Doge community follow crumbs to uncover a Ponzi scheme

Unusual transactions on the Dogecoin blockchain led the community to a discovery of an alleged Ponzi scheme.

At the beginning of July, the Doge community on Twitter noticed a spike in transactions on the Dogecoin blockchain. As scam hunter @CalisCihan told me, most of these transactions were very small.

Following the spam transactions, the community discovered a high yield investment platform (HYIP,) and has a reason to believe this might be a Ponzi scheme designed to drain victims’ crypto wallets. Ponzi investment schemes pay their early investors with money from new investors.

“A large number of small transactions worth 0.0207 Doge were executed on a daily basis supposedly to hide the true nature of the business and the movement of money,” a Doge community member @RepeatAfterVee tweeted.

The discovery

“We have all noticed that the number of transactions has greatly increased. We thought the reason for this was the tipping that the community usually does. @mishaboar [another member of the Doge community] discovered that it was spam, and Salty [@CalisCihan] was able to find out who was doing the spamming through the addresses. I researched the operation of these Ponzi schemes a few years ago, so I immediately knew who they were and how they worked,” @RepeatAfterVee told Cybernews.

While going through hundreds of addresses, serving to fool the trail, @RepeatAfterVee discovered the Dogecoin Address DDU3x2mGdE2vKvJe5usfCR1h3muKHB9bvo. As it turned out, the wallet was operated by Huilo Invest LTD HYIP.

“As you can see, at one point, they had $600,000. But it is very difficult to say how much money they have taken from Huilo (working since November 2021) investors,” she told me.

It’s not only Dogecoin owners who might have been affected, as Huilo Invest also accepted investments in USD, BTC, LTC, ETH, Dash, Dogecoin, Tron, Stellar, BNB, and Bitcoin Cash.

Suspiciously high yields

Huilo Invest LTD poses as a "Forex Innovations Company" and offers suspiciously high investment returns. It offers classic, royal, and expert investment plans with 7,3%, 8,4%, and 9,9% hourly returns, respectively.

For example, if you choose to invest $1000 in a so-called royal plan, you'll have $1,176 in 14 hours. The company's website claims users have deposited almost $4 million and withdrawn nearly $2 million worth of cryptocurrency.

The Doge community immediately pointed out that this might be a Ponzi scheme. According to some HYIP monitors, Huilo Invest indeed issued some payments, presumably to appear legit and keep users in the loop.

More red flags

However, some of these monitors indicate that this might be a scam. For example, the hyip.biz monitor warns that Huilo Invest has been marked as dangerous in several investment forums.

“Most of the website design elements taken from other HYIPs. Much of the contents are similar to other HYIPs. IP 185.186.52.19 that occurs elsewhere for 9 HYIP,” hyip.biz analysis reads.

It has also been marked as a scam by the scamosafe.com website.

“The HYIPs, in particular, are usually operated as a Ponzi because many investors can withdraw initially, but sooner or later, the service will inevitably close,” the website reads. “HYIPs usually target traders and investors with little or no experience by promising fictitious investment opportunities, allegedly delivering unrealistically lucrative gains.”

Apart from big promises, a couple of other things immediately raise suspicions. While the company claims to be Huilo Invest LTD, its website links to a UK company named Huilong Co., LTD, established barely a month and a half ago and, apparently, operated from China. Its office address is 291 Brighton Road, South Croydon, United Kingdom, where, according to scamosafe.com, over 10,000 other companies are registered.

Upon looking closely at its website, some pages appear to be default pages. If you go to check the rules, the page displays Lorem ipsum – a placeholder text commonly used to demonstrate the visual form of a document.

It’s never over

"GOOD NEWS: Spam of the Dogecoin network by HYIP Huilo has ended," @RepeatAfterVee tweeted on Monday.

But she pointed out that it's never really over with similar platforms.

"The last spam transaction from their address was sent two days ago. I expect that the same owners will soon open a new company that will start the same scheme all over again. We'll see if they use Dogecoin," @RepeatAfterVee said.

I've repeatedly tried to reach out to Huilo Invest but received no response.

@RepeatAfterVee suspects that Huilo Invest operators have more similar platforms to extort money. She pointed out that nine websites sit on the same IP address – all were live for only a couple of days before closing.

"The owners of these Ponzi schemes can run several companies at the same time, which have different "businesses" (of course, this is all a lie because there is no business.) Each of those companies gives different interest rates. Some are more, some are less successful, and some close right after starting because they can't attract "investors," @RepeatAfterVee explained.

She recalled a Ponzi scheme platform that was pretending to invest in nanotechnologies. In 2016, its operators managed to extort almost $500,000 in a couple of weeks.

"But back then, it was easier for me to track them because they only used BTC and weren't as skilled at hiding as they are now," she added.