Buying a fake U despite knowing it's fake? Beware of the arbitrage scam

The Black U Pig Killing Scam is a traditional and mature scam in the web3 field, which is a new version of old wine in a new bottle. It accurately and effectively grasps the greed of human nature. The victims are more widespread and the damage caused is even greater.

As a new type of value storage and transfer tool, cryptocurrency has the characteristics of anonymous payment and cross-border transfer. Therefore, as encryption technology is adopted by all walks of life, it appears more and more frequently in black and gray industry activities, including fraud, theft, cyber attacks, etc. Among them, stablecoins are particularly favored by black and gray industry practitioners because their value is anchored in the legal currency of the real world. This type of stablecoin involved (mainly USDT) is figuratively called "Black U" by the industry.

As countries gain more control over the ability to track encrypted funds and improve corresponding laws and regulations, the number of cases where law enforcement agencies crack down on entities behind link addresses based on encrypted fund analysis has also increased. Therefore, most industry organizations and practitioners tend to avoid black U for fear of being investigated by anti-money laundering. However, there are still some speculators who disregard laws and regulations and actively participate in black U cleansing, resulting in themselves being deceived or punished by law.

Below, Bitrace uses a real event as a case to expose a "Black U arbitrage scam".

Earn 2k in 5 minutes simply and crudely?

Recently, a victim submitted a report to Bitrace, saying that he saw a video promoting black U arbitrage on the Internet and entered the corresponding website to participate in online earning, but his funds were defrauded and could not be redeemed.

It is understood that the website claims to be an order-taking platform for laundering the USDT funds involved in the case, allowing users to use "clean U" to exchange for "black U" at an "exchange rate" of 1:1.1 to 1.45. After receiving the black U, the users transfer it to other platforms for sale, and the excess amount is the user's "running point" income.

The victim first transferred 5 USDT to the designated address with a try-it attitude and received 5.5 USDT in return. Then he transferred 207 USDT and received 269 USDT in return. Then he transferred 1000 USDT but did not receive any return. When contacting the platform, the customer service refused to refund the money with excuses such as "the deposit and withdrawal IP are inconsistent, and the deposit and withdrawal hash values ​​are inconsistent", and asked him to place another order, and both orders would be refunded at the same time. At this moment, the victim realized that he had been deceived.

It is not difficult to see that this is a common routine of pig-killing scams, where small amounts are returned more, and large amounts are not returned. The scammers first build trust through successful transactions of small amounts, making the victims mistakenly believe that there is a real profit margin to be taken, and then make them step into the trap step by step. After the victim recharges a large amount, the scammers take the money and run away.

According to the victims, such promotional videos of black U online money-making can be found everywhere on certain video websites. Videos with words such as "gray industry" and "running points" in the titles have also been played a lot. It is not difficult to see that some people are tempted by high profits.

Bitrace on-chain data tracking

According to the relevant addresses provided by the victims in this case, Bitrace conducted on-chain fund tracking, and the basic situation is as follows:

• So far, the fraud gang has illegally obtained more than 870,000 USDT through the same method. 784 independent addresses transferred USDT to the fraud address, but only 437 addresses received the return. Nearly half of the participants did not succeed in the initial "arbitrage". This means that "smart" behaviors like wool-pulling are difficult to achieve;

• The address handling fees of the fraud gangs come from online gambling platforms. This is a common behavior of many black and gray industry gangs. Online gambling platforms generally lack compliance mechanisms, resulting in a large amount of funds involved in the case flowing in and out of their business addresses, forming a de facto "coin mixing platform";

• After obtaining the funds, the fraud gangs will immediately transfer and launder the funds. At present, it seems that centralized trading platforms are their preferred place to sell the stolen money.

Currently, Bitrace has guided the victim to go to the local police station to report the case.

There are risks in participating in black U arbitrage

Bitrace would like to remind you that many arbitrage activities under the banner of high returns are actually pig-killing scams. Furthermore, participating in arbitrage activities often faces the risk of platform running away and loss of principal. Last but not least, if you voluntarily participate in fund laundering when you know it is a black U, you may face imprisonment.

Take the "Criminal Judgment of the First Instance of Manx's Assistance to Information Network Criminal Activities" issued on April 11, 2022 as an example. The defendant Man, for the purpose of profit, knowing that others used information networks to commit crimes, still used his bank card to provide payment and settlement assistance to others, with a settlement amount of more than 1.32 million yuan. The circumstances were serious. His behavior had violated the state criminal law and constituted the crime of assisting information network criminal activities. The People's Court of Mayang Miao Autonomous County, Hunan Province sentenced Man to six months in prison and a fine of RMB 10,000. The illegal income of RMB 3,000 that had been returned was confiscated according to law and turned over to the state treasury.

Final Thoughts

As a traditional and mature scam in the web3 field, the Black U pig-killing scam accurately and effectively grasps the greed of human nature, and the victims are more extensive and the damage caused is greater. As an individual investor, it is not wrong to look for speculative opportunities on various platforms and hope to gain returns, but at the same time, you should also reasonably assess the risks and actively understand the relevant scams and laws and regulations.