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India Small Town Layman Falls For A Conman: First MLM, Then Wallet Theft

First MLM, Then Wallet Theft – Why A Small Town Layman Falls For A Conman?

The growing incidence of bitcoin multi-level marketing (MLM) scams in countries like India is a two-pronged wake-up call. First, has a small town investor become more gullible than ever? Second, and more scary, is bitcoin – with all its complexity and novelty mixed with explosive growth – making it easy for vampires to confuse newborns?

Also Read: Denmark just saw a new form of money laundering 

The MLM Pied Pipers

From Amit Bhardwaj to Dr. Saxena; From Gaincoin, Onecoin, those $300 million dollar frauds, the Ponzi scheme onslaught, to the very recent Coinsecure wallet hack (reportedly as big as $2.7 million) – Indian investors have a lot of good reasons to think of cryptocurrency as analogous to fraud. If someone is not manipulating them with corny MLM, then there is someone else all packed at an airport with millions of stolen coin lining his pockets.

Ashok S, a frequent investor in emerging finance alternatives in a tier-3 city in India, likens bitcoin to another Amway – and straight off the bat. “It is as risky and as manipulative as any MLM. One can only make money by adding new chain-members. When a chain saturates, the profits stall automatically.” He has not invested in bitcoin yet after a bad experience with another financial MLM two years back. Yes, in his assessment, bitcoin equals to MLM.

Turn to a young guy in Jodhpur who invested in 6 bitcoin on the advice of a ‘tech-savvy’ acquaintance only to find coins vanishing from his account because the adviser himself logged in somehow and stole it all. The accused is now in judicial custody but the victim has burnt his hands well for trying anything like that again.

First MLM, Then Wallet Theft – Why A Small Town Layman Falls For A Conman?
He knows better?

Isn’t this fog the very ground for scammers to breed on? To help the likes of Amit B easily dress bitcoin in a MLM format? Nischal S, CEO, Wazirx explains that bitcoin and MLM are completely different but also notes how until a year ago, people were being sold MLM under the name of bitcoin. “Let’s take the Bitconnect scam, for example. Traders were sold on the Bitconnect token because of huge MLM.”

Ask Sidharth S, founder, CREBACO (Credit Rating for Exchanges, Blockchains and Coin Offerings) and he would also recall hundreds of people who have been duped under MLM in India. “No investor wants to lose their money. That’s why it was important for us to bring credit rating in this space. We study management, technology and security aspects by doing all the checks and white-hacks we can.”

But how well can we guard ourselves when a technology veteran, who is at the very helm of any exchange or wallet we trust our money with, decides to run off by pulling a smart heist?

Meet the sly and slick flute player

Mukesh C, a cyber forensics expert who has been assisting police and cyber crime cells in India for some years now, is freshly back from helping Delhi cops in investigating the Coinsecure case. “The accused did not confess anything initially. We had to apply forensics and detailed interrogations to get to the truth. It was easy for him because he was a key person in the company and a crypto scientist himself (with dual citizenship in India and Australia). Some 434 coins stolen and people still not aware of vulnerabilities hiding between hot wallet and cold wallet transfers. The man was smart enough to exploit technical parts and also delete server logs.”

Everyone – from users to cops to investigators – is still trying to wrap heads around new technologies. “People need to know that someone is watching their wallets and devices all the time and waiting for just the right minute to whisk it all away.” He stresses. Well, if only people were listening.

Greed breeds weeds

In the reckoning of finance expert Mohit G from New Delhi, thorough verification before getting into anything is required for the people behind it. But potential investors get attracted to fake proposals. “I get almost daily invites on social media with promises to double the BTC investment,” Mohit G lamented.

First MLM, Then Wallet Theft – Why A Small Town Layman Falls For A Conman?
Being cyber literate will help

A worrying state of cyber-illiteracy is what will help cyber crime further if people do not become more aware and smart about protecting their devices, keys and understanding of new technologies – cautions Mukesh C.

Scams happen due to lack of awareness and Sidharth argues that except for the private-key part, which people often do not know of, bitcoin is simply impossible to hack for anyone. “If you guard your private keys well, you can never be hacked.”

Korea and Berlin stand out as examples worth emulating in Sidharth’s eyes. “There, people are crypto-aware and educated. That makes a lot of difference.” That’s the way ahead and exchanges like Digifinex are investing strongly in user awareness on areas like security tools, phishing, public wi-fi and keys. Wazirx also shares that now people have learned from incidents, and become more aware of such Ponzi schemes.

Let’s hope that understanding technology better helps users instead of abusers as we move forth.

Why do you think it is easy for fraudsters to fool bitcoin users? Let us know in the comments section below.


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