Chinese EOS App Shuts Down; Project Walks Off with $50 Million in User Funds

An EOS-based wallet application has allegedly blocked users from withdrawing their funds. Analysis now shows that the project has been moving funds through the network via Huobi dummy accounts.

Key Takeaways

  • EOS Ecology was a Chinese crypto wallet application that promised users high returns on their holdings.
  • On Monday, it became clear that many users couldn't withdraw their tokens from the app.
  • The total amount reached roughly 200,000 EOS tokens, or $50 million at the time of press.

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EOS Ecology, a Chinese crypto application, is reportedly shutting down. Users are, however, unable to withdraw funds amounting to a total of $50 million. Many are now claiming the project is a fraud and a Ponzi scheme.

The EOS Ecology Scheme

The wallet app lured EOS investors by promising high returns on their holdings. 

Beyond attractive rates, EOS Ecology also duped investors by falsely claiming its association with Starteos. The latter is one of the largest and most trusted block producers on EOS. The confusion stems from another initiative led by Starteos from 2018.

The block producer created an auction platform for EOS users to create accounts ending in “.io.” 

Like web domains, users can claim an account, and if no one contests it within 12 hours, the account is theirs. When examining an EOS block explorer, the accounts created using Starteos’ platform would appear linked to the block pool. 

This information is relevant because it also appears that the EOS account “w.io” is directly linked to EOS Ecology. The marketing manager of Starteos told Crypto Briefing: 

“If [a user bids a] name from us, [people] could see the name is generated under .io. Most [people] know that it’s a normal process to bid a name and register it. But the scammers tell the newbies that, since the name is generated from .io, that means w.io is part of Starteos.”

Source: Bloks.io (iow.io)

Thus, EOS Ecology quickly convinced newcomers that they had close, legitimate ties to a trustworthy project. 

“The first time we heard about this was in January this year,” the marketing manager of Starteos told Crypto Briefing on Telegram. “They were in our WeChat group to scam our group members.” The team made another announcement on Mar. 14, telling users that there is no connection between Starteos and w.io. 

Initially, the wallets promised returns were dolled out on schedule and users suspected little. It has become clear, however, that this was not possible over the long term. 

On Monday, users reported that they were no longer able to access their funds. The total amount of user funds in the wallets is nearly 200,000 EOS tokens

EOS activity reveals that funds tied to EOS Ecology and w.io have been moved primarily to accounts called “huobidevice1,” “huobidevice2,” “huobidevice3,” and “huobidevice5.” Each of these accounts has been created by “coldlaregist.”

The total sum of all relevant accounts comes to $50,949,954.35 in EOS tokens. The bulk of the funds are held on huobidevice3 and huobidevice5.

Source: EOSpark.com

The above amount sent to huobidevice5 was hidden below 26 pages of micropayments from what appear to be dummy accounts. The majority of activity comes from “snailpay1131,” “zbeosforsend,” “vuniyuoxoeub,” and others.

Despite the names of the accounts, Huobi stated that: 

“After Huobi verification, the two Huobidevice5 and Huobidevice3 addresses that received a large number of EOS inflows are not Huobi addresses, the Huobi account is ‘huobideposit.'”

Due to the size of the scheme, attempting to sell the tokens would have a definite impact on the price of EOS. Such a sale would, however, be challenging to do without attracting suspicion. 

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