CashFX: Follow the money
This is a work in progress.
TL;DR Summary
From what I have seen, CashFX rotate their deposit addresses every couple of months, building up a large balance of Bitcoin. The bitcoin deposits are used:
- to pay out member withdrawals but the rate is slowing,
- sold by a single customer account on Binance, most likely belonging to CashFX staff,
- CashFX have sold at least 5,550 Bitcoin to Binance but only ever purchased a handful. If pay outs were due to profits from trading I would expect to see Bitcoin purchased with these profits and used for payouts. I see no evidence of any trading profits being used for payouts. Payouts come from other member deposits.
- significant Bitcoin is moved in bulk to other Bitcoin addresses where it sits inactive for long periods or sold on exchanges.
None of this looks like the behaviour of a legitimate investment fund but it does look a lot like a failing pyramid/Ponzi scheme.
Update 26th May 2022
On May 22nd the entirety of member deposits for the past 2 weeks, 180 BTC or about $5,400,000, was sold at Binance. This is a change in behaviour from the past few months, when they used some of the member deposits for payouts. Now that they are promising members a debit card for withdrawals, they do not even need to pretence of making payouts to some members. This card is very unlikely to be real. Maybe a few members will be given a pre-paid Mastercard to make it look authentic but it is more probably that they will delay further, blaming KYC for delays, close accounts that fail KYC, force upgrades or fees to unlock “phase 2”, etc… Their aim now is to delay the collapse as long as possible whilst getting in as much money as they can before that happens.
I know some people who joined up with CashFX, a multi-level marketing (MLM) company which claims to guarantee profits from Forex trading. When I first looked at this is had all the hallmarks of a typical MLM profiteering from a “pyramid-like” structure where a very few people would profit handsomely and the vast majority would lose money. Because there is no other outcome for a MLM.
But I was also interested in the mechanics, as it’s a shady Panamanian company that only accepts “investments” via Bitcoin. (Yes, if that alone doesn’t sound enough alarm bells then you don’t know enough about Panama or cryptocurrency to invest in a Panamanian cryptocurrency company.) I was interested in following payments to CashFX but I didn’t have much information to go on and those I know weren’t willing to share details of transactions. But lately some CashFX members have publicly shown information about their deposits, which allows us to find these on the blockchain and go from there. So, I wanted to work out:
- where the bitcoin ends up,
- if deposits are used to pay withdrawls,
- if bitcoin is sold,
- if the bitcoin is held in reserve (for use in leveraging a loan in USD, although there are issue with this hypothesis),
- if bitcoin is being syphoned off to personal accounts,
- what the rate of deposits is,
- does it look like CashFX is a scam?
CashX claims to trade on the Forex markets, which are fiat currency. Balances in CashFX are in US dollars, so Bitcoin deposits show as USD in your account. This is important as the price of bitcoin is very volatile, once a deposit is made the USD amount it represents immediately starts changing.
This investment scheme would work perfectly without any real trading as long as Bitcoin’s price kept rising. As long as the price rose a withdrawal in Bitcoin would be less than the deposit and still have an increase in USD value. Once Bitcoin’s price drops, withdrawals for the same USD amount are larger than the historical deposit. If the payouts are based on deposits, then this depreciation means they are running out of money and are unable to pay out to everyone who wants their money. Which is exactly what is happening.
Couple of technical notes:
- I’ve used Bitquery’s API for some of this analysis as it aggregates transactions to find the major flows of BTC. This isn’t publicly accessible but I have linked to the key transactions in a blockchain explorer.
- I’ve listed 2 traces here but this is about far more than 2 deposits. These were used to identify the deposit addresses, where thousands of deposits were pooled and syphoned off to other uses.
- My credentials are that I am a software architect working in an Accounting IT team for a large multi-national company. Traceability and processing of large sums of money is part of my daily work.
Trace 1
On March 15th 2022 Koby Raj showed his 2 subscribers how to do an upgrade and showed the deposit address in the video.
The initial deposit address is 1EcET25EPyZfjeq2zGgqi4a76e8UHrviVe.
This forwards to a collecting deposit address bc1qwv8773cg84kjuc7403d47fumdy2xkcglwzvwmr. In total this address received 680 Bitcoin between March 7th and April 21st. That’s 15BTC per day but the deposits are loaded towards the beginning of that period. You’ll see hundreds of small deposits being made to this address.
Straight away, on March 7th, 60 BTC is sent to bc1qfmhapzaylhgtdqsvvaw83am55ky4zru39ugvsu. From this address on March 8th there are pay outs to 168 bitcoin addresses.
So, member deposits were directly used to pay member withdrawals.
This pattern is repeated several times. For example:
- bc1qepr24a8jlx85fehccp7xx49huxxhykewhrxukz receives 50 BTC for pay outs to 942 members on 27th and 28th March.
- bc1qxcphgyvuz0j0xm62u5wc78f863dquy38u39ezm receives 49BTC for pay outs to 718 members on 4th April
until we find something different…
On April 13rd 100 BTC is sent from the deposit address to an account in Binance (1B2C6R6kRL5nNUXiutdaC6dSLPf14qRqYd). We know this is a Binance customer account as the BTC are transferred to Binance’s hot wallet, indicating a sale.
Binance does not exactly have an upstanding reputation and is rumoured to be currently under investigation by the Securities and Exchange Commission and the IRS.
In all, CashFX sells 108 BTC of the 680 BTC deposited. The rest are used for payouts and a few are transferred to other addresses, where they remain.
Trace 2
On May 10th 2022, Gordon Martin upgraded and posted the video of him doing so.
The BTC was forwarded to bc1qc4m685sw5grguvh76xvwkfg7t0d546rc43d2ul which is the current primary deposit address for CashFX. As of 20th May the balance was 132 BTC and had been in use since 25th Jan and received a massive 2,251 BTC!
We can now look at transactions from here and see if this fits the pattern we saw above, which it does.
Here’s a transfer of 41 BTC to the 1B2C6R account on Binance on May 9th 2022.
We see money going to pay outs with a couple of transfers (one and two) that put 50 BTC into bc1q4zyvyvzcj5k986dplvw8fx2r80ep2n2055j0n6. That address pay outs out to 3,299 addresses between January 27th–29th.
There is a long chain of individual pay outs that I followed until it reached bc1q4pmlxpafh65wawj02ckzh2df97ud77ntc5jc4d which paid 2,344 accounts between Jan 28th and Feb 1st.
I do not know how many CFX members are waiting for a withdrawal but they claim hundreds of thousands of members and an estimate of 129,000 was made in February 2022. I imagine that number is even higher now as withdrawals appear to be slowing down over the last couple of months.
I’ve also traced transfers from the deposit address to holding addresses such as bc1q7ljf… where 24BTC sits doing nothing. Is this somebody’s rainy day fund?
I’ve also traced deposits of 21 BTC and 86 BTC to an address that from it’s volume looks like an exchange’s hot wallet, so also appears to be cashing out or trading for other cryptocurrency.
A note on that upgrade…
You can see some of the devious mechanics of CashFX at work here. Upgrades defer the ability for a member to make a withdrawal and reduce the amount of money owe at that time. To make an $10,000 upgrade you need to pay $11,500, in this case $7,491.67 from their balance and $4,006.66 as fresh BTC, to be used to pay other people’s withdrawal requests.
As CashFX has been unable to honour withdraws it has pushed members to upgrade and also made it easier to upgrade and downgrade. The aim of this appears to be to reduce the amount of withdrawals and keep the con going for as long as possible.
So, what’s going on here?
To play devil’s advocate for a minute, it could be that the BTC sold matches the balance of deposits vs withdrawals and reflects the amount by which the investment fund grew over those weeks. The deposits paid out to withdrawals could just be easier to handle than transferring USD from the investment fund. But how likely is that?
- From an accounting and bookkeeping point alone, keeping an accurate view of any supposed investment fund is nigh on impossible, let alone by such a small team as CFX claims to have.
- The BTC price is very volatile and the sale of BTC happens infrequently, about once a week.
- Because of this, the USD value of the deposit will have changed significantly between deposit and sale, mostly downwards. So maintaining a correct accounting for deposits to a supposed investment fund is incredibly difficult, if not impossible.
- Recently a lot of BTC was sold as the price was dropping, indicating a panic sale, and resulting in a large disparity between the BTC value at deposit and at sale. That would take a real trading organisation some time and luck to recover from, but CashFX has maintained positive results for members.
- The manner of deposits and the lack of transparency in CFX means that it is impossible to do any meaningful anti-money laundering and anti-terrorist financing checks and processes. These are usually essential for establishing a proper relationship with an honest bank or payment processor, such as one you’d need to launch a credit or debit card.
It’s important to note that CashFX has never shown any proof that trading is or ever occurred and never been transparent about the route deposits take to their supposed investment fund. In the absence of this, applying Occam’s Razor for the simplest solution, it is my opinion that there is no investment fund; CashFX are selling BTC for profit, not investment; pay outs are funded by deposits; and the falling volume of deposits and falling price of bitcoin explain why they are unable to honour more than a small percentage of their withdrawal requests.
Scams like this can drag go on for a very long time as members want to believe and admitting you were wrong is one of the hardest things to do. CashFX keep selling a bright future to keep people hooked but they are promising far more than they seem to be able to deliver and this is possibly because they need to make big promises in order to keep the deposits coming in as long as possible before exiting and disappearing into the night with their ill gotten gains.
What will be left behind is broken dreams and empty bank accounts.
Update — FAQs
I’ve already got some responses to this, so to answer some FAQs:
Is CashFX legit?
No, most probably not. I can’t be 100% sure without seeing their internal accounting process but I’m 95% sure it’s not a legitimate trading fund.
CashX is legit because I have made a profit / my money back / got withdrawals.
None of that proves it is a legitimate trading fund. Bernie Madoff ran the world’s largest Ponzi scheme for decades and before it finally collapsed people had made “profits” that were paid out from other people’s deposits. The result is a ongoing process where those profits are being reclaimed and paid back to victims.
Does it matter, as long as CashFX continues to pay out?
Yes, because if CashFX is a pyramid scheme then like all other pyramid scheme, it is impossible for it to go on forever. It can take as little as 13 levels of MLM structure before you need more than the world’s population to keep the scam going.
Not only are pyramid schemes illegal, they are immoral and in my opinion, continuing with a pyramid scheme once you know it is a pyramid is inherently an immoral and unacceptable decision. Pyramid scheme can only succeed if those on the bottom lose money, whilst being sold on the idea of doubling their money. No amount of small print about not guaranteeing returns or not investing more than you can afford to lose absolves any of your guilt.
