A group of scammers operating out of China under the name PlusToken have allegedly attracted around US$2bn worth of cryptocurrency investments before being shut down, with US$185mln of that sum having been sold off already
The price of Bitcoin tumbled 3.2% to US$6,874 following a report of a cryptocurrency Ponzi scheme that has allegedly stolen digital assets worth US$2bn.
A group of scammers operating out of China under the name PlusToken had attracted around US$2bn worth of cryptocurrency investments, according to a report released by blockchain analyst group Chainalysis, with US$185mln of that sum having already been liquidated.
Ponzi schemes are scams that promise high rates of return to investors for supposedly little risk. However, the scheme does not generate returns by investing but rather by using funds from new investors to pay off existing ones. Once the pool of new investors dries up, the scheme collapses.
While six people connected to PlusToken were arrested by the Chinese authorities in June, Chainalysis said the stolen funds have continued to move through cryptocurrency wallets and cashed out through other brokers, indicating that some of the scammers could still be at large.
The firm’s analysts concluded that the flood of large amounts of Bitcoin into the market as a result of the PlusToken scammers offloading their holdings was likely behind the recent decline in the price, adding that around 20,000 Bitcoins, worth around US$150mln, were still yet to be cashed out.
“It’ll be interesting to observe whether the relationship between those cashouts and Bitcoin’s price continues. Given this analysis and the effects we’ve observed so far, liquidations of large amounts of illicitly obtained funds are likely to drive down the price of cryptocurrencies”, Chainalysis said.