CRYPTO ARBITRAGE AND PYRAMID SCHEMES:

HOW TO IDENTIFY THE WARNING SIGNS

Certain European legal proceedings have highlighted recurring methods whereby investment proposals involving crypto-assets are presented through automated arbitrage systems, digital platforms, or purported software allegedly capable of generating high and continuous returns.

A particularly significant case is that concerning Arbistar 2.0 SL, which was the subject of proceedings before the Spanish Audiencia Nacional. According to the official documentation issued by the Spanish judicial authority, the investigation concerned an alleged fraudulent cryptocurrency investment operation in which monthly returns ranging from 8% to 15% were represented as achievable. The documentation of the Audiencia Nacional further stated, at the stage then reached by the investigation, that 1,127 persons had allegedly suffered harm, with quantified losses amounting to €41,481,766.22, indicating that the conduct might be attributable to a pyramid/Ponzi-type scheme.

The case provides a useful example for understanding certain risk indicators, without the mere presence of any one such indicator being, in itself, sufficient to establish the existence of fraud.

HOW THE SCHEME MAY PRESENT ITSELF

A proposal may be structured around:

1. The promise of automated arbitrage

A computerised system, bot, or algorithm is presented as being capable of automatically executing transactions across different exchanges and generating consistent profits.

2. The promise of high and predetermined returns

The prospect of particularly high monthly gains, especially where such returns are represented as stable or substantially guaranteed, constitutes a factor requiring careful scrutiny.

3. The display of returns on a platform

The client may be able to view balances, profits, or apparently executed transactions through their account. Such displays, however, do not, in themselves, constitute evidence of the existence of the underlying assets or of the actual availability of the funds.

4. The reinvestment of purported profits

The display of returns may induce the investor either to leave the purported profits on the platform or progressively to increase the amount of capital invested.

5. The incentive system for new participants

The existence of bonuses, commissions, or programmes designed to reward persons who introduce new participants constitutes a further factor requiring careful analysis, particularly where the expansion of the structure is significantly dependent upon the inflow of new capital.

6. Difficulty or inability to withdraw funds

A particularly significant stage arises when, following a request for the return of capital, blocks, delays, additional conditions, or requests for further payments are introduced.

WHAT MUST BE VERIFIED

The presence of such characteristics does not, in itself, automatically justify characterising an activity as fraudulent.

For this reason, our methodology does not begin with an allegation, but with documentary verification.

Where available, we examine:

• the corporate structure and beneficial owners;
• declared registrations and authorisations;
• investment agreements and terms and conditions;
• communications received by investors;
• the platform’s stated operating mechanisms;
• evidence relating to the purported arbitrage activity;
• documented financial movements;
• blockchain addresses and transactions;
• relationships with exchanges and intermediaries;
• any affiliate or recruitment programmes;
• the chronology of investments and withdrawal requests;
• available technical and IT documentation.

The objective is to determine whether what was represented to the investor is actually substantiated by the available documentation, financial flows, and technical evidence.

THE PRINCIPLE GUIDING OUR WORK

We do not prejudge a matter as fraudulent.

We reconstruct the facts.

We distinguish between what is documented and what remains to be verified, and we differentiate the parties’ statements from the findings emerging from technical and documentary evidence.

Where a judicial authority has already issued orders, decisions, or other measures, or has published official documentation concerning a particular matter, we use such sources as documentary references, accurately reporting their content, date, and procedural nature.

In this way, an apparently complex situation can be transformed into a verifiable chronological, financial, and documentary reconstruction, capable of being submitted for assessment by legal counsel, technical experts, and the competent authorities.

From the promise of returns to the verification of facts.
From the platform to the blockchain.
From the document to the reconstruction.
From the reconstruction to protection.