The Civil Guard, within the framework of the “BITDROP” operation, has arrested in Valencia what it has called “one of the biggest scammers with false investments in cryptocurrencies at the European level. “The criminal operated from the city of Valencia and was charged with 7 crimes of fraud and money laundering.
The operation that ended this arrest a few hours ago began last August. Civil Guard Agents they learned of this fact thanks to private security agents, as they themselves have said. The scammed people are located in different countries, from what is known so far: in addition to Spain, there are also victims in Luxembourg, Switzerland and Portugal.
7 high-end vehicles, electronic devices and various documentation of the arrested person have been intervened, among which there were several USB that were cryptocurrency wallets. The total of the blocked assets amounts to more than two and a half million euros.
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How the Ponzi scheme works
The detainee had created an alleged cryptocurrency investment platform on a website. He promoted it through forums, radio programs, sporting events and even charity movements, especially in Spain and Portugal (the country of origin of the arrested man).
The great attraction of this platform is that offered a minimum return of 2.5% per week to investors depending on the amount they contributed. These investors could also exercise certain responsible roles and attract other investors.
This is what is known as “ponzi scheme”, a very old form of scam (its name comes from a scam from the beginning of the last century, although in books from the XIX century scams are defined that clearly marry this methodology) that has been also adapted to the world of crypto assets (starring in some of the biggest scams that have been collected) and that clearly he continues to achieve his goal of stealing large amounts of money.
How does it work? Investors believe that this high return comes from some legal activity. In this case, they thought they were investing in cryptocurrencies and that this gave them a 2.5% weekly return. In practice, the money that a great investor earns comes from the money contributed by others investors. At the same time, the theft model is based on the fact that large investors, in order to continue making money, do not claim what they already have invested. And the scammer kept all these investments.
The investments made by the victims were used by the detainee to lead a high standard of living buying high-end vehicles, trips or meals.
At the beginning of 2021 the analyst firm Ponzitracker stated that scams under Ponzi schemes are at highs not seen since 2010, although still far from the stratospheric figures prior to the 2008 crisis.
There are even Nobel Laureates in Economics like Paul Krugman who have even said that the whole business around bitcoin would be a kind of Ponzi Scheme that hurts those who least know the crypto world.