Exit scams have for the last few years been synonymous with cryptocurrencies. In the current low ICO rate environment, most crypto enthusiasts have hoped that such fraud would soon become outdated. Well, a new one has just hit the radar with NovaChain.
The blockchain based startup has shut down its website as well as its social media accounts. It has even stopped replying to its fan’s emails even though they promised their fans passive income for those who made use of their “highly reliable” trade bots deployed on Binance.
The anatomy of an exit scam is pretty simple. The startup will collect cash from its community through an ICO and close shop when its objectives have been realized. One unique characteristic of this fraud is their association with publicity stunts. This is often in the form of social media influencers who at most seem to know little about cryptocurrency. Their work is usually to build up on FOMO, to help set up investors.
Platform Marketed by Influencers
The influencers are only paid to publicize a token, and they should therefore not be considered as reliable sources of investment data. This is applicable more so in the cryptocurrency arena, prone to abuse by many fraudsters.
Most NovaChain fans seem to have heard about the token from such influencers. The platform was sold as an arbitrage trading bot also referred to as the “T Rex trading bot.” The project was introduced with much fan fare causing intense interest in the industry.
There is an allure to trading bots, because they are basically, moneymakers. The NovaChain T rex trading bot would assist users in generating passive income. The one outstanding danger sign was the information on the project was mainly in the hands of crypto influencers.
These kings of Twitter and Facebook chatter were its marketers, implying that the project might not have had much of a premise. Unfortunately, the NovaChain bot did perform arbitrage trades. This led its investors further into the deception. The keen, however, did notice some standard features between the project and BitConnect.
Similarities with BitConnect
Both used influencers and were not transparent about their earnings. US YouTube personality Trevon James, for instance, was investigated by the SEC and FBI for his connection with the BitConnect saga.
A Reddit user on this connection wrote:
“In light of the NovaChain scam, it’s important to remember that YouTube influencers are here to do just that. Influence you and your money. Reflect on this”.
One more user backed this thought by cautioning investors:
“Anyone pumping the price of any coin, even the most secure one like Bitcoin, is at some level attempting to play with your money. Don’t let anyone tell you how some coin is a great way to invest money in. Do listen to experts, but definitely not to people who have a stake in promoting any coin. By experts, I mean people who vet white-papers etc. and people who vet business proposals. There are very few of them anyway”.
The NovaChain developers pulled out when investors began to pour in large sums of equity. The project had run for a year but had started as failed NovaLend a lending platform.