Most DeFi projects are developed on the Ethereum blockchain. Many of them promise quick wealth, and some have all the hallmarks of a Ponzi scheme. Exposing them could stall the ongoing ETH rally.
A suspicion arose in relation to the Philippine project Forsage. Its founders managed to raise 600K ETH on the promise of high interest in the future. Recently, the flow of funds to the project’s accounts has greatly decreased, and immediately there were problems with paying interest to those who invested earlier. From this, analysts conclude that Forsage is a Ponzi scheme. In particular, Dovey Wan of Primitive Ventures announced this on her Twitter account. She suggested that the founders of Forsage will soon be forced to sell off the money collected, and this will bring down the ETH rate.
Why ponzi scam is always the driving force for bull cycle? As it brings fresh fiat onramp and constant buy pressure from previous no coiners
2020 Forsage (on ETH)
tracking mega ponzi activities with crypto on-ramp has been my best macro strategy https://t.co/li3TiwoRfN
— Dovey 以德服人 Wan 🪐🦖 (@DoveyWan) September 7, 2020
Dovey Wan notes that the Philippine government issued a warning to citizens early in July against investing in Forsage. However, according to the analytical company Dune Analytics, the warning was not heard, because after it funds continued to be transferred to accounts. This is confirmed by the amount of GAS – tokens for paying commissions on the Ethereum network, according to this indicator in August, Forsage was the third in the network.
Ponzi schemes pose a threat to the entire cryptocurrency market. Experts believe that it was the collapse of the PlusToken Ponzi scheme in June 2019 that caused the crash of the entire market. Bitcoin dropped from $14K to $10.5K in a day and dropped to $6700 in six months. The losses from PlusToken amounted to $5.7 billion. Experts fear that a new scandal will also cause a market crash.
The explosive growth of DeFi projects also poses a threat to the market. Most of them work on the Ethereum blockchain using unreliable algorithms that can lead to both colossal earnings and losses for investors. Recently, a user with the nickname Amplify boasted on Twitter that due to a failure on DeFi exchange Uniswap, he earned $250K in a few minutes, investing just $200 in SYFI tokens of the project Soft Yearn. This happened by chance, at the moment when the SYFI price was recalculated depending on the coin supply. As a result, instead of two tokens, $100 each, Amplify received over 15 thousand SYFIs, immediately sold them, and got $250K.
The opposite situation led to another trader losses of $1 million when he tried to invest it in another DeFi project Swerve.Finance. He sent cryptocurrency mistakenly to the address of the smart contract from which it is impossible tщ get money back.