Tulip Research announces ArbiStar a multi-billion dollar Ponzi scheme
The company tried to hide its financial trail when investor money disappeared into thin air
Spanish cryptocurrency company ArbiStar with a Russian marketplace on the darknet Hydra.
International consortium of news organizations developing transparency standards.
Imagine a well-known cryptocurrency company with a complete set of attributes of a successful investment project. Impressive trading portfolio, super smart crypto arbitrage bot and tempting investment income.
But there is one caveat – this impressive and credible company is in fact a large-scale scam. The entire business model, from the website to the advertising campaigns, is built according to the laws of the Ponzi scheme. everything is masterfully designed to lure as much money as possible from the maximum number of investors, and then say that the stupid arbitrage bot has mixed something up and all this time people have been receiving payments that are much higher than the real profit. And now we are discussing an exit scam – an attempt by scammers to hide with depositors’ money.
“The multi-billion dollar Ponzi scheme”
Such a story happened with the Spanish cryptocurrency company ArbiStar. According to Tulip Research, a research firm that specializes in detecting fraudulent activity through blockchain analysis, the organizers of the scheme allegedly stole almost $ 1 billion from 120 thousand customers..
The so-called bot malfunction allegedly affected 30 thousand investors, whose profits disappeared into thin air under the pretext of “heavy losses.” It appears that these losses were part of a carefully orchestrated scam..
The company even said it would freeze the accounts of the affected parties to stop further losses and promised to return the money to accounts with negative balances. Moreover, they stopped accepting new investments in order to create the illusion of striving to retain as many loyal customers as possible..
According to ArbiStar, an error in the bot’s code allegedly created a liquidity hole in the amount of 28% of the total funds. However, some have already convicted ArbiStar CEO Santi Fuentes for misappropriating their funds..
But what really happened to all this money? Some of them allegedly leaked to the dark side of the Internet and settled on Russia’s largest black market, Hydra..
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But the story doesn’t end there. In fact, this is just the beginning.
Santi Fuentes’ dark past
ArbiStar is a Spain-based cryptocurrency investment company. It is headed by Santi Fuentes. The firm uses multilevel marketing (MLM), also known as network marketing, referral marketing, and pyramid selling.
Many respected and successful companies have achieved their current position precisely through a business model based on the use of MLM strategies. For example, Mary Kay and Avon. Once in the wrong hands, however, this model opens up endless opportunities for abuse. Hence the popular term “pyramid scheme”. In this regard, it is sometimes difficult for users to understand where a respectable company is, and where are scammers posing as a respectable organization..
ArbiStar uses referral marketing for development, but the company does not sell retail products or services. People who become ArbiStar brand referrals are only able to advertise participation in the project. Therefore, the term “Ponzi scheme” is already appropriate here – a disgusting form of investment racketeering, where the money of new participants goes to payments to those who came earlier.
Perhaps the pyramid scheme of work can be alarming, but not seriously suspicious. But the fact that ArbiStar did not provide any evidence of registration with the Spanish National Securities Market Commission is already an alarming sign..
Fuentes has not registered with any regulatory body. Hence the question: what activities have ArbiStar undertaken behind the scenes if its founder does not want it to be subject to regulatory requirements under the securities law??
Fuentes’ corporate bio on the ArbiStar website states that he is “one of the most accomplished people in the referral marketing world. He has been very successful in leading teams of thousands. “.
However, in reality, some of the companies that Fuentes led did not do much. And their reputation is tarnished. Fuentes mentions these circumstances in another section of his corporate biography:
“He also led several failed projects that were not transparent and deceived their salespeople. That is why he is ideal for the role of head of ArbiStar 2.0 “.
The statement implicitly indicates that the company’s previous business model was unsuccessful. Fuentes went from selling medicated coffee to investing with virtually no experience in the field..
Serial fraud and pyramid schemes
In 2013, Fuentes was a distributor of Organo Gold, a Chinese medicinal coffee drink and health products with Ganoderma mushrooms..
Before heading up ArbiStar, in 2014 Fuentes worked as a lead investor in Global Unity, which itself was associated with the California Ponzi scheme WCM777, founded by Chinese Ming Xu..
Xu’s financial empire collapsed like a house of cards following an investigation by the US Securities Commission. However, by that time he had already managed to raise $ 65 million, while he deposited $ 28 million from gullible investors in various accounts in the United States, and then laundered them through Hong Kong and the Shanghai Banking Corporation..
Xu, WCM777 and affiliates were punished for violating the Stock Exchange Act, but that did not stop Fuentes from building pyramids further.
After the collapse of Global Unity in 2015, Fuentes managed to once again become a lead investor in another company known as MoneyBox TV, which turned out to be another Ponzi scheme. As in the case of ArbiStar, which did not exist then, he also built a business model on MLM with a referral commission. The company was based in Italy and was led by CEO Simone Di Sabato, who also had experience in questionable business practices..
ArbiStar soon appeared. As highlighted above, their arbitration bot crashed, investors’ money disappeared, and ArbiStar allegedly tried to take control of the situation. Then something amazing happened. ArbiStar 2.0 has appeared with new ideas for “developing cryptobots for automated trading”.
ArbiStar and the darknet giant
Lurking in the depths of the darknet is a monster lurking on underground servers in Russia known as the Hydra Market. Tulip Research has linked ArbiStar to this marketplace.
The Darknet Marketplace (DNM) Hydra is the largest black market in the country. It debuted in January 2015, when a platform emerged for the anonymous buying and selling of drugs, fake documents and other illegal goods, as well as for ordering hacks and hacker attacks. Hydra comes two years after the FBI closed the infamous Silk Road market.
Screenshot of Hydra Market interface
The prolific Hydra claims to have 3 million registered accounts on its network and to process over 100,000 cryptocurrency transactions daily. In addition, according to an analysis published last year by the news agency Proekt, this marketplace has 400,000 loyal customers..
By comparison, the largest darknet marketplace in the West was AlphaBay, which was believed to have 400,000 registered users at its peak. Its activities were stopped in 2017 by the US authorities and international law enforcement agencies..
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The Hydra website is hidden in the Tor network and is only accessible through an IP anonymizer. Last year, it reported that the platform is going to fight drug trafficking around the world and for this it wants to attract funding in the amount of $ 145 million through the issue of tokens.
The marketplace encouraged customers to buy packages of 100 tokens at $ 100 each. They were sold directly on the Hydra website for Bitcoin (BTC). The holders were promised rights to a 0.003% stake in the company, as well as a portion of the profits. Although it is still not known on which blockchain these tokens will be issued.
According to a memo issued by Hydra, “This will usher in a new era in the West. It is difficult to imagine the scale of the expansion. “However, the site had to postpone its plans due to the pandemic, which also suggests an upcoming exit scam..
The message about the postponement of the launch of the project due to the pandemic.
Interestingly, though, Hydra seems to be taking a proactive stance on deferral and trying to cheer users up:
“Everyone who bought tokens gets their money back to their accounts in full. Thank you for being with us. We will let you know when we return to the project “.
However, the information about the success of this fundraising operation is rather mixed and vague. It is currently unknown if the marketplace has managed to attract investors.
Suspicious transaction links ArbiStar to Hydra
After analyzing the movement of funds from ArbiStar accounts, Tulip Research discovered a suspicious transaction linking ArbiStar to the Hydra market. BeInCrypto previously reported that ArbiStar allegedly paid 247 users from the address from which transactions subsequently went to 18 accounts associated with Hydra Market.
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At first glance, this link seems inconsequential, however, given the scale of ArbiStar and the experience of the person behind it, this trail cannot be ignored, especially with all the other pieces of the puzzle..
For example, Tulip Research also discovered that over the past year ArbiStar has been using BTCPayServer through its PayJoin feature. PayJoin is a payment point that allows more private peer-to-peer transactions and better tracking of the money trail than traditional transaction methods.
Forensic experts were able to track the various movements made by the company with incoming transactions, prior to their implementation. Using heuristic methods, you can link individual addresses and thus distinguish them as belonging to the same organization.
Interestingly, in a recent interview, Fuentes blamed the alleged bot error on a development team that allegedly no longer works for ArbiStar from the moment the company discovered that “they did not do their job well.” Fuentes explained:
“The bot is working properly, the problem is on the side of communication between operations and what is reflected on the client’s screen. Since the discovery of the inconsistency, we have blocked the outflow of payments (withdrawals). From August 1, we also stopped advertising the bot in social networks “.
Fuentes pointed out that the amount of losses has nothing to do with the amount reported in the media. He also said that the company intends to compensate all victims within 12 months. They want victims of the so-called bot error to get back their investments and profit from the company’s products.
When asked if ArbiStar has a license to receive money from investors, Fuentes replied that this is not necessary, since the company deals with cryptocurrency, which, according to the law, is not considered money..
Nevertheless, given the background and all the attendant factors, it remains to be seen why ArbiStar remains without control from the regulator of the securities markets, and what is its relationship with the giant darknet marketplace Hydra..
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