The blockchain project Benebit has just pulled a midnight run and with it has taken at least $2.7 million or even as much as $4 million dollars with it. This makes it one of the most effective and lucrative thefts of ICO funds in blockchain history.
Following the discovery that the site used stolen pictures for their team page, the website quickly went down, and all attached social media pages and accounts went with it. Read on as we go over what the Benebit ICO scam claimed to be, and how you can protect yourself from getting caught in a similar scam.
“The currency for customer loyalty”
The idea behind Benebit was interesting. According to reviews of the project, and on cached versions of the website (which is now off-line), the purpose of the project was allegedly to create a system for keeping track of customer rewards points, discounts, promotions, and other loyalty program rewards.
A loyalty program is something like airline frequent flyer miles or hotel points.
A cached snapshot of the Benebit page which is now offline. Source: archive.org
Such points are earned when doing business with a particular company. Continuing to choose one business over another will lead to more rewards, and in some cases elite status. Such an elite status then lends itself to more rewards and more points. Points can be exchanged for goods, services, or discounts depending on the program.
The problem with these loyalty points and programs is that they all operate on their own proprietary system, require their own membership numbers, and can be difficult to keep track of. Some websites have popped up to help alleviate this by centralizing some of the information about an individual’s different rewards programs.
One example of this is Award Wallet which is a website that helps people track their travel points, among other rewards programs there supported. The system is not perfect however as many companies refuse to allow outside access through APIs or other data collection methods outside of their own systems.
For example, United Airlines (the airline famous for having passengers beaten and dragged off flights) does not allow their points to be accessible within Award Wallet. Additionally, Award Wallet charges a fee in order to unlock all of its features.
A supposed blockchain solution
It appears that the intent of Benebit was to offer a unified customer loyalty program that was based on cryptocurrency and blockchain technologies.
In addition, the platform was supposed to allow for customer-to-customer trades of loyalty points.
For example, if you were just short of a few hundred points for a free hotel night stay, you could potentially buy the points from another customer, who perhaps was unlikely to use them, at a heavy discount. The customer who sold the points could receive a cryptocurrency of their choice in exchange for points that would have expired otherwise.
Fake pictures discovered
However, it was discovered that pictures used on the about us section of the Benebit website were found to be used on a school website. Specifically, from Tower House School in the United Kingdom. Following this discovery, the website and all attached social media went off-line.
A confused user asks why all Benebit sites have gone offline. Source: bitcointalk.org
In the Telegram group that is still operating for the Benebit ICO, thousands of angry people are howling in misery for their stolen investments.
Reaction of Some Benebit ICO Scam Investors. Source: Telegram
This is also not the first time such an ICO exit scam has occurred. Another one, called Confido pulled a similar escape tactic late last year.
So, how can one protect themselves from falling victim to a scam like this?
The answer, unfortunately, is not so simple.
What’s interesting about the Benebit case is that several ICO tracking and rating websites gave the Benebit ICO a relatively high score in terms of their trust and confidence in the project. Usually, shady projects would fail to get high scores and most savvy investors would ignore them. But for Benebit, they somehow managed to get around these limitations and fooled many people. Including the so-called experts who gave it a high review score.
To protect yourself from such a scam it’s important to not blindly trust the opinions of others. The concept of proper ICO due diligence is often touted as being of the utmost importance when investing. However, few people truly conduct sufficient due diligence before making an investment.
This is especially true of cryptocurrency investors which mostly are young and inexperienced. Many are also being caught up in the hype of cryptocurrencies in general, and have dreams of making it rich quick.
Due diligence is everything
Due Diligence is the Key – Image via Fotolia
Due diligence is more than simply flipping through a white paper to get the gist of what is being promised. It means really looking into a company to find out who is behind it. This includes checking for social media profiles, other mentions on the internet, and of course a Google image search of members of the team to verify that they aren’t using stolen pictures, as is the case with Benebit ICO scam.
Next, one should get involved with the company through their official social media channels such as Telegram. Make sure to ask questions. If you feel the people you’re speaking with aren’t very competent, then it’s likely they are just trying to do a quick cash grab and aren’t really tech experts.
Another thing you should consider is the actual business plan for the ICO. What is it they’re trying to do? If the words “blockchain”, “decentralized”, and “cryptocurrency” didn’t appear on the website, would you still be interested in investing? If the answer is no, then you may simply have stars in your eyes and are not seeing things for what they are.
Finally, and most importantly, is you should diversify all your investments in such a way that if one investment fails or turns out to be a scam that it will not affect you significantly.
Some people in the Benebit Telegram chat are claiming that they lost dozens of Bitcoin, Ethereum and “entire life savings”. While this may or may not be true, it’s important to note that no one should be putting that much money into an ICO that they don’t completely trust.
Does the business plan make sense?
In the case of the Benebit scam, consider this for a moment: customer loyalty programs have been around for decades. Why hasn’t someone created a way for people to freely and cheaply exchange and trade points and rewards currencies?
The answer is simple. Because the companies offering the reward programs don’t want their currencies to be freely and easily traded. Doing so could negatively affect the profitability of the program, and may, in fact, cost the company more money to operate than it earns them.
The only way to exchange points is through agreements that companies set up amongst themselves in an attempt to create exclusive networks. The idea is to keep customers inside their network of partner airlines, hotels, restaurants, and so on. Unlocking these points could destroy the efficacy of these networks. No rewards program offering company in their right mind would allow this.
The main take away from all of this?
Never forget the most important maxim of investing. Do your due diligence, and only invest what you’re willing to lose.
Featured Image via Fotolia