How to Create Clever Ponzi Scheme Like Mavie Ultron? (8 Red Flags)
A DEX and blockchain called Ultron are apparently on the rise and dreaming big. However, the Mavie MLM scheme linked to it reveals that the organizers’ intentions can hardly be honest. Because where is the money coming from? It can only come from new entrants.
The organizers of the Ponzi schemes also know how to be known, so they are devising ever more sophisticated schemes to conceal their intentions. Blockchain, DeFi, is a complex world and can be particularly well suited to this.
Ultronswap is a decentralized exchange or DEX, but only one of many. The project is currently ranked 312th on the DefiLlama list of DEXs with $8.4 million in invested capital (TVL). However, there are growing signs that it is a cunning, sophisticated, well-executed scam, a Ponzi scheme, rather than a real DEX. It’s not orchestrated by good guys, but by super bad ones.
Ultron is a supervillain appearing in American comic books published by Marvel Comics. (Wikipedia)
How did we come to this conclusion? Let’s take it one step at a time, with common sense. First, the proof of the pudding is in the eating, so we checked out Ultronswap.com. At first glance, it is not different from the hundreds of other DEXs, offering the usual features (swapping, liquidity providing, farming, staking.) They promise to revolutionize the entire decentralized financial world with their solutions, but such grandstanding is also quite common in the cryptocurrency world. (It is somewhat rarer to find a solution to the blockchain trilemma, as is the case here.)
Red Flag 1: Ultron Everywhere
But if we look at the offerings, we see that the whole DEX is essentially a marketplace of Ultron products. Some versions of the Ultron (UTX) token, Ultron-USDC (uUSDC), and Ultron-USDT (uUSDT) coins can be combined with bitcoin and ether (wBTC, wETH). It is as if the whole Ultron was created just for the sake of Ultron.
Red Flag 2: Unsustainable High Yields?
In the DeFi world, triple-digit yields were not uncommon in the bull market, but in the bear market, they have become unsustainable. Many coins, whose staking or deposit in liquidity pools had yielded high returns, were brutally devalued. Previous prices have fallen by a tenth, a twentieth, or more.
Farming returns currently seen in Ultron’s system are between 36 and 93 percent per year. While it is not fraudulent in itself to promise such high numbers, experienced DeFi investors already know that it is at the very least extremely risky or deceptive.
On the “Ultron Staking Hub” platform, on the other hand, they have already upped the bets, promising an annual return of 314 percent, and for five years. Where does this astonishing result originate from? Where is the money coming from?
If it sounds too good to be true, it probably is.
Red Flag 3: Inflationary Risks
What the promoters pay on the high liquidity pool yield is likely to be recovered in the longer term through coin inflation. At least that’s what a lot of other DEXs have done in the past. This also indicates the fact that, according to Coingecko, there are still less than five billion of the maximum 50 billion UTX tokens on the market. The revenue from trading fees is usually nowhere near enough to provide such high returns.
Of course, as with other projects, the promoters promise, claim, or predict that the price of their tokens will rise significantly in the meantime.
Red Flag 4: a Real Layer 1?
Ultron’s coin is supposed to have its own layer 1 network, a blockchain, but it is barely listed anywhere. Coinranking lists over 100 such networks, but Ultron is not one of them. The Rabby wallet has integrated 44 blockchains but is not among them. The Metamask wallet can connect to Ultronswap but indicates that it uses the Binance blockchain. Only the built-in wallet of the Brave browser has adapted Ultronswap with a few clicks (initiated by the DEX).
Of course, a successful layer 1 blockchain can mean a huge increase in value for coin holders, as we have seen with Bitcoin, Ethereum, and many other coins. But a blockchain that fails or is faulty, or even subject to malicious attacks, can cause a devastating loss.
Red Flag 5: Big Promises and Small Lies
On one of the project’s Facebook pages, you may notice that things they call “supreme features” are already commonplace. They are features that hundreds of other DEX projects implemented already. So farming, staking, and swapping are now everyday features of DeFi. It looks like a good-sounding jargon used to talk the head off incompetent small investors.
On the other hand, they also promise a wonderful soccer multiverse where you can “have your private stadium”. This sounds like a great idea, but companies develop metaverses with budgets running into billions of dollars. Will the Ultron metaverse be competitive? We see too many promises and too many commitments.
Citing the DefilLama site, they claim to be among the top 20 layer 1 projects in the world as a blockchain. They are 63rd on the list.
Red Flag 6 (The Huge One): Multi-Level Marketing
All of this so far, however, could be an ill-conceived or unnecessary but not fundamentally malicious DeFi project. What makes it worse is the Ponzi element added through Multi-Level Marketing (MLM). From outside the blockchain, through a company called Mavie Global, which seems to promote exclusively Ultron.
MLM or Pyramid Scheme?
The line between MLM and pyramid (Ponzi) schemes is not always clear. In both cases, it is essentially a process whereby new entrants’ payments are somehow redirected to old entrants. In the classic pyramid scheme, which is illegal, the system redistributes all the revenue in this way (newcomers pay oldcomers). Then, when there is no more revenue, the whole system collapses. There is no real production or service, no economic activity.
In MLM, which in many cases may be legal, a commission system rewards the old players, the contributors at the top of the pyramid, with money from the new entrants. But only a part of the money is redistributed because more or fewer goods or services also change hands. There is some actual economic activity in the system.
The line between fair and unfair is sometimes difficult to draw. How much can we consider a fair commission, and what is excessive? How long is there genuine business activity, and what is almost all only about cash circulation?
The ideology is that if you want to “show others the wonderful world of Ultron” if you want to “change the lives of thousands of people”, you can join the project as an “affiliate” agent. This will give you access to additional income streams, active and passive income, according to videos and promotional material.
Even though this in itself would not be a problem, the problem is the extent. They pay participants 100 percent of their total deposit back, even if they bring in new people. They also promise other commissions, valuable souvenirs, and real estate. But forget the details – all this is only possible if they take a lot of the new entrants’ money. In this case, maybe everything?
If an Ultron affiliate recruits five affiliates who purchase a package within 30 days of signing up, they receive a refund on their proper initial package purchase. Packages purchased by affiliates must be the same or higher than whichever one the qualifying affiliate purchased. (Source)
Red Flag 7: In The Crosshairs of Ponzi Hunters
There are now many portals analyzing suspicious or dubious investment offers and warning investors if their money is at risk. The Italian site Decripto.org claims that the largely Slovakian executives who have been pimping around the Ultron-Mavie alliance have previously held important positions in other dubious or at least unsuccessful projects, such as the GIVVO Platform. (They mentioned the names of CEO Michal Prazenica, Tobias Sukenik, and Ivana Belakova.)
The article tries to unravel the web of companies and projects and finds that it is not very transparent and that they have little activity other than promoting Ultron through pyramidal marketing. It also criticizes the system of staking people’s tokens for months in which they can’t sell their investments. (This is also the case elsewhere in the blockchain world, and there are even perpetual stakes. See, for example, Convex’s and Yearn Finance’s solutions for Curve’s yielding tokens.)
Red Flag 8: MLM-Critics Are Suspecting
Since this is both blockchain and MLM, it’s not surprising that an MLM portal has also taken a swipe at the project. They also dissect the interlocking personalities and the former companies, although they do not cite any evidence that the old companies did any larger harm to investors.
They mention that the owner of one of the linked companies is registered in the UK, which country is a red flag in the MLM industry because of the lax laws there. Another country where scammers have a strong preference for moving is Dubai. Which is also on the companies’ track records, Mavie Global just held a major conference there in early March.
What is ready to go is investment fraud… a securities offering… Given Ultron has no external source of revenue, returns on invested Ultron are thus paid with subsequently invested funds. Ultron will no doubt come up with some pseudo-compliance to explain this away. Without audited financial reports filed with regulators, however, this is meaningless… Good luck getting your money back from them when Ultron inevitably collapses – wrote Behindmlm.com.
Mavie’s NFTs
In mid-March, they announced a new NFT-based marketing program called the New Momentum Plan, where NFTs serve to further increase the rewards for affiliates. One of our readers wrote about it:
Yesterday they announced a new marketing/affiliate plan which will be released on 13th March. We found out that the presale investors will get their money released in about 3 months. We were shocked, they want to pay double in commissions than till now. So we think they are slowly starting the rug pull, and they want to dry the maximum out of the market before the presalers got their opportunity to sell.
Conclusion
The Ultron project itself seems to be a “legit” and functional blockchain venture but the marketing system around, highly unsustainable. There are well-known red flags which used to help to identify and avoid Ponzi schemes. Such red flags are, among others:
- A guaranteed promise of high returns with little or no risk.
- A consistent flow of returns regardless of market conditions.
- Clients facing difficulties removing their money.
- Unclear investment strategies that are secret or described as too complex to explain.
- Lack of credibility of the organizer.
By our investigation, the Ultron-Mavie scheme shows various of these red flags. A sudden cryptocurrency bull market may delay, but a deeper bear market could accelerate the end of this “investment story”.
Cover: Midsummer AI
