Users of EOS-based wallet suddenly left penniless as company folds

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Chinese digital currency enthusiasts who put their trust in the EOS Ecosystem wallet are now second-guessing their decision. The wallet, which built its platform on promises of outstanding returns for users’ deposits, has suddenly gone dark in an apparent exit scam. With the wallet founder’s disappearance, around $52 million in held funds have gone missing, as well. 

Chinese media outlet ChainNews broke the news yesterday. Its report followed warnings issued by the blockchain-centered news source for more than a year, which had warned users to stay away. When traders began realizing that they couldn’t access their accounts yesterday, those warnings proved to be accurate, and users will most likely have no recourse to try to recuperate their lost money. 

The exit scam found the perpetrator allegedly empty the accounts, as well as the platform’s own account. It shouldn’t have come as a surprise to anyone, and reiterates the importance of performing due diligence before handing over money to anyone in any situation—digital currency or fiat. EOS Ecosystem was sued last year in a Chinese court for operating a pyramid scheme that attracted more than 33 EOS tokens, and previous reports have shown that the platform was never running an EOS node as it claimed. 

ChainNews adds, “At present, the funds have been transferred to a ‘huobidevice3’ account in large quantities. It is reported that the account is not a Huobi deposit account, so the funds are still outside. To be honest, EOS is not a good way to cash out after the lap, and it is easy to be tracked. Huobi is a main OTC exchange, so these funds are a problem.”

Should the exit scam result in someone trying to cash out the $52 million at once, it would have dire consequences for the value of EOS. However, the good news is that there may be a way to freeze the funds before that happens. According to ChainNews, “Based on the characteristics of EOS, it is possible to freeze the assets on the account. It is better to contact BM to freeze them. Those who are interested can also explore it, but in my opinion, the implementation is more difficult. EOS has always been criticized for its centralization, and it costs less to try. Of course, whether it can be achieved technically or not, you still need to explore it yourself.”

This isn’t the first time that EOS has been involved in a massive scam. Block.one introduced the EOSIO open-source blockchain software in 2018, and that has led to a number of investment scams centering on the digital currency. Among these can be found EOSCUBE, EOSFIN and ESO Vote. In other words, it might be smarter to avoid EOS completely.