ¯\_(ツ)_/¯
Crypto County Boy
I archived a copy in case it goes offline. Needless to say that it was a fake frontend created ad-hoc and probably purchased it on Zenith Script Storewhere cheap templates can be bought for your scammy ICO platform.
Uh, and by the way, this UI has never been deployed. Will be in the future? Who knows. ¯\_(ツ)_/¯
Crypto Country Boy at the end of 2018 also starts his “own” company called Coin.Lotto and self-proclaimed himself as the CEO but again he made the same error exposing the URL of this unreleased project. I archived a copy in case it goes offline so you can go and have a look of this new revolutionary gambling platform.
Note for the readers: at the time of writing Coin.Lotto is not live yet.
Marko S. aka Crypto Soldier actively promoted Arbitraging. Actually, he didn’t make a lot of videos on his YouTube channel, but he’s clearly very close to David Peterson, the CEO of Arbitraging. He also went to David’s home and make a short video as proof.
Other Arbitraging promoters identified:
- Crypto Austin (archived here)
- IL-Matt (archived here)
- Matty Crytpo (archived here)
- KineticEnergy (archived here)
- CRYPTOEKEEPER (archived here)
- Crypto TiWi (archived here)
- PJ3 ICO Private I (archived here)
- Bitsaway1 (archived here)
- shoemoney (archived here)
- Whale Miner (archived here)
- REVOLUTION IN CRYPTO (archived here)
- Crypto Sensei (archived here)
Dissecting David Peterson (CEO of Arbitraging)
David is considered a God in the Arbitraging community: he also makes videos about the platform and how to use it, he speaks directly to the investors in their Telegram groups and everybody gets crazy because of his creation.
But recently he made a video (archived here) about his story and he also showed some personal images that I reverse searched on Google and Yandex. After a bit, I found a blog post from 2017 written by David in a fishing enthusiast website, called In-Depth Outdoors.
His signature in this article was Jeremy, not David, and after more researches, I was able to find a company related to this man, called Srills that is selling products for plants and garden. Moreover, I found an article of a daily newspaper of Crookston, a city of Minnesota where the same Jeremy appears but this time his complete name was shown:
Jeremy Rounsville, the owner of Srill Products, is David Peterson CEO of Arbitraging and the following picture (and his hand-tattoo) found on Srill’s official Twitter profile confirmed it:
“If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck”
Investing in ICOs has high risks and people quite often try to get into the crypto game before it’s too late so they can cure their FOMO (Fear Of Missing Out) but there are some tips you can follow to avoid getting burned:
- Educate your self first and question everything
- More than 80% of ICOs will probably fail and go to zero. Keep that in mind.
- Don’t invest in an ICO simply because the company claims their coin will increase in value in the future
- Unclear roadmap of the project with extremely vague goals and poor grammars in the whitepaper are usually bad signs
- Never trust YouTube promoters that promise you back easy money without any risk, do your due diligence and research the subject of your potential investment
- Follow well-respected figures in cryptocurrency if you like the subject. There are many people on Twitter that have gained reputations for providing high-quality information to their followers, helping them to avoid scams
- Avoid anonymous projects that provide blurry information not confirmed by anyone: best way to scam people is by hiding your identity
- Don’t trust services without a proper Identity Verification Service used by businesses to ensure that users or customers provide information that is associated with the identity of a real person
That’s it, I’m out.