Recently, our risk control monitoring has detected instances of investment fraud where scammers have enticed users to purchase digital assets and make investments on fraudulent platforms. These deceptive practices have resulted in substantial financial losses for our clients. Therefore, we would like to provide an introduction to different types of investment fraud and offer prevention suggestions. Currently, the following are the main types of investment fraud:
1. Scam of Investment Advice
According to our risk control monitoring, scammers have induced users to withdraw crypto to false platforms to engage in investment.
Common ways for criminals to obtain user contact are as follows:
- Scammers use financial and information websites, as well as self-media channels, to lure users into adding them as friends with titles like "expert guidance" and "guaranteed gains".
- They may pretend to be the official customer service of major platforms to make friends with users, using the disguise of "insider information of crypto" and "professional recommendation" to lure users to join "group chats." To prevent scammers from swindling in the name of Poloniex, you can verify the authenticity of the provided contact phone number and social media account by referring to How to Identify Legitimate Poloniex Websites, Social Media Profiles, and Communications.
- Scammers may use social media platforms to pose as successful and trustworthy individuals, often using attractive profile pictures and engaging in friendly conversations to gain the trust of their targets. They claim to have expert investment guidance from so-called "teachers", "experts", and "gurus".
Common ways for scammers to gain users' trust and commit investment fraud are as follows:
- Through live broadcasts and other ways, they are disguised as "professors", "experts", "big VIPs", "broadcast masters", or "crypto masters" to share their investment experience, and even offer live broadcast trainings for up to 15 days, to gain early trust.
- They may invite users to join the group chat and share the strategy and gain skills in the group. The scammer may post the current market trend analysis in the group and share their own strategies. Except for a few real users, the rest of the group are basically "fake users" paid by the scammer. These fake users claim to follow the "expert" to earn profits and post screenshots to lure others to join the investment.
- They may claim that other platforms have better investment opportunities and inducing them to withdraw money to a false platform. However, the fake platform will eventually shut down or deliberately liquidate users' positions.
2. "Click Farm" Traps
Scammers may post advertisements for high-paying part-time jobs, such as making money at home every day by simply giving likes or playing games, to lure users to invest money to engage in fake "click farming." Common scams are as follows:
- Scammers will entice users to make small attempts and cash out the first commission to establish trust. They will then present bigger temptations, utilizing the desire for favorable deals to induce users to increase their investment.
- During such process, the victims are lured into increasing their investment with reasons such as "it takes time for the money to be returned", "system failure", "the task is not completed", and "only members can get high-commission tasks."
- In the withdrawal process, they are often informed of "wrong input of bank card number" or required to increase investment under various pretexts such as "card changing fee," "security deposit," or "artificially inflating transaction volume."
- Some of these new scams have begun to involve cryptocurrency. Scammers will also ask the victims to buy cryptocurrency for the purpose of "making huge money" or "high commission rebate" to get the victims to withdraw their cryptocurrency to designated addresses.
Advice for Security and Risk Control
At Poloniex, we always prioritize user advantage. Despite fraud occurrences on other platforms, Poloniex remains dedicated to investing in and enhancing its risk control system. We consistently combat illegal and illicit activities, striving to create a safer trading environment. However, ensuring secure transactions requires everyone to raise their own risk awareness. Here we suggest:
- Do not trust any so-called "professors", "group managers" , “experts” or any other online investment recommendations.
- Any part-time click farming involving cryptocurrency is fraud, since there is no such demand in any scenario of the crypto industry.
- Choose reliable trading platforms. Select established exchanges for trading cryptocurrency, and use official channels for trading other assets, e.g., choose banks for investing precious metals.
- If recognized to be cheated, stop investment and report to the police immediately. Hand to the police the other party's telephone number, social media accounts, chat records, and other retained records that can help them solve the case.
- If you come across any indications of cryptocurrency scams, please report them to the platform promptly.
Risk Reminder on Preventing Money Laundering Risks
To provide our users with a better trading experience, Poloniex has upheld the principle of "refined risk control" to minimize user perception of risk control. In fact, we conduct real-time risk control monitoring in various scenarios, including registration, verification, OTC trading, transfers, spot trading, deposits, and withdrawals. Once relevant rules are triggered, several measures will be imposed, such as twice facial recognition, time- and amount-limited withdrawals, trading restrictions, and account limitations. We are the leader in various crypto risk control standards, including being:
- The first platform to integrate facial recognition verification
- The first platform to introduce advertiser verification
- The first platform to notify high-risk and medium-risk withdrawal risk
- The first platform to impose time- and amount-limited withdrawals on specific users
- The first platform to integrate risk control with on-chain data monitoring and tracking
- The only platform capable of identifying victims and intercepting risks of online dating scams
Compared to conversion rate, transaction volume and other business indicators, Poloniex pays more attention to the security of user assets. We are committed to resolutely combating illegal activities and consistently update our risk control system at a timely manner. We firmly oppose our users from participating in proxy purchasing or money muling to aid money laundering crimes.
Proxy purchasing and money muling have significantly disrupted crypto trading rules as well as social and legal order. We would like to remind our users to stay vigilant against money muling traps and beware of being manipulated to assist in money laundering crimes.
What Are "Proxy Purchasing" and "Money Muling"?
"Proxy Purchasing" refers to the act of using fiat money to buy crypto via OTC platforms or OTC communities on behalf of others. "Money Muling" is the practice of some illegal platforms using high returns to entice or recruit users to perform proxy crypto trading, with the ultimate goal of serving money laundering criminals.
Typically, money mules need to pledge a certain amount of USDT before receiving the illegal funds provided by the money muling platform to buy crypto on OTC platforms, thereby accomplishing money laundering. Both money mules and the money muling platform will earn commission.
Risks of Participation in "Proxy Purchasing" and "Money Muling"
1. By engaging in proxy purchasing or money muling, users allow others to utilize their accounts for trading. These are organized fraudulent activities if they are not based on actual transactions. Assisting others in fund transfers when knowing they use information networks for criminal purposes may constitute a criminal offense and require criminal liability.
2. By recruiting users, a money muling platform may form a multi-level pyramid scheme that result in significant losses of user assets. Additionally, there is a risk that the platform may abscond with users' deposits.
3. Providing proxy purchasing or money muling services may incriminate users in money laundering.
How to Avoid "Money Muling" Traps?
- Protect your personal privacy. Do not sell your identification information to others or allow others to use your bank accounts or trading accounts.
- Exercise caution with suspicious websites or links. Only trade crypto on verified and authentic platforms. Avoid opening suspicious websites, downloading suspicious apps, or using hyperlinks to log in to crypto exchanges, online banking, shopping websites, or third-party payment platforms.
- Decline requests for purchasing crypto on behalf of others to aid criminal activities.
- Safeguard your trading account. Do not share your account with others or succumb to unrealistic promises of high profits to involve in money laundering activities which can result in financial losses and legal consequences.
Maintaining a sound trading environment requires ongoing efforts, and we have introduced a range of risk control rules to address proxy purchasing and money muling. Users involved in such activities will have their Poloniex accounts and associated accounts banned. Furthermore, we will continue to give full effort to our technological advantages, consistently optimize our risk control system, and develop robust risk control intelligence.
Risk Reminder on Preventing "Online Gambling"
Based on recent risk control monitoring, certain online gambling platforms are enticing players to utilize cryptocurrency for participation in "online gambling" activities. It is important to note that "online gambling" is an unlawful practice, rife with numerous fraudulent schemes that can lead to substantial financial losses for users. In order to protect our platform users from engaging in gambling activities and incurring such losses, we present an overview of the harms associated with "online gambling" along with prevention suggestions.
I. What Is Online Gambling?
Online gambling refers to the behavior of gambling such as participating in chess and cards and betting online, which is deceptive and harmful. Moreover, "ten bets and ten losses" is the "invariable rule" of the casino. Unlike traditional forms of gambling, online gambling is not limited by time or place. It spreads more widely and develops and changes faster.
In the realm of online gambling, the concept of capital and assets control seems non-existent, as bets are merely abstract numbers that lack tangible significance to the gambler. The psychedelic feeling and the convenience of withdrawing money binding together, the gambler's correct sense of value for money will be slowly destroyed, which is the most terrible part of online gambling!
II. Common Scams of Online Gambling
1. Making a small profit under the guidance of an "Expert"
Criminals add gamblers as online friends through dating apps, part-time groups, forums and other channels. And the gamblers will be pulled into their community, where there will be an "expert." For the first few times, they will let the gamblers make small gains with a small number of bets. Later they will induce additional investment to complete the scam. Most of the profits are made by "fake gamblers", which are designed to give real gamblers the illusion that they can earn money by following an "expert."
2. No chance to withdraw
Once the gambler transfers the money to the gambling website, no matter whether they win or lose, there is no chance to retrieve their money as it is a setup made by the criminals.
Gambling sites will obtain your capital through "backstage control", "rebate" and other ways. After winning money by luck, when applying for withdrawal, you will see the prompts, such as "the website is being maintained" or "insufficient balance", that prevent you from withdrawing. Unable to withdraw, gamblers can't help but continue to gamble and end up losing all the money they have won and even their own principal.
3. False popularity and backstage control
New gamblers will usually find many people playing on the platform. This atmosphere causes them to fall into collective unconscious. They feel that there is safety in numbers and a lack of individual accountability, making them unable to think calmly. In fact, the "people" playing are mostly "robots." In general, online gambling platforms are equipped with backstage control. In addition to setting popularity, the backstage can also manipulate the profit point of the dealer and the player, which can let you win the money in a small controllable range and then make you lose in most cases.
- Suggestions on prevention of "online gambling"
- Stay vigilant against online dating schemes that promote involvement in investment fraud related to online gambling.
- Stay wary of "expert" recommendations that encourage participation in investment fraud related to online gambling.
- Don't believe in the notion of "betting to get rich", as experience has shown that betting mostly results in losses.
- If you've experienced losses from online gambling, it's important to resist the temptation to gamble again in hopes of making up for those losses.
- Share the risks associated with online gambling with your family and friends and encourage mutual supervision and support within your household.
- If you come across any indications of online gambling involving cryptocurrency, please promptly report it to the platform.
- Regarding the platform's approach to users engaging in online gambling
Users are reminded that everyone should be on guard against fraud in the name of "Poloniex" that induces them to participate in online gambling and other illegal activities. Poloniex has no cryptocurrency rebate activities in collaboration with any online gambling platform.
Poloniex OTC has taken stringent risk control measures to maximize the security of users' assets during transactions and is committed to combating each and every illegal activity. The current risk control and handling standards for users involved in gambling activities are outlined below:
- When a user initiates a suspicious withdrawal, a risk prompt will be issued for confirmation.
- When a user initiates a high-risk withdrawal, the withdrawal will be directly rejected.
- Users who are slightly suspected of being involved in gambling will receive a pop-up reminder before the OTC transaction.
- Users with moderate suspicion of engaging in gambling activities will receive a prominent pop-up risk reminder before the OTC transaction.
- Once a user's involvement in gambling is confirmed, the platform will take immediate action to permanently restrict certain or all functions of their account and any associated accounts.
Compared to conversion rate, transaction volume and other business indicators, Poloniex pays more attention to the security of user assets. Fighting against illegal activities and online gambling is a long-term battle. We will continue to give full effort to our technological advantages and consistently optimize our risk control system.
Risk Reminder on Preventing Investment Scams through "Online Socializing"
Recently, our risk control system has intercepted certain users' attempts to transfer high-risk assets. We discovered that scammers are luring users into buying crypto and investing on fraudulent platforms through online socializing, resulting in significant financial losses for some users. This type of fraud is commonly known as a "Pig Butchering Scam". To better protect our users, we provide a detailed explanation of the process of a pig butchering scam along with prevention suggestions.
What is a pig butchering scam?
A pig butchering scam is a type of fraud that utilizes online socializing to induce users into engaging in false investments in the forms of wealth management, gambling games, and forex trading, among others. The deceived users are called "pigs" by the scammers. They will present themselves as attractive and wealthy individuals, gradually building emotional connections during the "pig-raising" stage. Once a certain level of emotional attachment is established, they will entice the victims to invest and "butcher the pig" at the final stage of the scam.
How a pig butchering scam works?
Step 1: Establishing trust through adding friends
There are two common approaches used in a pig butchering scam to initiate contact and gain trust: 1. Online Dating: Scammers add users as friends on various dating websites and social media platforms. They present themselves as successful individuals, creating different personas tailored to users' preferences. Through frequent conversations, scammers show care and concern for users to gain their trust and eventually foster romantic relationships online.
2. Investment Mentoring: Scammers showcase their profits and leave their contact information under themes like part-time jobs, side incomes, wealth management, and investment on news sites, online forums, and communities. They will wait for users to add them as friends or send friend requests to users.
Step 2: Sparking curiosity and encouraging small investment gains
During the conversation, the scammer will claim that they have to leave for a while to look at how their investment goes, aiming to arouse the user's curiosity. If the user inquires about profit possibilities, the scammer will introduce a lucrative project and persuade the user to make small investments for side incomes. To alleviate the user's concerns, the scammer will use psychological techniques by saying things like "Don't worry. I'm an expert", "It's a platform loophole", "I promise you won't lose money", and "I'll show you my withdrawal history."
During the first small investment, users can experience the entire process of depositing, investing, and withdrawing crypto, usually making profits. During the process, risk control systems or law enforcement agencies may detect users engaged in certain activities, triggering intervention by platforms to mitigate potential risks or threats. In response, scammers will equip users with strategies to deal with manual reviews, claiming that they are merely formalities and that users who follow the instructions can quickly get passed and make rapid profits. As a result, many users will do so in disregard of any advice, leading to enormous losses.
Step 3: Users experiencing withdrawal issues or unable to contact scammers after a large investment
Under the combined influence of emotional attachment and attractive investment returns, users tend to trust scammers and increase their investments, eventually falling victim to the scam. The following patterns can be found in crypto-related scams:
The scammer encourages users to buy crypto on legitimate platforms and then withdraw the crypto. (At this point, the scam is already successful as the scammer has already controlled the crypto.) The assets will then be transferred to a new platform for "arbitrage trading" or to false investment platforms under the guise of futures trading, new crypto trading, gambling games, forex investment, and precious metal investment, among others. Alternatively, users may directly transfer their assets to the scammer for proxy trading.
As users start with small investments, the scammer will present some profits that can be successfully withdrawn. Some scammers may claim that they have mastered the patterns or loopholes of the platform's app, assuring users of guaranteed profits. At this stage, users have become fully convinced and start to make large investments. When users exhaust their savings, the scammer will recommend credit products, urging them to apply for loans for further investment. Until users can no longer provide additional funds, the scammer will declare investment failure, claim that larger deposits are required to enable the withdrawal service, or send false withdrawal notifications. When users realize they have been deceived and attempt to confront the scammer, the scammer has disappeared without a trace.
How to prevent pig butchering scams?
First, follow the "Three Don'ts" principle.
1. Don't trust strangers met online, and don't believe in promises of guaranteed profits or high returns with low costs.
2. Don't be greedy. Reject the temptation of gambling activities and lucrative investment returns. Remember that there are no free lunches, and greed makes you susceptible to scams.
3. Don't transfer your assets to strangers. Even when dealing with acquaintances, exercise caution. Communicate and consult with your family and friends to avoid traps.
Second, keep safe your assets.
Manage your assets by yourself in a rigorous manner, and never get involved in unfamiliar fields. As cryptocurrency is part of the emerging investment market with potential high returns, it also comes with risks. Therefore, users should acquire the necessary knowledge and make prudent investment to gain profits.
Additionally, never engage in proxy trading and gambling activities. Keep your crypto on reputable and trustworthy platforms. Make sure to visit the exact addresses and be wary of phishing websites.
Third, take remedial measures.
If you fall victim to a scam, stop your investment immediately. When dealing with the scammer, pretend to be unaware of the deception and collect information such as the scammer's identity, location, account details, and visual evidence. Report the scam to the nearest police station as soon as possible, allowing law enforcement to handle the case and gather more valuable clues to minimize your losses.
Alternatively, use a reverse strategy by pretending to invest more and trying to withdraw a portion of your assets from the fraudulent platform.