Poloniex Exchange Hijacking Scheme Causes Investor Losses of $250 Million and Counting

This morning at around 8:30am PST, a group of nearly 30 scammers, carried out a hijacking scam on the cryptocurrency exchange Poloniex. The orchestrated scam has collectively robbed Poloniex investors of $250 Million… and increasing with each minute.

The heist began yesterday morning when investors noticed the interest rate for lending your BitCoin to other investors was much higher than usual. Typically you can earn around 0.003% for loaning your money to facilitate margin buying and selling. The default length of the loan is 2 days but most loans are paid back within a few hours. Drawn in by the unprecedented interest rates, Poloniex investors loaned out a upwards of $14 million. Most thought they would collect a little interest for an hour or two and then have the loan back in the account to continue trading.

Unknowingly, they had just funded the group of theives to sinister plot. The following morning as Poloniex users began checked their lending accounts, they were surprised to notice not a single loan had been paid back. Yes, it’s considered a gamble to loan money for potentially 2 days, as the crypto prices can fluctuate considerably in that time. Strangely though, as investors looked over the various coin prices, the market seemed to have flat-lined. There was very little upward or downward movement. At closer examination it became clear what was going on.

The group had set a substantial position just above and just below the current selling price. Some coins the position was above 75 bitcoin (BTC), roughly $1,000,000 converted to USD. Without enough buyers to buy all 75 BTC the price of the coin can’t increase. You could also try and sell your position, but the low end was locked in with another huge position. The positions were so close together that you would lose money on the trading fees if you bought and sold at all. As unknowing investors bounced back and forth between the high and low they were just digging themselves in deeper. As people tried to buy out the top money would just come from the bottom. The positions were set at just the right positions to gain the culprit a 1% return for each buy and sell.

As this continued for nearly an hour some investors had the idea they would just sell everything off and cash out. If only they didn’t have a significant amount of their money locked up in a loan. This frenzy caused the price of Bitcoin to start declining, which meant the value of the money locked up in the loan was also declining. In addition, the scheme included short selling of Bitcoin, where they gained money through by speculating on the decline of Bitcoin’s price.

In just under two hours the scam had already moved over $100,000,000 into the digital wallets of these coluding low lifes.

Poloniex has no customer support number or even a listed mailing address on their website. I reached out to them through their customer support contact form, but they have not responded with any comment on the event.

Currently, there is a sign-up form for anyone who sustained losses from this policy loophole and would like to join a class action lawsuit, forcing Poloniex to release the accounts and names of those involved to the authorities.

The point of digitial currency was to eliminate scams, theft, and allow for a broad consensus on all transactions. How and if this financial crime is resolved will set a tone for the trustworthyness and future of digital currency as a whole. If digital currency markets are as corrupt as insiders on Wall Street, then really what’s the point?

Cryptocurrency Trading Patterns

POSTED : January 11, 2018

I created some cryptocurrency price graph overlays to analyze potential market patterns

DISCLAIMER!!! THIS IS NOT FINANCIAL ADVICE. DO NOT USE THIS AS A GUIDE FOR CRYPTO TRADING AS YOU WILL MOST LIKELY LOSE MONEY.

TIME DATA IS FOR PST, GRAPHS ARE FROM POLONIEX EXCHANGE

BITCOIN’S PRICE PLUMMETS EVERY JANUARY AROUND THE 16TH. HERE IS AN OVERLAY OF THE PAST 3 YEARS.

MONTHY TRADING PATTERN
MID-MONTH IS THE BEST TIME TO BUY

POSSIBLE CAUSE: PEOPLE WHO ARE PAID BI-MONTHLY RUN OUT OF FUNDS BY MID MONTH. SO, THEY SELL OFF SOME CRYPTOS,  THEN REBUY AFTER THEIR MID-MONTH PAYCHECK.

THE BUSIEST TRADING DAYS EACH WEEK ARE;
FRIDAY, MONDAY, WEDNESDAY, THURSDAY

NOT THE BEST TIMES FOR DAY-TRADING AS PRICES FLUCTUATE RAPIDLY AND IT’S HARDER TO PREDICT WHERE THE VALUE IS HEADED.

TYPICAL DAILY PRICE PATTERN

AS ONE MAJOR COUNTRY GOES TO BED THE PRICE FALLS, AS ANOTHER COUNTRY WAKES UP THE PRICE INCREASES
KOREA, USA, AND UK ARE THE LARGEST INVESTORS IN CRYPTOS

ETHEREUM DAILY PATTERN
MOST MAJOR COINS HAVE THIS EXACT PATTERN.
(THIS IS AN OVERLAY OF 4 RANDOMLY SELECTED DAYS FROM THE PAST 6 MONTHS)

IT APPEARS THAT MANY MAJOR CRYPTOCURRENCY PRICE PATTERNS MIRROR EACH OTHER.
IF YOU NOTICE ONE COIN DROPPING THE OTHERS ARE CLOSE BEHIND.

 

DO YOU JUMP ON A SPIKING COIN?

I ANALYZED SEVERAL PATTERNS THAT OCCUR WHEN ONE CRYPTO BEGINS TO SPIKE IN VALUE.

1. IT INEVITABLY PULLS PEOPLE IN. THIS CAUSES A SELL-OFF OF OTHER COINS.

2. WHEN OTHER COINS STOP DECLINING, IT IS A GOOD SIGN THAT THE SURGING COIN IS GOING TO STOP CLIMBING AS THE ADDED INFLUX OF PURCHASING HAS SLOWED. (BELOW, RIPPLE SPIKES AND SUDDENLY ETH, XLM, AND LTC. DECLINE SHARPLY. RIPPLE DROPS RIGHT WHEN XLM STARTS CLIMBING AGAIN.)

COINS THAT INCREASE IN VALUE WHILE BITCOIN’S PRICE DECLINES HAVE STEADIER GAINS OVER TIME.

BELOW, WHEN BITCOIN DROPS, PEOPLE FLOOD THEIR INVESTMENTS INTO OTHER COINS TO OFFSET THE LOSS.

NOTICE, ETHERIUM DID NOT BUBBLE LIKE RIPPLE AND STELLAR. EVEN WHEN BITCOIN FLUCTUATED OVER THE NEXT FEW WEEKS ETH MAINTAINED A STEADY LINE.

THE RIPPLE AND STELLAR BUBBLE CAUSED BOTH TO DIP LOWER THAN THEIR ORIGINAL VALUE. PATTERNS SHOW PEOPLE GET IN A SELL-OFF FRENZY AFTER A BUBBLE, CAUSING THE PRICE TO DIP BELOW THE “PRE-BUBBLE” PRICE.

(I ALWAYS DO RE-BUY POSITIONS SLIGHTLY BELOW THE “PRE-BUBBLE” PRICE)

5-YEAR CRYPTOCURRENCY MARKET CAP OVERLAY

Please note, this is the market cap for the entire cryptocurrency exchange market (not just Bitcoin).

bitcoin 4 year market pattern

SIGNS A CRYPTOCURRENCY PRICE MAY DECLINE.

1. IT IS APPROACHING MID-MONTH.
2.THE VALUE INCREASED EXPONENTIALLY AS BITCOIN’S DECLINED.
3. ANOTHER TOP COIN PRICE BEGINS TO SPIKE.
4.  OTHER TOP COINS ARE BEGINNING TO DROP.

5. PRICES DECLINE WHEN…
KOREA GOES TO BED.

I HAVE ABOUT A DOZEN OTHER OVERLAY ANALYSIS THAT I WILL POST LATER.

 -SETH HARDEN