Bitcoin could be dumped in the billions from history's third largest Ponzi (2024)

The third largest Ponzi scam in history, Plus Token Wallet, allegedly scammed investors out of $3 billion in cryptocurrency. Over $2.1 billion of this is in Bitcoin. As the perpetrators make their exit these coins could flood the market and tank prices.

Background on Plus Token

Plus Token Wallet was a mobile application promoted across China, South Korea, and Southeast Asia that promised outlandish 6 to 18 percent monthly returns. These returns, the project claims, were made via cryptocurrency arbitrage, trading, and mining—similar to claims made by coins like BitConnect. People were encouraged to recruit people under them in a multi-level marketing (MLM) structure employed by businesses such as Amway, Avon, and Mary Kay.

The main difference with Amway, however, is that Plus Token didn’t really sell products or services. Their revenues were made exclusively from the $500 minimum investment from participating in the app and additional ‘investments’ made in Bitcoin, Ethereum, EOS, and other coins exchanged for supposedly interest-generating PlusTokens. More precisely, the app made money by paying old investors with money from new investors—the hallmark of a Ponzi.

By structuring the project as a MLM the scam was able to grow rapidly through Asia, reportedly taking in $3 billion.

The big bust

Beginning in June, Plus Token affiliates began to experience withdrawal delays. Soon, withdrawals stopped altogether. Chen Jingbo, the most public of the Plus Token leadership, wrote the following message on July 1 on Facebook:

“Plustoken is affected by hacker attack. In order to ensure the safety of users’ assets, we will upgrade and protect the overall system, and suspend the coin charging business until July 5th. Everything is ok, but it will only get better and better.”

June 27, Chinese media reported that Plus Token officially collapsed followed by a June 29 report detailing the arrest of six Chinese nationals on the island Vanuatu for perpetrating an “internet scam.”

Chinese publication 36KR later confirmed these were six of the leaders connected to Plus Token, reporting investor losses of ¥20 billion ($2.8 billion) from the scam citing sources “close to Chinese police.” The six may face decades in jail.

Billions in Bitcoin and Ethereum could flood the market

It wasn’t until August that the enormity of the scam became clear. Dovey Wan, a founding partner at Primitive Ventures and an expert on the Chinese crypto scene, uncovered wallet addresses related to the scam exceeding 200,000 BTC ($2.15 billion) and 800,000 ETH ($158 million), along with an unknown amount of EOS.

Investor losses of approximately $3 billion would make PlusToken one of the largest Ponzi schemes ever. For reference, the two largest Ponzi scams in history, perpetrated by Bernie Madoff and Robert Stanford, caused estimated investor losses of $20 billion and $7.2 billion. Iconic crypto-scam BitConnect wrecked an estimated $2 billion in damages. There is a strong case that Plus Token would be the third largest Ponzi scam ever perpetrated if the losses from the scam are confirmed.

Wan also cited unconfirmed reports that this crypto is making its way onto exchanges, like Binance, in batches of approximately $1 million. Sell offs of these coins started in early July, according to a security audit from Peckshield.

Something to remember is that even though high-level leaders may have been arrested, it is not improbable the scam has many other second-level leaders, especially at this scale, that can continue to launder these coins.

More optimistically, many of the BTC addresses are in the P2SH format, indicating they are multi-sig wallets. With many of the Plus Wallet ringleaders behind bars many of these coins could become entirely inaccessible, functionally decreasing the Bitcoin supply and increasing prices.

Meanwhile, a report from Bloomberg disputes that tokens are being dumped on the market, citing research from TokenAnalyst. Allegedly, only a few addresses associated with PlusToken have had material balances of Bitcoin moved.

Analysis of potential market impact

If all 200,000 BTC were to flood the market the impact on its price would be significant. Based on an unadjusted current supply of 17.9 million BTC, the coins would reintroduce 1.1 percent of circulating to the market. With a realized market capitalization of $99.5, which measures market cap by pricing coins at when they were last moved on-chain, it represents a 2.1 percent expansion to supply.

Based on 7-day HODL waves, which measures the last time coins were moved on-chain (only 4.2 percent of all coins moved within the last 7 days) shows a current circulating 7-day supply of 752,000 BTC. This means a 200,000 BTC liquidation would result in a 26.6 percent expansion of 7-day supply.

OpenMarketCap, which aggregates data from “trusted exchanges,” which are less likely to have significantly skewed figures from wash trading, reports 24-hour real trading volume of $1.5 billion. The amount of Bitcoin that could be dumped on the market is 1.4 times this.

The precise impact on the market price of BTC is unknowable. Few market participants broadcast all of their bids and asks because doing so would make it easy to trade against them. Nevertheless, given the sheer scale of the scam, a continued liquidation of Plus Token crypto assets would have a profound and material impact on the market.

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