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Investors Snagged, NovaChain Exits with Millions of Dollars

NovaChain Fraud

Exit scams have for the last few years
been synonymous with cryptocurrencies. In the current low ICO rate environment,
most crypto enthusiasts have hoped that such fraud would soon become outdated.
Well, a new one has just hit the radar with NovaChain.

The blockchain based startup has shut down its website as well as its social media accounts. It has even stopped replying to its fan’s emails even though they promised their fans passive income for those who made use of their “highly reliable” trade bots deployed on Binance.

The anatomy of an exit scam is pretty simple.  The startup will collect cash from its community through an ICO and close shop when its objectives have been realized. One unique characteristic of this fraud is their association with publicity stunts. This is often in the form of social media influencers who at most seem to know little about cryptocurrency. Their work is usually to build up on FOMO, to help set up investors.

Platform Marketed by Influencers

The influencers are only paid to
publicize a token, and they should therefore not be considered as reliable
sources of investment data. This is applicable more so in the cryptocurrency
arena, prone to abuse by many fraudsters. 

Most NovaChain fans seem to have heard
about the token from such influencers. The platform was sold as an arbitrage
trading bot also referred to as the “T Rex trading bot.” The project
was introduced with much fan fare causing intense interest in the industry.

There is an allure to trading bots,
because they are basically, moneymakers. 
The NovaChain T rex trading bot would assist users in generating passive
income. The one outstanding danger sign was the information on the project was
mainly in the hands of crypto influencers.

These kings of Twitter and Facebook chatter were its marketers, implying that the project might not have had much of a premise. Unfortunately, the NovaChain bot did perform arbitrage trades. This led its investors further into the deception. The keen, however, did notice some standard features between the project and BitConnect.

Similarities with BitConnect

Both used influencers and were not transparent about their earnings.  US YouTube personality Trevon James, for instance, was investigated by the SEC and FBI for his connection with the BitConnect saga.

A Reddit user on this connection wrote:

 “In light of the NovaChain scam, it’s important to remember that YouTube influencers are here to do just that. Influence you and your money. Reflect on this”.

One more user backed this thought by cautioning
investors:

 “Anyone pumping the price of any coin, even the most secure one like Bitcoin, is at some level attempting to play with your money. Don’t let anyone tell you how some coin is a great way to invest money in. Do listen to experts, but definitely not to people who have a stake in promoting any coin. By experts, I mean people who vet white-papers etc. and people who vet business proposals. There are very few of them anyway”.

The NovaChain developers pulled out
when investors began to pour in large sums of equity. The project had run for a
year but had started as failed NovaLend a lending platform.

The post Investors Snagged, NovaChain Exits with Millions of Dollars appeared first on Ethereum World News.

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Cobinhood Crypto Exchange Announces Bankruptcy, Community Spots Exit Scam

A famous Taiwan-based crypto exchange Cobinhood has filed for bankruptcy
and afterwards allegedly pulled an exit scam.

In April 2019, the associated company of Cobinhood, Dexon Foundation, raised over $3 mln on its DXN token ICO. Just the other day, the exchange unlocked DNX and immediately dumped it on the market, without giving investors their purchased coins.

Right on the same day, the exchange declared bankruptcy and appointed liquidators, while the price of DXN plummeted around 80 percent on the news. The crypto community saw this as a clear exit scam.

What preceded the exit scam

Niche crypto trading platforms, such as Cobinhood, have often been controversial for investors. The Taiwanese exchange is famous for a large choice of coins that investors can trade. Analysts believe that a great number of listed assets may be the sign of poor regulation.

As reported, the exchange filed for bankruptcy and got a liquidator to deal with firing the staff. Initially, Cobinhood had mentioned future redundancies earlier, saying that they want to improve their efficiency. This, most likely, means that the exit scam was planned well in advance.

Even though crypto startups often go broke and announce bankruptcy, the case with Cobinhood made the community think this was a scam. The news came as a shock to those who had been investing in crypto on it and had participated in the Dexon ICO in April.

The token dump

As was mentioned above, Cobinhood unlocked DNX tokens on May 20 but instead of giving the investors their purchased coins, dumped them on the market. Then after the company announced its bankruptcy, DNX price dived more than 85 percent. The coin price took just a few hours to go down.

The negative market response also hit Cobinhood’s native token’s price – COB. Later on, DNX managed to recover a little, but still the loss in value from the initial price totalled 60 percent.

Cobinhood still has not given the public an exact date when it will cease work. At the time of writing, the site of the exchange is still functional with trades being conducted in the standard mode.

Other recent exit scams

Among other crypto exchanges that have stopped operating and where the community suspected exit scams are QuadrigaCX and – the most recent one – New-Zealand-based Cryptopia.

Quadriga was unable to continue work due to the sudden death of its founder and CEO in December 2018. All the private keys to hot wallets were locked in his personal laptop. Later on, the investigation found out that the majority of assets had been kept on other exchanges for security reasons. However, some assumed that the situation looked like a crypto scam. The CEO of Binance was among them.

As for Cryptopia, it was accused of pulling an exit scam by investors themselves who were shocked at the company shutting down after recent attempts to recover the hacker-stolen assets and assuring everyone that all is well.

The post Cobinhood Crypto Exchange Announces Bankruptcy, Community Spots Exit Scam appeared first on Ethereum World News.

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Cryptopia Exchange Appoints Liquidators, Community Suspects Exit Scam

Cryptopia, the New Zealand-based exchange ‘famous’ for several successional hacks at the start of the year, announces a halt in all operations due to liquidators getting down to work

As 2019 began, Cryptopia had bad luck to suffer several hacks in
succession when digital assets of its customers were stolen from the platform’s
hot wallets.

Later, the exchange resumed trading, however, the situation seems to have changed for worse.

Redditors start panicking

On Tuesday, a redditor published a post urging others to check Cryptopia’s website, which back then said that the exchange was undergoing maintenance. The redditor Fallenkeith2018 expressed fears that Cryptopia had been hacked one more time.

The post says:

I woke up this morning to check Cryptopia to see if there was any updates on the website about new trading pairs. When I went to Cryptopia mainsite, it says: “Don’t Panic!

We are currently in maintenance.

Thank you for your patience and we apologise for the inconvenience.”

Has there been any unofficial (or maybe official) word anywhere on what happened? I can’t find anything on the twitter or discord.

The last update on the exchange’s Twitter account was made on April 26,
when Cryptopia made a notification to users about a 1-hour maintenance.

This made people on Twitter and Reddit assume that the exchange had faced another malicious attack.

Cryptopia: liquidators have
been appointed

On Wednesday morning, notifications on both Cryptopia’s website and Twitter account appeared.

The highly publicised hack of Cryptopia’s exchange in January 2019 had a severe impact on the company’s trade. Despite the efforts of management to reduce cost and return the business to profitability, it was decided the appointment of liquidators was in the best interests of customers, staff and other stakeholders.

Source:
https://www.grantthornton.co.nz/press/press-releases-2019/cryptopia-limited-appoints-grant-thornton-as-liquidators/

The press release broke it to the community that the necessary investigation by the liquidators will take ‘months rather than weeks”.

This brought a storm of indignation from exchange users on Twitter, with many tweets suggesting that Cryptopia is simply doing an exit scam.

A user @OTC_Buyer assumed that Cryptopia is going to be sold to a more successful owner and the business will continue.

The majority of comments in the thread about the future of the trading
platform are highly skeptical or negative.

The post Cryptopia Exchange Appoints Liquidators, Community Suspects Exit Scam appeared first on Ethereum World News.

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Consumers Have Lost Almost $100 Million To ICO Exit Scams

A common criticism that onlookers have for the cryptocurrency industry is that it is rife with scams and criminal wrongdoings. While this is often an unwarranted blanket classification of this nascent industry, research done by Diar, a weekly fintech-focused publication, claims that there are still some bad actors present in this industry

According to last week’s Diar report, ICO exit scams have raked in approximately $96.8 million in the past two years. While this is a staggering figure in and of itself, it was reported that approximately 70% of these funds were stolen within the past two weeks, with the culprits being four different projects run by two ‘firms’.

The first firm is Shenzhen Puyin Blockchain Group, a shady crypto-centric firm based in China’s Guangdong province, who reportedly ran three scam ICOs — ACChain, BioLifeChain, and PuyinCoin — which raised over $60 million in funds collectively.

As pointed out by eagle-eyed users on Reddit, the office in which the teams of the three aforementioned ICOs were supposed to be in remains empty, clearly indicating that something shady had occurred. Eventually, as news of this scam spread, the State Market Regulatory Administration (SMRA) of China caught wind of these projects and the company behind it.

The second firm was NVO, who raised nearly 3000 Bitcoin to ‘build’ a decentralized exchange and cryptocurrency wallet before disappearing altogether.

While the publication didn’t go into much detail about the other 10 scams listed, there was one that stood out, this being Block Broker. Ironically enough, Block Broker was founded in a bid to “completely eliminate ICO fraud by creating a 100% safe investment environment.”

It all seemed well and good, with ICO review sites like TrackICO, posting a multitude of raving reviews for the project. However, when it was revealed that the likeness of the project’s CEO was nothing but a stolen photo, it became evident that BlockBroker was a scam posing as a scam “eliminator.” Sadly, by the time the expose occurred, it was too late, with the figures behind the project running away with $3 million.

As the publication notes, the use of “fake profile pictures” is a common practice with exit scam projects, along with the plagiarism of promotional materials and whitepapers, which should be focused on showing a token or project’s worth instead of the malicious action of copy and pasting.

Although these projects — or scams more accurately — are clearly in the wrong, the aforementioned report notes how the incentives around an ICO offering are inherently flawed, writing:

“Unsurprisingly, the blatant exit scams continue to plague the largely unregulated ICO sector where the founders have no contractual obligation to deliver a product. After raising millions of dollars with no string attached, the founders’ incentives to actually build a valuable company are very limited.”

While this is a powerful statement by itself, as it clearly highlights the issue with the ICO crowdfunding structure, to add insult to injury, the report drew attention to yet another issue in the following statement:

“Even if the founders were to build a valuable venture, it’s unclear at best whether the price of the utility token would reflect the success of the company.”

This statement brings a much more fundamental issue to light, where cryptocurrency projects can be often overvalued, as investors seek to make

Despite the theory that scams are likely a minority in the ICO pool, as Ethereum World News has reported, many projects which are operated in good faith fail to meet promises touted in their whitepapers, including claims of decentralization.

While this issue may be starting to subside, with the development of blockchain technology pushing forward at a relentless pace, the aforementioned problems with the ICO structure still prove to be a problem in today’s cryptosphere.

Photo by Fancycrave on Unsplash

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