Feb 22, 2022 9 min read Scams

Qoin Coined Scam?

Big building. Must be legit.

Background:

As I covered the Zipett scandal publicly, I had a number of Qoin folk reach out to me and share their stories. The post below is what I have been able to piece together.

Key points:

Qoin began in early 2020 with the messaging along the lines of "a way for merchants to get additional customers, so long as they are willing to accept an alternate payment method to cash."
Starting at ~$0.15c and quickly rising to a price of ~$9.50 today
Claims are that the platform have over 38,000 businesses to spend your Qoin with (Link: www.qoin.world)
Towards the end of 2020, Qoin's parent company opened their own private exchange that Qoins could be converted into regular AUD.
According to BTX website, buying Qoin is priced at $8.68 and if you wish to sell your Qoin to them, the rate is $6.97 (Link: https://blocktradeexchange.com/)
Prior to the BTX launch Qoin experienced rapid growth a ground team of hundreds of agents signing merchants to the platform
Merchants were led to believe that if they accepted Qoin today, they would be able to cashout when the BTX launched - and be shown the rapid growth of Qoin, implying they would get appreciation of their Qoins before BTX launch.
Qoin agents were recieving substantial amounts of Qoin just for signing up a new merchant - starting around 1500 Qoins if you were involved early, decreasing to <200 Qoins per sign up currently.
BTX was funded by Qoins cash reserves initially and quickly was depleted.
A blackmarket was established of people buying and selling Qoins at lower than market rates (Arbitrage trading)
Qoin 'Whales" would exploit new merchants and pay above market prices to secure valuable items during the 'hayday' of Qoin.
Now there are many disgruntled people and a $100M class action taking place (Link: https://cointelegraph.com/news/aussie-firm-to-launch-100m-class-action-over-dodgy-qoin-token)

So with that background taken care of, lets explore what on Earth is going on with Qoin and why it may be a wise decision to avoid it.

Lets be part of where the... oh never mind.

History

Qoin began in early 2020 with the promise of helping businesses get new customers, with the onset of Covid-19, what business wouldn't want to get new customers?

So what was the catch?

If you wanted new customers you had to agree to accept payment for your services in this new creation called Qoin.

But wait, you're also assured that because this is crypto and crypto has the potential to grow, you have the potential to accept Qoin today at $0.15 and it could potentially grow to over $5.00 (Which of cause, you're assured, is not financial advice or promise of growth or return).

They were also notified that even though they cant cash out now, later they will with the release of Qoins exchange. Until then, enjoy the growth and spend with other merchants as the platform grows.

Growth in the value of Qoin was heavily implied from the onset, with a pitch about 'Metcalfes Law' (value grows as network grows) and SPECIAL algorithm that increases the value of Qoin as new merchants register (Merchant total & Annual revenue - something along those lines).

Qoin hired agents to be the ground forces out acquiring new merchants for the platform, agents who were rewarded in part cash and part Qoin (A large amount of Qoin mind you).

So this was the beginning: Merchants being signed under the promise of new customers and exciting growth. Agents being paid large amounts of Qoin for simple merchant registrations. Qoin HQ having personal BIG BAGS of Qoin for well, anything they like.

Rapid Growth

Amazing. Look at all the advantaging happening.

With the initial success of the ground team, it seems that Qoin quickly doubled down on their recruitment efforts so that they could saturate the SME market in Australia before launching overseas.

Going from a small base of agents to, what sources say, were a ground team of over 100 agents, across multiple states in Australia.

As you could imagine, this would have been very exciting. You have a quickly growing merchant base accepting this new Qoin thing, you have the implied promise of the Qoin increasing in value enabling you to buy more with less, you have the implied promise of the merchant base continuing to rapidly grow, you have the promise of cashing out with an exchange going live at some stage and the pitch designed in a way to create massive FOMO for not getting involved.

Curtesy of a source. Qoins growth slide in their November 2020 pitch deck.

The opportunity of the future was right in front of merchants and agents would be quick to explain that from April to November, Qoins value had gone from a measly $0.15c, all the way to a whopping ~$3.50, with ~14,000 merchants.

Outstanding.

They would further imply: If this is the growth we've had so far, imagine when we open up overseas in larger markets? (With the attached statement: Past performance does not indicate future performance.)

Curtesy of a source. Qoins growth slide in their January 2021 pitch deck.

By January 2021, as a result of the 'logical' explosion in merchant signups, Qoins value had gone from ~$3.50 in November, all the way to a whopping ~$5.00, with ~20,000 merchants - in just two months!

Unbelievable. Bravo.

Curtesy of a source. Qoins growth slide in their March 2021 pitch deck.

By March 2021, Qoins value had gone from ~$5.00 in January, up to ~$7.50, with ~33,000 merchants.

Impressive. Somebody call Steve Baxter and tell him to invest in this opportunity of the future!

With such unbelievable growth of both user base and Qoin value, it is hard to imagine how anything could derail the steam train that is Qoin.

The Wheels Start Coming Off #1 - Black Market

Now if we take a look at Qoin from an economic / political perspective, what we can see is that you've got almost a quasi communistic style political system where the 'State' controls prices.

In communist countries, such as say Cuba or Venezuela, what happens is that in response to the government's modus operani, black markets spring forth to service the market.

In the case of Qoin, you have the artificially increasing price of Qoin, based off a poorly thought out algorithm and a lack of, for a large part of 2020, an ability to turn Qoin back into cash.

Let's explore this briefly. As in any system, industrious folk are able to identify opportunities to make money and that is exactly what happened with Qoin - in a few different ways.

The first way was in early holders of Qoin, which large bags, that had grown substantially in value (think $0.20c to $3.00 as an example), deciding to both sell Qoin cheaper than market rates to new people entering the market and to buy Qoin cheaply off those looking to cash out, for the purpose of reselling at a higher rate.

Geniuses.

The second set of black-market enablers were the Qoin agents themselves.

The Wheels Start Coming Off #2 - Agent Pollution

The agents and head honchos/management of Qoin were the next to pollute their own ecosystem.

Context is everything, so here's a reminder:

There were agents in January 2021, when prices per qoin was ~$5.00, earning 1,500 Qoins for signing a merchant up to a free app. ($7,500 per merchant, with sources saying some agents would be signing 100+ merchants a month - $750,000 per month in Qoin, with no way to cash out)

Head honchos/management, according to sources, held LARGE bags of Qoin and allegedly snapped up best deals from merchants early and also contributed to the black market directly

So what was happening is agents were receiving large amounts of Qoin and the only option they had was to buy stuff they don't really need from unsuspecting merchants or sell their qoins cheap on the black market.

As you can imagine, if you've got 100's of agents flooding the market with qoin like its nothing, and prices not reflecting the expansion of qoin in circulation (price controls), the net effect isn't going to be healthy.

The meme above reflects the sentiment in the market as exciting new merchants come on the platform, at first accepting 100% Qoin, then getting obliterated by "Qoin Millionaries" (Agents / Head honchos / Management), and then deciding to either stop accepting Qoin or only accept as part payment by the time the rest of the ecosystem got to come across them.

Another symptom of this corrupt system was that qoin "whales" would outbid genuine, general merchants, on any good product that came into the community - for example, instead of a car being listed at a set price, due to fierce competition, cars would be almost auctioned off to the highest offers.

As agents and head honchos had access to substantially more Qoin than regular people did, these would automatically cut the average user out of the deal before it even really begun.

According to sources, it is also alleged that head honchos, right at the top of the top, were also exploiting the system for their own gains - being in the form of getting cash and getting products such as vehicles, houses etc

It is easy to see who the real winners are in this situation right?

It is not the merchant. It is not the broader ecosystem. It is the agents, the management, and the head honchos.

It is also alleged that those at the very top of Qoin were not only participating in but also orchestrating a portion of the black market, directly against the interests of their own community.

The Wheels Start Coming Off #3 - BTX Failure To Launch

Head Honchos Tony W & Raj P.. Symbols of trust (Dumb and Dumber)

Hope is a driving force in human existence. It keeps us pushing through adversity and in some cases can be the only thing that helps us stay alive.

For a long time it seems that the HOPE of being able to cash out via the BTX exchange was a driving force in the Qoin community.

What went wrong?

When BTX initially launched, sources say that daily cash out limits were $1000 per account holder and as you can imagine, the reserves of BTX were bled dry in a very short period of time.

See BTX wasn't operating as a normal exchange, in that there was no buyings wanting to purchase Qoin off people wanting to sell and as a result of a disproportionate amount of people wanting to cash out, Qoin provided the funding reserves.

These reserves were depleted quickly and Qoin acted promptly, changing withdrawal limits from $1000 per day, to $500, and then to $250, and now down around ~$100.

As of today, it is reportedly, virutally impossible to convert your Qoin into cash via the BTX exchange and as a result, the black market is the only place to go - however, due to low merchant acceptance of Qoin today, the price of Qoin has dropped to <$0.50 on the black market.

Promises Not Kept

As you could imagine, when you combine the promise of a vibrant community of buyers and sellers with the promise of being able to cash out via an exchange, not being met... people are pretty pissed.

Today you seem to have a market that either only accepts Qoin for a small percentage of a purchase price (Lots of buyers, little willing sellers), which is a far cry away from the prime days of Qoin during the later stages of 2020 - where people were able to buy expensive items like houses, cars, boats, jet skis and so forth.

With the inability to cash out, as originally promised, there is now a $100M class action against Qoin.

One thing is for sure, you have to make sure you use your critical thinking skills before diving into when of these quasi ponzi schemes, or you may find yourself at a large loss.