Ponzi Operators Targeting Investors on Crypto Trading bots and DeFi Platforms in India

Beware if you are an investor looking to purchase an automated crypto trading bot or the blockchain-based form of finance known as decentralized finance (DeFi). Chances are that you may land in the net of the Ponzi operators and run at the risk of losing money using the DeFi and trading bot platforms due to the sophistication required to interact with such platforms.

Advocate PM Mishra, managing partner of Finlaw Associate and Director at the Finlaw Consultancy Private Limited said, “Poorly educated Indian masses have lost a large amount of their hard-earned money under the guise of the MLM scheme since the 1990s. From Golden Forest to the Sharada Scam in the name of real estate to speak Asia, MMM helping plan, online forex scams, Ponzi operators are now focusing on Crypto and DeFi platforms to cheat the gullible investors in India”

For the scammers, the crypto trading bots ensure winning trades and zero losses. Since the prospect of making constant winning trades or above-normal returns is so tantalizing, many inexperienced crypto investors are losing money to scams that claim to use the sophisticated mechanism of automated trading bot. 

Mishra, Finjuris Counsels LLC, UAE & BCH Consulting, Estonia, and Europe, said, “Smaller criminals are also using the trading bot narrative to defraud ignorant and inexperienced investors. They do this by convincing investors to buy trading software or bots that they claim will generate returns above 100% in a short span. Often the scammers use social media channels to target their victims. Many unsuspecting traders have fallen for this even after being warned”

After it peaked in 2019, cryptocurrency-related crime (including ransomware) has decreased. On the other hand, the DeFi-related crime has increased significantly. DeFi was responsible for more than half of cryptocurrency crimes in 2021. The increase in DeFi crime is blamed on a combination of developer incompetence and non-existent or poorly enforced regulations. External hackers can steal from vulnerable DeFi projects, or “rug pulls,” in which developers and influencers promote a project and then exit with the money, as a form of pump-and-dump. 

Decentralized finance enables users to stake their cryptocurrencies to users to maximize profits through interest.” Staking refers to ROI (Return on Investment Scheme), and providing such a return without regulatory approval is punishable in India. All of these MLM scammers regard DeFi as heavenly, although DeFi has nothing to do with this type of scheme. “DeFi is essentially based on DAO, which is more of a Cooperative Federalism,” Mishra explained.

Mishra also warned the investors for trading in Nonfungible Tokens (NFT) platforms and Altcoin. NFTs may be popular in the current times, but they run at the risk of being duplicated. NFTs contain specific hashtag codes and the one holding the codes is in power and that the hack recovery is difficult. Similarly, Altcoin being counted as the cheapest and illiquid penny stock has the pump and dump characteristics and often falls into the hands of scammers and criminals. 

“Hackers and criminals resort to age-old malware and viruses to gain access to crypto wallets. For this reason alone, two-factor authentication can be a protective shield for crypto-wallets” said Mishra.


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