Friday, October 4, 2019

Regulator warns of two cryptocurrency purses that offer huge profits

Key facts:
Cloud Wallet and WoToken Wallet claim that they use artificial intelligence on their platforms.
The regulator suspects the offer of earnings of up to 20% and the referral bonuses they offer.

The British Columbia Securities Commission (CVCB) warns Canadians about new applications described as "smart wallets" of cryptocurrencies, which could share features with pyramid schemes.

The regulator highlighted two applications, both linked to operations in Canada. The authority suggested that users will approach with "extreme caution." Cloud Wallet and WoToken Wallet, which require minimum deposits between USD 100 and USD 1,000 to start operating, claim that they use artificial intelligence to perform automated cryptocurrency operations in multiple exchange houses.

Both applications promise users extremely high rates of "earnings" per month, which CVCB compliance director Doug Muir said was an initial warning signal for the regulator. WoToken Wallet announces that its users will earn between 6% and 20% monthly, while Cloud Wallet suggests that users can get between 6% and 15%, according to a CVCB press release. The other warning sign for Muir is that both applications promise bonuses for registering additional users, a feature that, according to him, is common in pyramid schemes.

“There is an aspect of pyramid scheme, which means that people are encouraged to enter and attract other people as well. This activity involves two things: it creates a stream of money in this scheme that causes us some concern, but it also creates an incentive for people to get involved because it is another method of profit, ”said Muir.

A video on the Cloud Wallet YouTube page explains a basic scenario in which a user, whom they call «Simon», deposits USD 500 in Cloud Wallet, the minimum to be eligible for the application to get something described as a «bonus correspondent". Simon refers "Catherine" to Cloud Wallet and receives a bonus that equals his monthly earnings. The more people who register, the more bonuses you can receive. When his partners register new recruits for the application, Simon is also eligible to earn money with them.

According to the CVCB, those bonds would be paid in crypto assets that are exclusive to the applications. Then, users can convert those assets into other cryptocurrencies that are more commonly traded, such as bitcoin and, from there, convert their funds into conventional currencies.

When an attempt was made to make a contact before the publication of this article, a Cloud Wallet spokesman said they could not immediately get a lawyer to answer CVCB's concerns. However, the spokesman stressed that the application is not a "Ponzi scheme" and went through a "strict approval process only to appear in the Apple App Store."

The Post was unable to contact WoToken Wallet before this publication. In addition, Muir did not say if users had complained about losing money in the applications, only that CVCB received information "that caused us some concern."

The CVCB has not raised charges to the companies that run the applications, but considers that the information it had about them was significant enough to alert investors about them in the press releases.

"We were worried that there might be some damage to the public and that people could lose their money," he said.

Both Cloud Wallet, which can also be accessed through Android Google Play, and WoToken Wallet, which can be downloaded online, have been in the market for about a year, Muir said. It is not known how many other applications conform to the pattern established by these two applications. Muir also said he does not know how many users are registered in each of these applications.

What may have aroused CVCB's interest in these two specific applications is that both have operations in Canada. WoToken Wallet is managed by WoToken Limited, a company that is connected to another that recently registered in British Columbia. Cloud Wallet, the CVCB said, is currently being announced in online forums by a person living in Canada.