The Russian-owned cryptocurrency exchange ‘Yobit’ has been selling in-house mined alt-coins disguised as legitimate tokens and continues to defraud investors.
In one of the more ingenious scams to play on the confidence of cryptocurrency traders, the Russian-owned exchange ‘Yobit’ has been defrauding traders by selling their own homemade altcoins, marketed as well established, legitimate technologies. Research shows that this has been their business model for the last three years and continues to this day.
Many traders would aghast to find that instead of purchasing a lucrative token, they instead had been defrauded. Yet this is exactly what traders have been experiencing using the services of Yobit; one particular incident involved traders being duped into thinking they had bought Ethereum tokens in Omise_Go (OMG), where instead they had purchased an scam-coin entitled OMGame.
It would be akin to thinking you had purchased stock in Disney (DNY), only to attempt to sell the share and find that you held a certificate in the name of a fake company named ‘Dosney’ (DNY).
Yobit has effectively been conning investors using a simple but effective scam that is especially damaging to high volume or newbie punters who stand to lose thousands. Worryingly the scam is not only limited to Omise_Go, many other well known technologies are also at risk, with Binance coin (BNB) being once listed as Boats n’ Boobs and another home-brew scam-coin, Phreak, continues to be masqueraded as Phore (PHR), a legitimate product that hopes to offer smart contracts through proof-of-stake masternode technology.
Unfortunately, the scam is devilishly simplistic as it preys on the fundamental notion of honesty behind a ticker name.
Many traders are even unaware that unlike shares on the stock market, cryptocurrencies are so numerous that a ticker may be used more than once on varying products and although traders are wary of an exchange pulling an exit-scam, few consider the chance of their assets could be fake.
The scam works as thus:
- Yobit take an established coin such as OmiseGO (OMG).
- They then quietly create and release their own scam-coin, OMGame.
- Yobit then list OMGame on using the ticker (OMG) at a handful of Satoshi cheaper than current market price. They then drive up hype for discount purchases through social media (no note of OMGame is made to the consumer on the trading screen).
- Volume is then 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. The coin also cannot be transferred to another exchange.
- Support emails in return claim that the coin was a 3rd party technology product that no longer met the exchange’s T&C and Yobit is not liable for remuneration.
Although simple in its nature, the 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 was 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 alt-coin listings:
- Free — 0.00 btc — no guarantee of listing
- 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 alt-coin isn’t difficult; services tailored to individuals with no coding experience 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 a 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 sailing through dangerous waters. 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, as many advocates for cryptocurrencies enshrine a free, unregulated market and yet to protect investors regulation is necessary to prevent consumer fraud. Should consumers continue to use fraudulent services such as ‘Yobit’, the cryptocurrency sector will continue to suffer detrimental setbacks.
This was originally posted to my Steemit on May 2018 and has been revised to include further information.
The information contained in this article does not constitute to financial advice.