I went and read CipherTrace's report to see if I could find more on this story.
This is what I found
Well this makes things more clear, thanks for bringing this report in. So, rather than simple Ponzi its an exit scam? Kim Jung Un huh? Not a fan of these mobile apps, especially closed source wallets...
And what will be the community reaction about these coins? Accept them like nothing? Freeze them? Well if this turns out to be true since it appears to need confirmation...
2019 the Year of the Exit ScamMassive PlusToken Wallet Ponzi Scheme Impacts 2.4 Million UsersUS$2.9 billion worth of deposits appear to have been lost when Chinese police broke up an alleged Ponzi scheme involving the purportedly South Korea-based crypto wallet and exchange, PlusToken. It is unknown how many people were affected, but PlusToken claimed to have between 2.4 and 3 million users/investors. CipherTrace has not definitively confirmed this apparent fraud or exit scam. The details of who was behind PlusToken and where its custodial funds went are currently shrouded in a mystery involving Chinese nationals, Chinese police, the government of Vanuatu, and the two supposed co-founders—a Russian known only as “Leo” and South Korean who uses the name “Kim Jung Un.” If confirmed, it would be the largest such loss ever, dwarfing even the US$600 million exit scam pulled off last year in Vietnam (See CipherTrace Q3 2018 Cryptocurrency AML Report).
The wallet required users to download an app through which they could deposit crypto and also invest in PlusToken (PLUS). The company claimed the PlusToken coin, which is based on the Ethereum blockchain was developed by the core team of a major technology company. The wallet reportedly held Bitcoin, Ethereum, Bitcoin Cash, Litecoin, XRP, DOGE coin, Dash coin, and PLUS coin (the native cryptocurrency of Plus Token). Users accessed the wallet through a mobile app and could trade online at the PlusToken exchange website, pstoex.com. Both were not functioning at the time of this report. However, a copy of the whitepaper is still on LinkedIn
https://www.slideshare.net/ArnoBalzer/white-paper-plus-token.
A Crypto High Yield Investment Product Popular in AsiaPlusToken appears to have been a popular in Japan, South Korea and China, and the company claimed it would have 10 million users by July 2019. Typical of a HYIP (High Yield Investment Product), the astounding user growth (if they truly had some 3 million users) stemmed from advertising huge returns. Specifically, PlusToken and its affiliates claimed that even in weak crypto market by using arbitrage among various cryptocurrencies (enabled by a bot called AI-Dog) and cloud crypto mining they could deliver wallet holders an ROI of between 8 and 16 percent each month, which was paid out in PLUS. Users were required to deposit a minimum of US$500 worth of crypto assets to participate.
PlusToken members could also make money by bringing new users into a multi-level marketing program typical of a pyramid scheme. In fact, new users could only join by through invitation from an existing PlusToken holder. However, it appeared there was no verifiable source of business revenue other than proceeds from new membership.
Meeting with Prince Charles Lends CredibilityAll of this led to multiple warnings in the crypto community that PlusToken was a scam. The company’s founder publically dismissed those reports. However, after a company press release, replete with photos, claimed that on February, 2019 Leo had met with England’s Prince Charles at an Invest in Futures event hosted by the prince’s charitable foundation, PlusToken gained some newfound credibility. “Leo and Prince Charles had intimate talks on how the blockchain serves economic society, according to a press release promoting a new PlusToken exchange. Also, he put forward valuable advice on the development of future blockchain-related bills issue in the UK. Besides, Leo donated at the charity dinner generously and won a lot of complement.”
With today’s potential for deep fake photos, CipherTrace researchers reached out to the Prince Charles Foundation to validate the authenticity of the photos. The Foundation confirmed “Leo” had in fact attended the dinner, however staff were not willing to provide other information, such as his last name, due to concerns over the GDPR.
On June 28, 2019, Chinese police arrived on Vanuatu and arrested the “Plus Token Six” for running an “internet scam.” The Island’s government allowed China to almost immediately extradite the six—who were either Vanuatu citizens or applying for citizenship—back to the mainland.Alarm Bells Go Off in June as “Technical Difficulties” Prevent Users from Withdrawing FundsIn late June, PlusToken users began to experience trouble withdrawing custodial crypto assets. On June users found that withdrawals on the PlusToken app were frozen due to alleged “technical difficulties,” but by June 29 the PlusToken app had completely shut down due to alleged “system maintenance.” This caused great concern among the PlusToken Community.
“The PlusToken Six”Also on June 29, Hong Kong’s leading newspaper, the South China Morning Post, reported that six Chinese nationals wanted by Beijing for operating an internet scam were arrested on the Pacific island of Vanuatu and extradited back to China. Vanuatu law enforcement and immigration authorities along with Chinese police raided a property where the six were conducting their operation. Subsequently the Chinese tech news agency 36Kr claimed to confirm that the “internet scam” reported by the Post was, in fact, PlusToken. Specifically, the arrests were for running a multi-level marketing company (pyramid scheme). As reported by the New York Times, China has been making a major crackdown on such business models, including Amway and Herbalife.
On July 12, a PlusToken community website responded to the incident, claiming the six arrested in China were PlusToken users and not associated with the company, and “Thus, no need bother about this rumors (sic).” The statement further claims that withdrawals remain restricted because the server is still unstable and urges users to wait “until server synchronization and stabilization” and not to worry if they cannot log in because its technical team is trying to recover the server and data. The statement then asks users to stop trying to log in until they receive confirmation that the severs are back up.
This was not the first time PlusToken has warned users not to believe “rumors.” In October 2018, after news started circulating in China that PlusToken was being investigated for violating Chinese regulations and engaging in fraudulent activity, the company’s co-founder, Leo, posted a video on YouTube
https://www.youtube.com/watch?v=r3RTwNvgMu8 shot in his “hometown” of Kazan, Russia, telling users to “not pay attention to any haters.”
On July 10, China’s Yuncheng Public Security Bureau told the Daily Planet Daily that the case is still under investigation and that there are suspects that have since fled. As of the release of this report, Plus Token’s official site, pltoken.io, also appears to be down with the last archive in archive.org occurring on July 1, 2019.
The case has even raised political concerns in the South Pacific, Australia and New Zealand regarding the increasing influence of China. The local newspaper reported that the rapid extradition of people who were either citizens of Vanuatu or applying for citizenship showed how the government bent to the will of the Chinese, and may have confirmed fears that Chinese intelligence was operating covertly in the country. “When they arrived in Vanuatu, Chinese law enforcement provided critical information to Vanuatu police concerning the PlusToken scammers. They not only knew their names; they knew where they lived,” said a report in Vanuatu’s Daily Post.
This also raises issues for international regulators and cryptocurrency users as to the 3-billion-dollar question: there is no word from the Chinese authorities on the fate of the missing user funds. Certainly this “exit scam” warrants further investigation, because unlike similar cryptocurrency frauds, it is not clear that insiders made off with the loot. CipherTrace will provide updates if available in next quarter’s report.
On July 12, PlusToken responded to the incident on its website, claiming the six Chinese nationals arrested in Vanuatu were PlusToken users and not associated with the company, and “Thus, no need bother about this rumors [sic].” (See screenshot above). The statement further claims that withdrawals remain restricted because the server is still unstable and urges users to wait “until server synchronization and stabilization” and not to worry if they cannot log in because its technical team is trying to recover the server and data. The statement then asks users to stop trying to log in until they receive confirmation that the severs are back up. As of now there are no further updates.
