Report: Social Media Detectives Are Hunting Down Crypto Scammers

In a recent article, Wired outlines how individual cryptocurrency traders across Twitter are becoming detectives to track down scammers and thieves who are stealing cryptocurrency from unsuspecting investors.

Wired reports in an article titled “Twitter Vigilantes Are Hunting Down Crypto Scammers,” that due to the relatively unregulated space of cryptocurrency, individuals are taking it upon themselves to track down scammers and thieves across the internet.

Wired gives the example of a Twitter user called “Gabagool.Ξth” who became suspicious of a Decentralized Finance platform called Ribbon. Ribbon promoted user loyalty like many other DeFi protocols by engaging in “airdrops,” which are distributions of cryptocurrency tokens to random users that have deposited a certain amount of cryptocurrency in the network. Ribbon airdropped 30 million Ribon tokens to 1,620 wallets in May.

On October 8, 36 wallets that received the Ribbon tokens exchanged them for Ethereum tokens and transferred the ether to one central cryptocurrency wallet. Gabagool became suspicious and thought that one individual had created 36 Ribbon accounts in an effort to maximize their chances of getting picked in the airdrop.

Ethereum Founder and Inventor Vitalik Buterin (flickr/TechCrunch)

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Gabagool estimated that the Ethereum wallet that received the tokens had collected about 652 ether, valued at around $2.3 million at the time. However, upon further investigation, Gabagool tracked down the owners of the wallet by cross-referencing the address with information from Twitter and the crypto-wallet register ENS Domains.

Gabagool alleges that the account belonged to Bridget Harris, a junior employee at Divergence Ventures, a San Francisco-based venture capital firm that has backed over 50 crypto projects, including Ribbon. Gabagool began to question if Divergence Ventures was aware of the airdrop and managed to game the system to convert Ribbon tokens to Ether, generating millions in profit as a result.

“They attempted to exploit that information to extract profit, and they did so while publicly stating to be very bullish and excited about Ribbon,” he said.

Wired reports:

Divergence Ventures denied insider knowledge about the airdrop but later admitted to “crossing a line”; it eventually returned the ether to Ribbon. In the wake of the incident, reference to the Ribbon investment disappeared from Divergence Ventures’ website. Divergence Ventures did not reply to a request for comment, and Harris did not reply to several requests for an interview via Twitter.

Gabagool is among an emerging breed of sleuths bent on spotting, tracking down, and exposing questionable practices in the budding DeFi world. Cryptocurrency is intended as electronic money that users can exchange anonymously and without intermediaries. But that anonymity comes with transparency: Cryptocurrency transactions are inscribed in an open digital ledger, the blockchain, which provides a record of how assets flow through the system. Companies such as Chainalysis and Elliptic have created software to aid law enforcement investigations into illicit activities involving cryptocurrency. In contrast, these new amateur detectives rely on their hunches and tips from others, use free tools to examine blockchain activity, and broadcast their findings from pseudonymous Twitter accounts like Gabagool, Zach, and Sisyphus. Gabagool says he noticed the questionable Ribbon activity while poring over Etherscan, a tool to keep track of blockchain transactions. He and other sleuths say they are animated by a penchant for investigative work, resentment, or frustration with the brazenness of some people in the space. They say they are trying to save DeFi from itself—by becoming its sheriffs.

Wired further explained some of the issues that the DeFi community has faced, writing:

Even as other corners of the cryptocurrency world edge toward the mainstream, this fast-moving, nihilistic mirror-world of precious tokens and runaway meme-coins remains largely beyond the purview of regulators—as the overall value of the cryptocurrency invested in DeFi platforms has surpassed $250 billion, according to data aggregator Defi Llama. Predictably, DeFi is rife with behaviors that would be considered questionable elsewhere. There are exit scams, or “rug-pulls,” where the creator of a DeFi project absconds with users’ cryptocurrency, as well as more nuanced “white collar” misdeeds, like promoting a project without disclosing payments from its creators, or exploiting connections and influence to gain an unfair advantage on the market.

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