Chainalysis highlights Mirror Trading International as biggest crypto scam in 2020
Blockchain research firm Chainalysis highlighted the alleged ponzi scheme Mirror Trading International as the largest cryptocurrency-based scam of 2020.
Chainalysis released its anticipated 2020 Crypto Crime report this week, which provides a deep dive into the murky world of criminal activity in the cryptocurrency space. As reported by The Daily Chain, crypto related crime fell significantly in 2020 when compared to 2019, where illicit activity accounted for $21.4bln worth of transfers or 2.1% of global cryptocurrency transaction volumes. Last year, those numbers fell to $10 bln, accounting for just 0.34% of the overall transaction volume.
The report highlights three positive outtakes from 2020; cryptocurrency-related crime is declining, only represents a small part of the economy and pales in comparison to the amount of illicit funds transferred in the traditional finance space.
MTI was the biggest scam in 2020
Chainalysis reports that scams are still the highest-grossing illicit activity in the cryptocurrency space. However the revenue from scams dropped significantly from 2019 to 2020, decreasing from $9bln to $2.7bln year on year.
Nevertheless the amount of funds stolen by scams in 2020 was still significant and the Chainlaysis report hones in on a South African based alleged ponzi scheme called Mirror Trading Internationa (MTI)l, which has since gone into liquidation, as the biggest cryptocurrency-based scam worldwide last year.
MTI attracted investors as a passive income source that required users to deposit a minimum of $100 worth of Bitcoin that would then be traded using an AI-powered foreign exchange trading software. Chainalysis noted that algorithmic trading is a common claim by many crypto-related scams.
Authorities take action
MTI attracted a lot of web traffic and Bitcoin inflows from America, the United Kingdom, Canada and Mexico since it began operating in the middle of 2018. Throughout its existence, the scheme has drawn criticism and accusations that it was indeed a ponzi scheme.
In 2020 authorities in America and South Africa warned investors to steer clear of dealing with MTI. Texas state regulators formally labelled the company a scam and took action against local promoters in America that had been trying to sign up more investors.
In South Africa, the Financial Services Conduct Authority delivered a similar warning to the public after discovering that the company had been operating without a financial service provider license in August 2020.
MTI scooped up $588mln worth of Bitcoin – according to Chainalysis data and analytics
In December 2020, MTI went into provisional liquidation after one of its directors allegedly skipped the country, taking with him access to a copious amount of Bitcoin that investors had entrusted to the company over the past few years. In January 2021, MTI claimed to have over 260,000 members around the world and had amassed 23,000 BTC of investor’s holdings, which is worth over $1 billion in today’s market.
The Chainalysis report and research into MTI claims that the scheme received $588mln worth of Bitcoin in more than 470,000 transactions during its operational period. Funds were sent primarily from exchanges, as well as self-hosted wallets.
The research firm also notes that MTI used a popular cryptocurrency gambling service as a money laundering and cash out mechanism. The platform received around $39mln worth of cryptocurrency from MTI in 2020.
The Chainalysis report stressed that the cryptocurrency ecosystem needs to take some valuable lessons from the MTI debacle going forward:
“Mirror Trading International is another example of why the industry must spread the word that algorithmic trading platforms promising unrealistically high returns are nearly always scams. When cryptocurrency exchanges and other services learn of these scams and receive their cryptocurrency addresses, they should discourage users from sending funds to those addresses or at least warn them that financial losses are highly likely,” an excerpt from the Chainalysis report explained.
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