Bitcoin Arbitrage Scams Run Rampant in China with Over 15,000 ETH Swindled in “Huobi Arbitrage Scam”
As bitcoin is continuing its rally in price over the past three months to break the $10,000 mark, crypto-related scams are making a comeback. A number of Telegram users complaint that they have been duped into the “Huobi HT arbitrage” scam, according to CoinHunter, a platform tracking stolen cryptocurrencies.
These crypto scammers mainly target Chinese investors on Telegram which has been the major social media platform for Chinese crypto traders since the crypto ban in the country.
They created a Telegram group called “Huobi Global official risk-free arbitrage group (Chinese)” and faked staff of the leading crypto exchange Huobi Global to induce users to transfer ETH into a specific wallet and promise users “HT” (an aircoin which is not the platform coin of Huobi) at the exchange ratio of 1:105 (1 ETH for 105 HT), after that, investors could trade this much “HT” back into ETH that is said to be more than their initial investment.
Screenshot of “Huobi Global official risk-free arbitrage group (Chinese)” telling users how to do arbitrage
According to CoinHunter’s incomplete statistics, the Huobi arbitrage scam has amassed a total of more than 15,000 ETH (roughly $4.6 million based on the ETH price of $307 at the time of this writing), with the biggest victim scammed 885 ETH.
After realizing they had been duped by the fake Huobi group, some investors were even scammed for a second time. The scammer faked wallet provider imToken staff claiming that once the user upgraded the imToken wallet via the link he provided and transferred in five times the amount of scammed ETH, they could roll back the transactions to trace back their lost coins.
Screenshot of fake imToken staff telling users to transfer more ETH in
The rampancy of such scams has forced imToken to dismiss its official Telegram group on June 10 and remove all the Telegram entry link off its website and products.
Crypto exchange Huobi released an announcement risk reminder on preventing the fraud of risk-free arbitrage.
Arbitrage is the practice of taking advantage of a price difference between two or more markets. The underground economy of bitcoin arbitrage was created and soon boomed when China closed down its cryptocurrency exchanges in 2017.
They first buy cryptocurrencies in open markets and sell them face-to-face or by using peer-to-peer networks like Taobao to trade over the counter with a higher price, and thus these crypto traders who make money by using arbitrage are called “brickmover(搬砖党)” in China.
While many people tout Bitcoin arbitrage as a quick and easy way to make money with Bitcoin, the reality is more complicated. There are hefty fees when converting bitcoin to a fiat currency and the real-time transactions you need to make arbitrage work well are impossible because of transfer time and market volatility. To register an account on overseas exchanges, these Chinese brickmovers even fake their KYC, and frequent trading between different exchanges may also pose their account under the close watch of exchanges.