Fake coins are rampant in the cryptocurrency world: counterfeiting gangs defraud hundreds of millions of yuan to buy villas and luxury cars

Contract liquidation, funds running away, being harvested by ICO and pig-killing schemes... In the cryptocurrency circle, the pitfalls that players encounter are too numerous to mention.

But many people don’t realize that they may even be harmed by “counterfeit money”.

Recently, there have been many cases of counterfeit coins in the cryptocurrency circle. Scammers can defraud money by issuing a coin with the same name as a well-known project.

With the popularity of decentralized exchanges, scammers have a new place to harvest.

01 Counterfeit money is rampant

Compared with paper money, what are the technological advances of blockchain-based digital currency?

"Payment is quick and convenient." "You won't encounter counterfeit money." Many people will answer without thinking.

Is this really the case?

In fact, there are many counterfeit coins in the currency circle.

The latest news related to this happened on July 5. On that day, DeFi data platform DeFiprime exposed more than a dozen DeFi-related "fake coins" on Twitter.

In general, counterfeit currency in the cryptocurrency circle can be divided into the following types.

The first type is the currency issued in the name of well-known projects.

For example, in the DeFi industry, well-known projects such as dYdX and Uniswap have not issued any coins, but scammers have issued so-called dYdX coins and Uniswap coins in the name of these projects to induce uninformed people to buy them.

The second type is coins with the same name as well-known coins. They are very deceptive and can easily deceive players.

Last month, the DeFi project Balancer issued a warning on Twitter that fake Balancer tokens BAL appeared on Uniswap. At that time, the real currency BAL had not yet been issued.

Searching for "BNB" on the Ethereum browser Etherscan yields 15 search results. Except for the first one, which is the platform coin BNB officially issued by Binance, the other projects have nothing to do with Binance.

Among these BNB copies, some coins have both the name (TokenName) and the code (Token Symbol) of BNB, and some coins have the word Binance in their names, such as Binance Block, Binance Token, etc., which are extremely confusing.

Looking back at history, the proliferation of counterfeit currency in the cryptocurrency circle began in 2018.

At that time, some media reported that scammers had issued fake EOS with the same name as EOS and sold it at extremely low prices.

What’s even more ironic is that after the launch of the EOS mainnet, there are more tokens with the same name as EOS on the EOS platform. According to the data from the EOS browser EOSPark, there are currently 5,213 EOS tokens, and 289 of them have the name “EOS”. Most of them are named “EOS”.

With counterfeit money flying everywhere, many players have been deceived and suffered heavy losses.

In August 2019, a Reddit user posted that he was deceived and bought fake Perlin coins (PERL).

Public information shows that Perlin is the eighth project of Binance IEO platform Launchpad. It was launched for trading on August 25, 2019 with an issue price of US$0.07.

The user said that the scammer tricked him into believing that he had a low-priced share of PERL and that he could make a profit by selling it when PERL goes online. Under the temptation, the user bought 145,805 fake PERLs.

He soon discovered that the contract address of the PERL he bought was inconsistent with the real PERL - he was cheated.

02 The scammer was caught

The proliferation of counterfeit currency in the cryptocurrency circle has attracted the attention of regulatory authorities.

On July 9, the official microblog of the Cyber ​​Security Bureau of the Ministry of Public Security disclosed a criminal case of "Telegram digital currency arbitrage". The fraud tool used by the suspect was counterfeit currency.

They pretended to be Huobi Exchange and formed the "Huobi Global Arbitrage HT Chinese Group Community" on Telegram.

HT is the platform currency of Huobi Exchange. The scammers claimed that they had a channel for HT "arbitrage", and players could buy "HT" at a low price from them.

How does it work? The scammers claim that players only need to deposit ETH into the designated address to receive “HT” at a ratio of 1:60.

As of press time on July 13, data from the Huobi exchange showed that the price of ETH was $244.23 and the price of HT was $4.24. Based on this calculation, the player's rate of return for completing an arbitrage operation is as high as 4.3%.

"I have also encountered this kind of scam. The scammer said that as long as you send 0.1 ETH, you can get 10.5 HT. According to the price at the time, you can earn more than 600 yuan by investing 1 ETH, and the rate of return is close to 40%." A cryptocurrency player revealed.

In order to make the scam appear more realistic, scammers will also place "shills" in the Telegram group, pretending to be real users, to lure real players into the trap.

Once players follow the scammers’ tutorials and transfer their ETH to the designated address, they will receive “HT” - it is not Huobi’s official HT, but fake currency issued by the scammers.

It has no value and cannot be cashed out on the Huobi exchange.

Once a player discovers the trick, the scammers will come up with another set of excuses, using reasons such as "insufficient recharge amount" and "insufficient brick-moving times" to induce them to increase their investment and complete the second harvest.

Data from the Cyber ​​Security Bureau of the Ministry of Public Security shows that under this fraud routine, since 2019, the above-mentioned criminal gang has used fake HT "smart contracts" to illegally obtain tens of thousands of ETH from victims, with the value of the case exceeding 100 million yuan.

After the scam was successful, these scammers spent lavishly and bought villas and luxury cars.

In June this year, Wenzhou Ouhai police arrested 10 criminal suspects in a luxury villa and a commercial house in Fuzhou City.

At the scene, the police seized dozens of mobile phones and computers used in the crime, confiscated tens of thousands of virtual currencies such as ETH, BTC, and USDT, and confiscated luxury cars and properties such as McLaren and Ferrari, with a total value of more than 13 million yuan.

Luxury cars and villas seized by the police Source: Ministry of Public Security Cyber ​​Security Bureau official microblog

This type of scam is not new, as the media reported it in 2019. Huobi also issued an announcement in May 2019, saying that it had never launched any form of "arbitrage" activities and reminded users to guard against risks.

According to statistics released by digital asset security tracking platform CoinHunter in June 2019, the amount involved in similar scams reached 15,000 ETH, which was worth 30 million RMB at the time. Among them, a single user was defrauded of up to 885 ETH.

03 Anti-fraud tips

Why are fake coins so rampant in the cryptocurrency world? This has to do with the scam routines of fake coins.

First of all, the threshold for issuing counterfeit currency is not high - most counterfeit currency in the cryptocurrency circle is issued through the Ethereum ERC20 protocol, and the required funds and technical thresholds are extremely low.

There was an article circulating on the Internet that introduced the issuance process of Ethereum ERC20 tokens.

By following the instructions in the article, most cryptocurrency players can issue their own tokens within 10 minutes.

Compared with the production of counterfeit money in reality, it is almost easy to produce counterfeit money in the currency circle.

In addition to issuing, scammers also need to "sell" the counterfeit currency in order to make a profit.

And this step is the core of the counterfeit currency scam in the cryptocurrency circle.

In the past, scammers promoted fake coins and induced players to buy them one-on-one. The aforementioned "HT arbitrage" and "PERL low-price private placement" are their common rhetoric.

But this sales method is inefficient and slow. Now, scammers have a new sales method - decentralized exchanges.

In the past year, decentralized exchanges on DeFi have been highly sought after. Taking Uniswap as an example, DeBank data shows that its recent average daily trading volume has increased by 380% compared with the same period last year.

Compared with centralized exchanges, most decentralized exchanges do not set a threshold for listing coins, which means that fake coins can also be traded freely on decentralized exchanges.

For example, on Uniswap, players can trade digital currencies in two ways: the first is to enter the name of the token they want to trade in the search box, such as BAL; the second is to enter the contract address of the token in the box.

For token issuers, as long as they submit a listing application on GitHub, Uniswap will include the token in the search box so that players can search directly.

Under such circumstances, some players have long stated that they encountered fake coins when searching for BAL on Uniswap.

Search results for BAL in Uniswap, the top one is real, the bottom one is fake

In addition, even if the fake currency is not submitted for application on Uniswap, as long as the player copies the smart contract of the fake currency, he can trade the fake currency on Uniswap.

Compared with the token name, the contract address of each token on Ethereum is unique and there is no possibility of duplication. Verifying the contract address can directly avoid being scammed.

But for novice users, these addresses are like a string of garbled codes. It is not easy to distinguish which address is the real currency and which is the fake currency.

“If decentralized exchanges increase the threshold for listing coins, they will be no different from centralized exchanges; but if there is no threshold, they will be exploited by counterfeit coins.” Blockchain researcher Sun Yuan said that this contradiction is inevitable, “Perhaps this is the price brought by decentralization.”

He reminded that we should be wary of arbitrage, over-the-counter transactions, low-price exchanges, decentralized exchange transactions, etc. Counterfeit coins often flow in through these channels.

The most important thing is not to have the mentality of taking advantage of others. "You are looking at other people's interest, while others are looking at your principal."

From ICO, Ponzi schemes to counterfeit coins, scams in the cryptocurrency world are constantly innovating.

In fact, all scams take advantage of human weaknesses. Players driven by greed will eventually be bitten back by greed.

This principle also applies to scam operators.