All about fraud in the crypto world: an interview with Pavel Markarenko

Hello, everyone! Today we are going to talk about money. Imagine you have a million dollars in crypto in your wallet. Is it possible to withdraw such an amount in one day in Ukraine quickly and without stress?

To answer this question, the AFFHUB YouTube channel invited someone who knows a lot about this topic — Pavlo Makarenko. Founder of Obmify, co-founder of the Spaceberry design studio, head of the Ukrainian City NGO. 

Read our brief overview of fraud in the crypto sphere, scam schemes, and the legalization of cryptocurrency in Ukraine.

How often does fraud occur in crypto exchanges?

Constantly. It’s a great topic for scammers, but in principle, it’s like any other fraud in any other niche. 

What problems arise most often during crypto exchanges?

It is difficult to say which ones arise most often. I can list those that generally arise, because each case is unique, each transaction is unique, and the problem as such can arise at any stage. Starting with the fact that, for example, a client cannot understand how to correctly select a direction on the website, does not understand how to correctly create an application, and, for example, when the money will arrive, how it will arrive, etc.

And how exactly do they scam people?

Look, for example, somewhere a person, especially an elderly person, was promised some “golden mountains” for their investment. And the easiest way for scammers to get this money from a person is to go to a normal reputable exchange office, create a cash crypto request there, and have this grandmother or grandfather, or another person who is uneducated in this field, bring cash to this exchange office, supposedly for this request. But in reality, this person will be bringing in, figuratively speaking, not some Forex project that promises them “golden mountains.”

If a reliable and normal exchange office sees that a person who does not understand anything has come, and when they enter not their own wallet, but that of a fraudster, they ask: “Why did you come? What is this money for?” And if something like “It’s an investment” and so on starts, then the request is also canceled.

No one wants to work with some kind of black market.

Everyone wants to build a normal, systematic business. Unfortunately, today in Ukraine, this is not regulated in any way. It is neither prohibited nor permitted.

Is the scam that they transfer more money to you?

(Scheme 1)

For example, you make a transaction and withdraw $1,250. They may transfer you $12.80, and you won’t see the decimal point. Then they will write, “Sorry, I overpaid you by $30, please send this transaction back.” 

If you are inattentive and do not notice this, then you go to your wallet, enter 1280 back and send it. Accordingly, they sent you $12.5, and you returned $1280. Congratulations, you have been scammed.

(Scheme 2)

There is a scheme, for example, when an exchanger displays an advertisement on Instagram, buys it from some well-known bloggers, and you trust these bloggers. You click on this ad and, for example, see that you will be paid extra for cash.

But this is unrealistic. As of today, they don’t pay extra for cash. Only for crypto in cash. As a beginner, you may not know this, so you go there thinking, “Oh, cool, I’ll spin some cash here — they’ll pay me extra in crypto, then I’ll sell the crypto — they’ll pay me extra in cash.” You think you’re the smartest, but in the end, you just transfer the transaction, and you’ve been scammed. Well, this is something “typical.”

(Scheme 3)

Then there is the “atypical” scheme.

For example, the most common scheme is the “triangle.” 

This is when there is a real exchange service, there is a fake one that wants to cheat you, and there is you as a user. 

This service that wants to cheat you can mimic the original, that is, create fakes. 

What will this fake do? It’s very simple. It will create a real request on the exchange website. It will accompany you throughout the entire process. 

That is, it will ask, “What do you want to exchange?” 

You will say, “I want to deposit $10,000 and receive crypto. 

He will say, “Okay, no problem.” 

He will go to the original exchange, create this request there, and transfer the fake wallet to the exchange. Well, his own, not yours. And you will be directed to them to deposit cash. When you deposit it, this scammer will receive the cryptocurrency from the original exchange, and you will receive nothing. And this scheme is very common. In Ukraine, too.

Legalization of cryptocurrency in Ukraine 

Why do you think Ukraine cannot legalize cryptocurrency? 

There are probably some legal restrictions in our legislation, nuances, bureaucratic processes, and we mustn’t forget that we are at war.

But if you ask me simply as a citizen, why: Well, I think there is simply no desire to do so.

If there was a desire, it would have been done already. Because in the Western world, where we are all heading, they have long since learned how to work with cryptocurrency and legalize it. It is already possible to create companies and create official crypto accounts for these companies. 

In other words, cryptocurrency has become a common means of payment in the Western world.

And when you send someone payments in cryptocurrency, are they tracked in some way, like you can do with our Privatbank and Mono cards?

If we don’t take highly specialized projects on anonymity such as Manera, Moneta, then the cryptocurrency we usually use: Bitcoin, Ether, USDT is tracked much better than any bank transaction. Because unlike a bank transaction, it lies in a public blockchain. And using modern incident investigation tools, it is possible to find connections between everything that exists in the cryptocurrency world.

How can cryptocurrency be stored securely?

In today’s world, the concept of “security” is very relative. The algorithm for maximizing this security is diversification of instruments. Diversification of funds, spreading them across different accounts.

That is, if you have $100,000 and you want to preserve it as much as possible, you need to put $10k on Binance, $10k on Bybit, and $10k in cash under your pillow at home.

What is the top secure exchange?

If we’re talking about the top exchanges, then keep your money on the top exchanges. Today, these are Binance, Bybit, and OKX. In my opinion, that’s it.

You can hear more details about fraud in the crypto world in our episode on the AFFHUB YouTube channel.