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Beware of this cryptocurrency scam which targets startups and fintechs

A multiplatform and multi-con scam on hundreds of people for at least $ 1,000 each in the course of 2017 and 2018. The old Cloud Mining exit scam on the far end. An altcoin called “Bitcoin 2nd Generation”, B2G or Bitcoiin2G came out of the farce with the actor Steven Seagal who reportedly supported the cryptocurrency.

The B2G ICO (initial offer of currencies) culminated in New Jersey, where the New Jersey Securities Office took action against B2G advertising in the state. A company called Dragons Mining is supposedly behind the entire scheme, possibly including the B2G itself.

A group that calls itself The Crypto Crime Fighters contacted Crypto-Tidal and provided additional information. Several exchanges and operations of “cloud mining” have participated in the execution of the scam. Crypto-Tomasico spoke on the phone with some of the main victims to obtain the summary.

Mining in the Cloud and BITCOIIN2G

Jorge, one of the main organizers of the victimized group, explained that the scam involved several companies and an altcoin called BITCOIIN2G.

“They are labeling it as a second generation of Bitcoin” he says.

The problem pyramid began, for most of the group, with a company called Start Options. If you visit startoptions.com today, you are immediately presented with a pop-up window that asks you to go somewhere else if you have never been paid. Jorge explained everything in great detail. We have archived the Start Options website.

Jorge says: They call themselves a mining company in the cloud. Therefore, the way this company works, or at least used to work, investors would contribute around $ 1,000 of investment, at least.

In return, this company would promise to pay anywhere between 25% and more monthly. Investors could log in. They have a back-end where the investor will see the results of their account since the mining operations “Had many of us, from different walks of life, put money in this cloud mining company from 2017 to 2018.

There are legitimate mining suits in the cloud. Nicehash and Bitcoin.com seem to sell real hashpower. Its mining power can be measured in the networks in which it is said to work. There are also companies that connect miners and tenants, such as MiningRigRentals.com, who have done business for years without users complaining about scams.

The existence of legitimate mining contracts in the cloud makes it difficult to say that “cloud mining is a scam”. However, according to the experience of this reporter, most of the mining equipment in the cloud turn into scams.

They had what they called a contract. Some of these contracts lasted 30 days. Another 60 days About 90 days That is, at the end of that period, investors expected to be paid. So, if you had a contract that was a 90-day contract, and you entered, let’s say $ 1,000, at the end of that period you expected to get your investment plus a return.

Start Options did not allow withdrawals before the expiration of a contract. Many cloud mining teams do it. Jorge says that he saw it in a similar way to a bank deposit certificate, where he would make a deposit and once it matured, he would reap the reward.

Reminiscent of the GAW miners

The veteran cryptonaughts are probably already listening to the bells ringing. It sounds a lot like the old GAW Miners company. Led by Josh Garza, GAW Miners managed to defraud the millions of investors. Originally selling mining equipment with a new brand, they later launched a cloud mining team that was later shown to be nothing more than a Ponzi scheme.

The GAW scheme was to sell “digital miners” they called “Hashlets”. These were produced in limited batches and were transferable. The lengths that Garza and his companions made to hide their scheme were admirable. Hundreds of people who were being actively deceived came to Garza’s defense when this reporter and this publication began publishing stories that questioned the integrity of the company.

The start options for Age of Scam

One of the claims on the website is a copyright date of “2012/2017”. This is where Jorge has the idea that they have existed for “several years”.

However, when we look at the web file of startoptions.com, one of the oldest sites that we can open is something that has nothing to do with mining. It seems to be some kind of traditional stock options website.

The first time we see the Start Options in its current version is in October 2016. As you can see, just a couple of months before, the old French traditional stock options site was still running.

Your site uses some kind of Javascript that pushes the browser to version 2018 when it moves to the 2016 version. It is likely that they are very aware that people will be investigating their claim of having been in business since 2012. The mining of the Cloud was unknown in 2012.

In fact, they are still on Facebook. We have also archived that page.

It is unknown if the old startup options company and the new start options scam are related. Domains can be bought and sold.

We know that there are no files from the site in September 2016, while it was archived most of the months before that. If the domain changed hands, we assume that it happened during this period.

We are relatively sure that they are not the same people because the oldest company used French on their website and seemed to be focused on the euro. The new company was based in Hong Kong. No one is really sure of that part. Operations were also conducted in the Philippines for some of the scams.

The bullfight and its many victims

It was during the bullfight of 2017 that our story really begins, regardless of when Start Options entered the fake mining industry.

From the point of view of a con man, bullfighting is the best time to run cryptography scams. All the old scams of “bitcoin generators” and useless altcoins are back on the table.

Thousands of new people enter the market ready to spend their money. Often, these people have experience in some other form of business. They do not fully understand technology. A sense of FOMO (fear of getting lost) impels them to make quick decisions. All they know is that they must get into this before it’s too late.

This is the context in which the Crypto Crime Fighters were incorporated into the Start Options scheme. Start Options was just the beginning.

Affiliate marketing is driven

This reporter asked Jorge if he had ever seen evidence that the company was really mining. For larger groups, this test is found when they hit blocks. In the GAW scam, they were able to extract some blocks and prove it, at least in the first days. Jorge says:

Some investors supposedly examined them. Apparently, they had been in business for several years. There were photos that were shown. One of the investors went to Hong Kong and visited his office. There were photos and for what we knew, they looked legitimate. At the time. It allowed more of us to gain confidence and jump with some money.

Like most cryptographic things, legitimate or not, Start Options used affiliate marketing to increase its victim base. Affiliate marketing offers users incentives to encourage others to join a program or buy a product. At its best, it is simply a convenient way for small-scale merchants to charge for their efforts. In the worst case, it essentially involves the affiliate in the scam as an active promoter. Other recent large-scale scams, such as BitConnect Club, used affiliate marketing to extend their multimillion-dollar rake.

Mining test

Instead of the actual power of the network, the Start Options provided photos and testimonials. Here is a picture of “your offices”:

The white man in the photo is called John De Marre. We will talk more about him at the end of the article.

Hashpower is public information available. When a miner exploits a block, he has the option to indicate that they are doing it. In the early days of mining, the address to which the reward went was simply available. But in modern times we can identify mining groups because they publish their names in plain text.

As far as we know, Start Options and its associated teams have never exploited a block of Bitcoin. If they were ever undermining, they were probably mining through a larger group.

Ponzi Economics

Even the most gullible rookie will not just jump on board. The reader is probably gathering the elements of this scam by now. Jorge says:

Apparently, some members were paid at the beginning of this, sometime in 2017.

Deposits were accepted through Bitcoin or bank draft. The minimum deposit was always $ 1,000.

Cryptocurrency has notified federal authorities about the events in this document. We will update this story if we receive any comments. Unfortunately, at present, the resources to enforce the law are limited at the federal government level.

On bank transfers, Jorge tells CriptomonedaseICO:

Those transfers went to two different destinations. A destination, as I understand it, went to the Start Options bank account in Hong Kong or the Philippines. The other destination was based here in the United States.

Introducing BITCOIIN2G (B2G)

When most investors were introduced to Start Options in 2017, they expected to exploit Bitcoin, Ethereum and Litecoin. These are stable networks with global brands.

It is conceivable, especially during the bullfight, that people can make a profit without mining at all. Some schemes in the past have simply taken deposits for mining contracts and negotiated them for profit. These schemes have probably lasted longer.

In February 2018, Start Options published a notice on its website:

February 6, 2018, Hong Kong: On Monday morning, the Director of Options Finance, Mr. Felix Logan announced that he will add Bitcoin 2Gen (B2G) on its Mining and Commerce platform.

B2G is a new cryptographic affiliate with Steven Seagal

Investors will be able to negotiate B2G in the first week of April 2018. He added that it is important to diversify the portfolio to reduce the risk caused by Bitcoin’s constantly fluctuating prices. Adding a new currency will make mining a more profitable business due to the low percentage of difficulty in extracting a new currency.

Bitcoin2gen (Bitcoin Second Generation), which intentionally uses two I’s and has the domain bitcoin.com, is described as follows:

Bitcoin2Gen proposed a self-sufficient cryptocurrency, which is transforming the world of cryptocurrency by creating a digital ecosystem. The self-sustaining Bitcoin ecosystem is an open and collaborative environment of a cryptocurrency (B2G), a mining ecosystem (Dragon Mining Tech) and a crypto-wallet (B2G wallet).

Point of return

So far, in the investigation, we have determined that the Start Options did not exist for “several years”. The earliest that could have been operational was at the end of 2016.

As noted above, it was in February 2018 when they decided to integrate a random altcoin on the platform called B2G. This is when things started to get hairy for investors.

While some people probably experienced problems before, the real scam started after that point. Jorge explains:

They changed everything. As for the payments, before that, they were very receptive. After switching to B2G, they created this other platform called Thorex.

He says they changed the retirement process. Now a platform called Thorex.net was required along with SMT currencies to make a profit. We approached the central part of the scam, a total lack of liquidity of altcoins who were required to earn income from the platform. Jorge continues:

Thorex

The process changed. They went from making the payments in Bitcoin directly to the Bitcoin wallet of the investor. Now the investor had to go to the Start Options platform, request a withdrawal. That retreat would then go to this Thorex platform that they created for B2G. It would become this other currency that internally called SMT. SMT claimed to be 1: 1 per dollar. [A stablecoin.]

Jorge says that people who tried to use the Thorex platform never received the payment.

The people who tried to take that route never took their money because it would get stuck in the Thorex platform. Literally forever.

Thorex.net seems to be an active website. The user can instantly convert one of the three tokens to B2G. SMT is one of those chips. It is important to note that the user can not convert B2G to anything else using the platform.

B2G is listed

Receiving the payment in an altcoin is better than not receiving any payment. But the altcoin must have some form of liquidity. Most altcoins use bitcoin for liquidity. They are paired with Bitcoin through several exchanges, and those who make transactions in them can get their funds by converting them into bitcoins and then converting bitcoins into dollars, or simply keeping the BTC.

Jorge says that B2G was listed in two exchanges, one of which is the well-known HitBTC exchange. Like many altcoin exchanges, HitBTC will allow altcoins to be included in the list for a fee.

Exrates

The other was called Exrates. Now, in HitBTC, you can buy B2G, but you can not deposit. So let’s say that in the Start Options you received your payment in B2G, let’s say $ 2,000. The ideal would be to take those B2Gs and put them in Exrates, but I could not put them in HitBTC.

HitBTC did not allow deposits of B2G. The coins were initially put into exchange by the currency team and these were actively negotiating. New deposits and withdrawals were disabled.

Through the exchanges during the cryptography boom, the price of B2G was as high as $ 240.

However, on a closer inspection, these prices were only available in HitBTC. That would mean that a user would have to make a deposit with some other cryptocurrency in HitBTC, buy the currency before the bubble and then sell it.

B2G reaches more than $ 240 per coin

Such rates have never been available in Exrates, which was the only exchange rate that offered a USD pair with B2G, and in fact, at that time, the only operable way to actually use B2G investors was now paid.

Indeed, these rates were fictitious. The real value of a coin is in what you can do with it. If you can not even deposit or withdraw the object, it is not really an asset on the platform. Also, if more tokens cannot enter the trading group, then it is protected from normal trading routines, such as oversupply and dumping.

Presumably, there would have been a lot of dumping if users of Start Options had ever been able to use the HitBTC markets.

Now in the other change, Exrates, B2G was trading for cents on the dollar. I’m talking about pennies. Therefore, if you initially had a value of $ 2,000 in B2G with which you were paid the start options, if you had to exchange them in Ex rates, you could literally get $ 10 if you were lucky.

It seems that Home Options used the highest available rate – the rate produced by the closed HitBTC market. – To name the payments you made to users in B2G. Therefore, I would give them $ X in B2G, which in HitBTC supposedly was worth the amount owed to the investor, but the investor could not achieve liquidity through HitBTC.

His only real option was Exrates, which had much more realistic values and was negotiated directly against the dollar.

HitBTC is sued

The story gets more interesting here. At the time when the Crypto Crime Fighters contacted Cryptocurrency, B2G claimed to have filed a lawsuit against HitBTC for B2G tokens of “washing operations”.

The subject of your claim is questionable. HitBTC may end up arguing that it was the token creators themselves who performed all the operations that created the bubble described above. They were interested, after all, not the exchange.

They even retweeted someone by asking Cryptocurrency to investigate the matter. Do not worry, B2G. We are investigating you, it’s fine.

The Hong Kong exchange is now being accused of not fulfilling its part of the agreement. Over the course of several months, B2G was never promoted on the homepage and, although it was on the list, deposits and withdrawals were never available.

HitBTC finally blocked all communications with the B2G team when the B2G team requested reimbursement of the 75 bitcoins that paid HitBTC but never received what they paid. B2G has sent a crime report to the Hong Kong police and is in the process of filing a lawsuit.

Dragons mining

A company based in China called Dragon Mining stands out in the whole scheme. You can remember them in the screenshot above where the Start Options encourage people looking to get their money to go to DragonMining.tech.

Dragon Mining is intimately involved with B2G. Considered the “most efficient miner in the world”, we found a video of what appears to be an Antminer S9 called “Dragonmint” and says mine at 16 TH / s.

Now, at the time of writing this report, the total network hashate for B2G was only 36 GH / s. This means that not even one of these alleged miners is mining in the network.

A 51% attack would be very feasible, even for a small operation. You can buy a 1TH / s platform for less than $ 1000. The best conclusion as to why HitBTC did not want to allow deposits or withdrawals from B2G is the fact that its network had no hostility. The 51% attacks would be trivial.

DragonMining hardware is real, but B2G does not have Hashrate

DragonMining is producing real hardware. They are also selling mining contracts. Cryptocurrency found some units for sale on eBay and some other retailers. We do not know how they compare with the Antminer series in terms of price compared to performance.

Another scam to the rescue

Dragon Mining has probably financed its hardware operations by cheating investors in cloud mining. Jorge explains that another company “saved the day” when Start Options executed the exit scam. Jorge says that this happened around June of 2018, when the first B2G era mining contracts began to mature.

After the expiration date of the 90-day contract, the Start Options stopped answering phone calls, messages and emails. Then we hear another partner say: ‘Hey, Start Options is closing its doors. We’re going to rescue them all. Therefore, we will take several accounts for the Start Options and we will migrate those accounts. However, for those accounts that wish to migrate, you must pay a certain amount of money. Do not worry That money will be added to your account. So when you win your contract, you will recover that money. ”

Migration rates – The latest in Scammer Genius

Obviously, everyone was happy to hear that because Start Options had fallen silent. We are happy to get on board. They seem to be legitimate. Some members have been paid by this company. That company is what we call BTW, Bitcoin Trading World.

Jorge goes on to explain that BTW could not face everyone from Start Options, so another company on the twisted web called BTC Mining Factory takes the remaining accounts in a similar way.

The deposit or “migration rate” for both companies varied. Bitcoin Trading World charged a percentage of the amount that the user had previously invested with Start Options. BTC Mining Factory charged a flat rate of $ 500 plus 2%, if Jorge remembers correctly.

The exact figures are not important. What is interesting is that these other companies were capitalizing on the group of verifiable victims. Instead of extending the real liferafts, they were given more snake oil.

The victim is living through his worst nightmare and assumes that he will receive help. Only to be attacked again.

BTW and BTCMF execute an elaborate B2G pump scheme

At one point, says Jorge, the companies offer to allow people to exchange their B2G for BTC. They created an obvious arbitrage opportunity: you deposit “$ 25,000 in B2G” and we will give you the value of Bitcoin. The capture? You have to pay a fee.

Another member of Crypto Crime Fighters says that each new “opportunity” came with a sales pitch. In the case of the change of Start Options to BTW and BTCMF, users were offered a “buy one by one” agreement regarding Bitcoin investments. That’s right: they said they would give users a bit of free Bitcoin hashpower for every Bitcoin they invested.

For people who do not understand the very limited profit margins available in Bitcoin mining, these opportunities may seem a little good to be true. But at this point, the red flags are blinking.

Bitcoin Trading World and Bitcoin Mining Factory were never fulfilled

It is now October 2018. At this point, it has been about six months since the transition to B2G and the subsequent problems in Start Options. Jorge says that a typhoon struck Hong Kong right on the expiration date of his contracts.

As in Start Options, Bitcoin Trading World has a pop-up window when you visit its website and it tells you to get your Dragon Mining payment:

They asked for a couple of weeks to make payments. Jorge says that most people were very nice and willing to wait. However, he says, Bitcoin Mining Factory simply makes the same startup options it had made:

With BTC Mining Factory, they simply fell silent. They simply would not respond. They closed their live chat. And that was the end of that.

BTC Mining Factory has the same pop-up window that directs people to Dragon Mining.

As with all scams, there is already a clamor of people trying to warn new investors. CriptomonedaseICO discovered this opposite video in which a woman claims to make a successful withdrawal in Bitcoin Trading World: She, of course, has a reference link in the description of the video.

The highest level of scams

Bitcoin Trading World, before leaving as others had done, used a common scam tactic in the world of cryptographic scams: they offered a prepaid debit card.

They said, we have been in contact with Visa International. We have paid about $ 100 million to issue prepaid debit cards. It is easier for us to pay with fiat than in Bitcoin at this time. So we’re going to issue Visas and we’re going to have about four different levels of Visas. There is a free one where you can withdraw $ 500 per month. And we have other levels.

Jorge says that some of the Crypto Crime Fighters contacted Visa and discovered that there was nothing that happened with Visa.

Examining the scam dynamics

Let’s go back a second and see what we just learned. The startup options completely deceived these people after they moved to the B2G model. It is not clear if they were ever legitimate, but it is clear that they became insolvent after they decided to integrate B2G and pay exclusively in B2G.

We can reasonably assume that many people chose not to enter the new scam, but the size of the minimum investment would have made any potential rescue attractive to the majority.

Perfect marks

What represented the victims of Start Options, then, were major brands. They were in a position where they felt the new companies needed. They had already entered into previous scams.

A perfect market The dynamics of this scam is unique in this regard. When GAW and other scams imploded, some teams appeared trying to pretend they could save the day, but they were not successful.

However, in the hustle and bustle of the cryptography boom, when all eyes were focused on the hard bitcoin and Craig S. Wright’s latest tweets, our informants fell prey to some extremely advanced scam tactics.

As this reporter told the Crypto Crime Fighters:

It is as if they decided that they wanted to make another X% over what they had already stolen, so they created a scheme and executed it. Jorge says: It gets better than that.

Dragon mining is the pinnacle of the pyramid

Finally, we learned that DragonMining had several other schemes very similar to the Start Options. They are the following:

Each of these companies had a similar model. They sold mining contracts, finally paid in B2G and partnered with DragonMining.

Rescue operation of the Dragon Mining insurance policy

Dragon Mining told investors in all scams that they had an insurance policy, as Jorge explains:

They said we’re not going to take away an extra penny. We have this insurance policy that was established a while ago and we are calling the victims of the companies so that they can receive their payment at least the amount they deposited. That was a relief for us, so we filled out the forms online.

“It gets better”

However, Jorge was right. It gets better. He says the notice we see today was slightly different for a while. Encouraged people to go and complete their insurance claims. “Here was the insurance offer, in which we were all angry,” he says.

Initially, Dragon Mining said we will not ask for additional money from anyone. Now, when they started calling people about insurance claims, they wanted more money.

This was the structure of their offer: they said that we will pay 50% of their initial deposit in a year. You must give us X percentage amount to participate in the insurance program. Then, after one year, the price of B2G will go up and you can recover your entire deposit.

Jorge says that few of the victims, if any, participated in this program. Trying to get people to buy this last mile plan seems to be the scope of Dragon Mining’s involvement these days. The insurance program page says:

Any customer who has invested in these Mining Platforms (previously listed in our Mining Programs) has the right to claim their initial deposit or the total balance of their account in the specified Mining Platform.

The Dragon Mining insurance program becomes more desperate

Jorge says they are hungrier as the scale of his scam comes to light. They offered the express processing of insurance claims “within 72 hours” for the low price of 1BTC.

Again, few of the burned victims, if any, have tried to see these things. These people have been overwhelmingly shown again and again that they are not reliable.

The insurance scam seems to be the last of his efforts, to date. Crypto Crime Fighters has filed police reports and is working on a class action lawsuit against the perpetrators of the scam. Some of the parties are American people.

Key players in the biggest scam you’ve just heard

Now we talk about who was involved. Each company had a supposed corporate structure, but there were major players who had to do with the victimization of innocent noobs in the crypto game.

John De Marr is a principal promoter of Start Options and Bitcoin Mining Factory. He has been a registered private investigator in California. De Marr is in the image above, in the “home” of Start Options, along with other images provided to CriptomonedaseICO.

Steven Seagal

Of course, it would be negligent not to reiterate the participation of Steven Seagal. Seagal approved the B2C ICO. That’s bad news for Seagal, which can be hit with fines like other celebrities have.

Those scammed by the companies mentioned above should contact [email protected] to get involved with a developing class action lawsuit.


Also published on Medium.

Published inCloudCryptocurrenciesFintechStartups

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