Cryptocurrency, as a new type of value storage and transfer tool, possesses the characteristics of anonymous payment and cross-border transfer. Therefore, with the widespread adoption of encryption technology in various industries, it has increasingly appeared in the scenes of illicit activities, including fraud, theft, and cyber attacks. Stablecoins, due to their value being anchored to real-world fiat currencies, are particularly favored by practitioners in illicit activities. These stablecoins, mainly USDT, are commonly referred to as "black U" within the industry.

As various countries gain the ability to track encrypted funds and improve corresponding laws and regulations, cases of law enforcement agencies cracking down on entities behind chain addresses based on encrypted fund analysis have increased. As a result, most industry institutions and practitioners often avoid involvement with "black U," fearing anti-money laundering investigations. However, there are still some speculators who disregard laws and actively participate in the laundering of "black U," leading to being deceived or legally sanctioned.

Below, Bitrace uses a real event as a case study to expose a "black U arbitrage scam."

Get Rich Quick in 5 Minutes?

Recently, a victim reported to Bitrace that they had seen a video promoting black U arbitrage on the internet and entered the corresponding website to make money, only to be deceived and unable to redeem their funds.

It is understood that the website claims to be an order platform for laundering USDT funds, allowing users to exchange "clean U" for "black U" at a "exchange rate" of 1:1.1 to 1.45. After receiving the black U, users are instructed to transfer it to other platforms for sale, with the excess amount being the user's "profit."

The victim initially made a payment of 5 USDT to test the platform, receiving 5.5 USDT in return. Subsequently, they made a payment of 207 USDT and received 269 USDT in return. However, after making a payment of 1000 USDT, they did not receive any return. When contacting the platform, the customer service used excuses such as "inconsistent deposit and withdrawal IP addresses" and "inconsistent deposit and withdrawal hash values" to refuse refunds, asking the victim to place another order, promising that both orders would be refunded simultaneously. It was at this moment that the victim realized they had been deceived.

It is evident that this is a common tactic used in Ponzi schemes: small amounts are returned multiple times, but large amounts are not. The scammers first establish trust through small successful transactions, leading the victim to believe that there are real profits to be made, gradually luring them into the trap. Once the victim deposits a large amount, the scammers abscond with the funds.

According to the victim, promotional videos for this type of black U arbitrage scam can be found on a popular video platform, and videos with titles containing words like "illicit" and "profit" have a considerable number of views. It is clear that under the temptation of high profits, some people are eager to participate.

Bitrace's Blockchain Data Tracking

Based on the addresses provided by the victim in this case, Bitrace conducted blockchain fund tracking, with the following key findings:

• As of now, the fraudulent group has illegally obtained over 870,000 USDT using the same method. 784 unique addresses transferred USDT to the fraudulent address, but only 437 addresses received returns, meaning nearly half of the participants did not succeed in their initial "arbitrage." This indicates that such "smart" behavior of taking advantage of the system is difficult to achieve.
• The fraudulent group's address fees come from online gambling platforms. This is a common practice among many illicit groups in the black and gray market. Online gambling platforms generally lack compliance mechanisms, leading to a large amount of illicit funds flowing in and out of their business addresses, effectively forming a "coin mixing platform."
• After obtaining funds, the fraudulent group immediately transfers and launders the funds. Currently, centralized trading platforms are their preferred destination for disposing of the proceeds.

Currently, Bitrace has guided the victim to report the case to the local police station.

Risks of Participating in Black U Arbitrage

Bitrace would like to remind everyone that many arbitrage opportunities claiming high returns are actually Ponzi schemes. Furthermore, participating in profit-sharing activities often involves the risk of the platform absconding and the loss of principal. Most importantly, voluntarily participating in fund laundering while being aware that it involves black U may lead to imprisonment.

In Conclusion

The black U Ponzi scheme, as a traditional and mature scam, has been repackaged in the web3 domain, effectively exploiting human greed. The victims are more widespread and the resulting damage is even greater. As individual investors, seeking speculative opportunities on various platforms in the hope of gaining profits is not wrong. However, it is also important to assess risks reasonably, actively understand relevant scam tactics, and be aware of laws and regulations.

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