Incognito Market's Withdrawal Issues Spark Exit Scam Suspicions

Incognito Market’s victims are not alone as the team of the cross-chain bridging protocol OrdiZK disappeared with $1.4 million worth of investors' cryptocurrency.

Incognito Market, a darknet platform, is being called an "exit scam" as users struggle to withdraw their Bitcoin and Monero. Meanwhile, the OrdiZK protocol is also under scrutiny for a potential exit scam, involving $1.4 million in investor funds, after a series of suspicious transactions and the complete disappearance of the team's online presence. In other legal news, Konstantin Ignatov, the brother of the infamous "Cryptoqueen" Ruja Ignatova involved in the OneCoin scam, has been released from prison after serving 34 months.

Darknet Dilemma

Users of Incognito Market, a platform known for trading narcotics valued between $10 million to $30 million, are reporting that they are struggling to withdraw their Bitcoin (BTC) and Monero (XMR) assets. This issue, which began surfacing on Mar. 5, led to fears of an "exit scam," where market operators disappear with users' funds.

The marketplace's troubles started when users voiced their difficulties in processing crypto withdrawals, prompting a response from Incognito's administrator, "Pharoah," on the darknet-based Reddit-like site Dread. Pharoah assured users that the withdrawal problems were only temporary, pointed out upgrades in the marketplace's withdrawal systems, and pleaded for patience.

However, the situation escalated as the complaints continued, and a respected figure in the dark web security domain, known as Hugbunter on Dread, reported an unsettling conversation with Pharoah. According to Hugbunter, Pharoah attempted to bribe him to delete posts critical of Incognito, leading Hugbunter to confirm the exit scam publicly, hoping to prevent any more losses among users.

This incident happened during a big Bitcoin rally, with the cryptocurrency reaching new highs, and Monero also experiencing large fluctuations in value. The timing is especially impactful, considering the recent Chainalysis 2024 Crypto Crime Report, which brought to light a resurgence in darknet marketplace activities. Despite the shutdown of Hydra, smaller platforms have continued to thrive, with Mega Darknet Market leading the way in crypto inflows.

Blockchain Betrayal

The intrigue continues. The crypto community has been hit by yet another alleged exit scam, this time involving the cross-chain bridging protocol OrdiZK (OZK), with the team purportedly disappearing with $1.4 million worth of investors' cryptocurrency. Blockchain security platform CertiK brought this to light, and pointed out a series of transactions that have left investors in shock and dismay.

According to CertiK, things began unraveling on Mar. 4, when the protocol's deployer account dumped 489 million OZK tokens on a decentralized exchange, netting $132,000 in return. This massive sell-off led to a dramatic 98% drop in the token's price. The next day, an additional $214,000 worth of OZK was sold, causing the price to plummet even more. Blockchain records reveal that on Mar. 4, the deployer engaged Uniswap’s Universal Router contract’s “execute” function to swap roughly 489 million OZK for 35.65 Ether (ETH). The next day saw a further exchange of 121 million OZK for another 0.93 ETH.

Then, the deployer withdrew 57.68 ETH (about $197,000 worth) from the OZKStake contract by invoking the “emergencyWithdraw” function. Investigations into the issue uncovered that before the alleged exit scam, the project controlled over $1.4 million across a marketing wallet, a treasury wallet, and the proceeds from the token sales.

In the aftermath, the project's X account was deleted, along with its Telegram group and documentation, erasing many traces of its online presence and leaving investors and the community grappling with the fallout.

This incident is part of a disturbing trend in the early months of 2024, with scammers and hackers already having stolen hundreds of millions of dollars from unsuspecting victims. Blockchain security firm Immunefi reports that over $200 million has already been lost to incidents like these in this year alone.

The incident with OrdiZK follows closely on the heels of another scam involving the gambling protocol RiskOnBlast, which executed the first rug pull on the new Blast network, stealing $1 million in investor funds.

Cryptoqueen's Brother Freed

In other crypto crime news, Konstantin Ignatov, brother of the elusive "Cryptoqueen" Ruja Ignatova, was released from prison after a 34-month sentence for his involvement in the OneCoin fraud scheme, which defrauded investors of $4.4 billion. According to Bloomberg, on Mar. 5, District Court Judge Edgardo Ramos issued a "time served" verdict, meaning that Ignatov spent enough time in custody to meet his sentence for the crimes related to OneCoin.

During the emotional court hearing, Ignatov took full responsibility for his actions, expressing remorse and the difficulty he faces looking at himself due to the pain and lessons learned over the past five years. Despite his release, he is required to live under court supervision for the next two years and forfeit $118,000 of his earnings from the fraudulent scheme.

Ignatov's arrest in 2019 and subsequent guilty plea to money laundering and fraud charges were pivotal in the case against OneCoin, especially after his cooperation with U.S. prosecutors. His testimony was crucial in the conviction of former lawyer Mark Scott, who laundered $400 million from the scheme and received a 10-year sentence in January of 2024. Judge Ramos recognized Ignatov's role in the massive fraud but also acknowledged his cooperation in the trial against Scott.

The OneCoin scam, branded as a cryptocurrency but operating as a Ponzi scheme, promised investors massive profits and positioned itself as a rival to Bitcoin. Initiated in Bulgaria between 2014 and 2018, it attracted hundreds of thousands of victims with the promise of guaranteed returns.

Ruja Ignatova, who spearheaded OneCoin before disappearing in 2017, remains on the FBI's "Ten Most Wanted" list, charged in absentia by U.S. authorities with wire fraud, securities fraud, and money laundering. Another key promoter of OneCoin, Karl Sebastian Greenwood, was also sentenced to 20 years in prison for his role in the fraud and money laundering activities associated with the scheme.