Crypto Scammers Use MLM Network to Lure Victims

KOMPAS/ADITYA DIVERANTA

Gatuk Indarto's WinCash Wallet application, which was disabled when accessed on Wednesday (1/12/2021). The app becomes a digital wallet where WinCash Coin crypto assets are transacted.

Fraudsters involved in crypto scams not only promise a big profit but also take advantage of a multilevel marketing (MLM) network to lure victims.

JAKARTA, KOMPAS — People involved in certain cryptocurrency scams use a multilevel marketing (MLM) network as a cover in conducting their illegal crypto investment, widely known as “money games” in Indonesia. They use a pyramid scheme to recruit “investors” with the promise of big returns and commission.

The money game “players” know each other even though they are not in the same city or do not ”play” in the same type of money games because they have been in the same MLM network.

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In the MLM network, apart from the founder, there is also a leader, who works under the supervision of the founder. The leader is in charge of introducing and recruiting as many people as possible to join the marketing network. In the money game practice, the leader is tasked with attracting people to become members and "invest". The leader usually promises prospective investors that the investment scheme they offer will give them a big return regularly.

The leader does not hesitate to offer the new investment product to investors who have suffered a loss.

The leader usually offers different types of money games or crypto investment products. If one of the crypto products has a problem and is no longer able to pay returns to members or investors, they switch to another money game. The leader does not hesitate to offer the new investment product to investors who have suffered a loss.

Cover

The confession of a number of people involved in a crypto scam to the Kompas daily’s investigation team confirmed the involvement of the MLM network in the money game fraud. They used an MLM network to cover their investment fraud.

Crypto asset trading mechanism scheme through physical markets registered with the Futures and Commodity Trading Regulatory Agency.The founder of Inacoin, one of the companies involved in illegal crypto investment, and also a number of MLMs, Iwan Kurniawan, acknowledged that the MLM model was used in sales of a crypto product. “There are two types of MLM. One is a pure MLM and another one is a money game. Money game developers use an MLM network," said Iwan when Kompas met him in Bogor, West Java on Monday (27/12/2021).

Iwan also explained many companies involved in crypto scams used an MLM network as a cover to carry out their illegal business. “It is only for a cover. By being engaged in an MLM, they can obtain a business license. As a trading company, it can sell any product and can freely set the price. Can I sell water, which is worth only Rp 1,000, for Rp 1 million? Of course I can. There are a number of gimmicks. With Rp 1 million, you can get many bonuses. It is a game. It is a trick,” he said.

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A money game player from Bandung, Indra Kusuma, said many money games of illegal crypto products were sold widely using an MLM network. Indra also acknowledged that he knew a number of money game developers such as Fili Muttaqien, who was sentenced to four years in prison for his involvement in fraudulent investment product Dream4Freedom and Anwar Moch Hasan, the founder of the WX-Coins crypto product. In fact, when Fili was imprisoned for fraudulent investment, Indra had time to visit him.

Pyramid scheme

Indra said he was involved in an MLM network to market a number of games or crypto products. After participating in many money games, Indra decided to quit before the scam was uncovered. He acknowledged that he had gained a large profit from the money games he joined.

KOMPAS/ADITYA DIVERANTA

The remaining balance of the WinCash Coin crypto in Gatuk Indarto's digital wallet in Banten, Wednesday (1/12/2021). The balance has not been able to be withdrawn since mid-2020 until now because the digital wallet has been deactivated.

Indra recounted his experiences. Through binary and pyramid schemes, Indra had succeeded in forming 33 MLM communities. He also had full control over the network he established, including giving instructions on when to stop the fund transfer to the company (founder). "At that time, I thought it was the time to stop. And it was right. After a month and a half, I told my members to stop all the transfers. The other members continued to transfer their funds (invest) until the investment collapsed,” he said.

WX-Coin investors could receive a large income from the money they invested, in addition to an additional bonus if they were able to recruit a new member.

The bogus crypto investment product WorldX Coin (WX-Coin) also applied the MLM model with a promise of a big bonus for those who were able to recruit a new “investor”. WX-Coin investors could receive a large income from the money they invested, in addition to an additional bonus if they were able to recruit a new member.

Former WX-Coin member (investor), Suyoto, said there was also an extra bonus. For example, if a new recruit bought a titanium package, a recruiter would receive an extra bonus of Rp 3 million so that the total bonus could reach Rp 5 million.

WX-Coin CEO Anwar Moch Hasan was indeed targeting the MLM community, the world he was previously involved in. Suyoto had known Anwar for a long time through an MLM community. They both became members of an MLM network in 2008.

They sold herbal products for health and beauty needs. “He was a leader when he was in herb marketing. He had a lot of networks, that's why he was appointed as a leader. We also had to guide and direct the network to increase the company’s sales," he said.

The role of the leader in the money game is important as explained by Nurul, a victim of Inacoin, a bogus crypto product. Nurul, who bought Inacoin for almost half a billion rupiah using his savings intended for his children’s education, said the leader who invited him to buy Inacoin had come to his house again. Unashamedly, the leader offered her to join a different type of money game.

In 2018, a friend of Anwar invited Suyoto to join the WX-Coin investment package. Suyoto and Anwar interacted in the same business again. Suyoto again used his MLM expertise in selling the WX-Coin. He recruited about 200 additional members.

According to Suyoto, the shifting of cash profits into WX-Coin crypto assets had trapped members in a MLM scheme because coins could be sold only among members (peer to peer). If no one wanted to buy, they had to attract new members to the WX-Coin scheme, considering that new members should first buy the coin.

The WX-Coin investment finally collapsed because it was unable to provide any more profit to its members. Anwar also disappeared and is still at large.

In addition, there was a 10 percent bonus for those who could invite new people.

The Give4Dream community also sold crypto asset Wincash Coin (WCC) through an MLM network. Uyung Juhelis (49), a former member of Give4Dream in Banten, recalled that a number of colleagues who marketed MLM products came to his house promising profits from crypto assets. One of them promised returns of 48 percent in 40 days from a crypto investment. In addition, there was a 10 percent bonus for those who could invite new people.

The bogus investment product was also widely sold in a number of residential areas in the Banten area until the end of 2019. Each residential area there had a network of members. The member network in Bumi Ciruas Permai housing complex in Serang, Banten, for example, was led by a number of senior members, such as Uyung's husband.

The recruitment of new members was often carried out through a seminar held at a hotel and by holding a trip. It was not known how many Give4Dream members there were. However, Uyung said that according to data he got at a seminar held in 2019, the total number of community members had reached 100,000 people throughout Indonesia.

KOMPAS/ADITYA DIVERANTA

The figure of Anwar Mochamad Hasan, the founder of PT Dunia Coin Digital or WX-Coin appeared in a video on the Youtube channel. Anwar whose whereabouts are unknown since 2019. Photo taken on Tuesday (16/11/2021).

Due to the massive campaign, many people became members. Due to the lure of a big return, Rasijan, a resident of Banten, decided to invest Rp 200 million. Now, after almost two years, he is still unable to withdraw the money.

The use of a pyramid scheme is one of the indications of the Investment Alert Task Force (SWI) to determine whether a crypto product is illegal or not. "If a crypto product is offered through a membership and a big bonus is offered to those who can recruit new members, it involves a pyramid scheme and it is illegal," said the SWI chairman Tongam Lumban Tobing. (FRD/JOG/DIV/BIL)

(This article was translated by Hendarsyah Tarmizi).