June 17, 2024

Over $100M Involved and 127 Suspects Detained: Analysis of Turkey's Crypto Ponzi Scheme

On May 30, 2024, Turkey's Interior Minister revealed that authorities had conducted a large-scale operation in Ankara against a cryptocurrency fraud project, with 127 suspects detained and a large number of assets and several firearms seized.

 

The project involved is called Smart Trade Coin. Since 2021, Turkish investors have been protesting and condemning the practices of this project, which was suspected to be a scam. According to the victims' lawyer, the number of users deceived by this project reached 50,000, with losses exceeding $2 billion.


What is Smart Trade Coin (STC)?


Smart Trade Coin claims to provide software that connects to multiple cryptocurrency exchanges. It claims to help users manage multiple cryptocurrency exchange accounts using one application, enabling them to use all exchanges through a single interface, configure automated trading bots for automatic trading, and earn profits by arbitraging price differences between exchanges, as shown below:



Is Smart Trade Coin (STC) a scam?


In 2023, Cem Dilmegani, Chief Analyst at AI Multiple, shared a research article about this project on the AI Multiple platform, repeatedly stating that the project was likely a cryptocurrency scam. Many users below also stated that they had been defrauded of large amounts of funds.

 

In app stores, about half of the reviewers called the application a scam.

 

Many users reported losing 95% of their savings, and users lost their savings and were unable to verify if these funds were taken by the Smart Trade Coin (STC) team.



Through Beosin KYT on-chain analysis, we identified some addresses suspected of being used by the scammers to transfer stolen funds.


As the flow and addresses of stolen funds were not publicly disclosed, we conducted relevant money laundering analysis and tracking of the stolen funds using Beosin KYT based on the project name Smart Trade Coin.

 

From the image, we can see that the STC token contract distributed the main funds to the 0xc12c address through the 0x5f45 address. Based on the expanded transaction method, we can see that this address conducted a large number of one-way ETH outflow transactions, involving huge amounts of funds close to the estimated loss amount published. Moreover, the transaction fees of the addresses involved in the outflowing ETH all came from the 0xc12c address, so we have reason to suspect that this address was used for distributing stolen funds.

 

The image only shows a small portion of the fund flow, with this address involving over 20,000 outgoing transactions. From this small portion of transactions shown, it can be seen that after distributing the funds, some funds from the suspected scam address flowed directly to various exchanges, while others went through multiple layers of transfers, consolidation, and dispersion before ultimately flowing into exchanges.


Should local authorities establish a corresponding regulatory framework?


The Kocaeli Gazette reported dozens of criminal lawsuits filed against this cryptocurrency trading platform. In 2021, 50 people gathered in front of the Ankara court to protest against Smart Trade Coin and its team.

 

Victim's lawyer Yagiz Kaya stated that the company had deceived over 50,000 people in Turkey. At that time, despite numerous complaints and estimated investor losses of $2 billion, no action was taken against the company.


Furthermore, some victims claimed they were encouraged to take out loans and sell their houses or cars to earn "36% monthly profits". Most clients not only failed to receive huge profits but ended up empty-handed and in debt.

 

AI Multiple's Chief Analyst Cem Dilmegani pointed out that the company's claims were unrealistic. The now-offline website claimed to "provide software connecting multiple cryptocurrency exchanges" and "help users manage multiple cryptocurrency exchange accounts using one application".

 

Even if this company had developed technology to generate consistent profits through arbitrage, it wouldn't market itself to retail investors. It would raise funds and conduct large-scale arbitrage.

 

Finally, the analyst emphasized that the company's lack of transparency in business operations, deceptive marketing, and lack of information all indicated that it was a scam from the beginning.

 

This incident has made various sectors of Turkish society realize that merely pursuing cryptocurrency freedom is not enough; a corresponding regulatory framework must be established. Only in a compliant and transparent environment can the cryptocurrency industry truly gain public trust and adoption.

 

Therefore, on Turkey's path to cryptocurrency regulation, the government and industry need to work together to seek a balance between protecting investor rights, preventing financial risks, and safeguarding innovative development. Only by adhering to compliant operations can cryptocurrency truly become a powerful tool for promoting economic freedom and hedging against risks.



As one of the earliest global blockchain security companies engaged in formal verification, Beosin focuses on a "security + compliance" full ecosystem business. We will promote the development of Web3 security and regulation in Turkey. Whether it's pre-launch code security audits, security risk monitoring and blocking during project operation, stolen fund recovery, or virtual asset anti-money laundering (AML) and compliance assessments that meet local regulatory requirements, we will continue to play a key role in these regions, promoting the development of Web3 security and regulation.

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