Spanish National Police have arrested the operator of cryptocurrency arbitrage firm Arbistar 2.0 in a crackdown on the platform that researchers and investors allege to be a massive bitcoin Ponzi scheme.

  • Regional news outlet La Provincial reports operator Santiago Fuentes was taken into custody in Tenerife on Wednesday morning and was to have been formally charged with financial fraud and money laundering Thursday.
  • Fuentes' site serves around 120,000 users who together have invested 40,000 in bitcoin ($520 million) into its arbitrage trading bot, blockchain investigations firm Tulip Research told CoinDesk, adding that Arbistar 2.0 has raised over $1 billion in bitcoin total.
  • Investors began to accuse the platform of fraud last month when Fuentes claimed a "computer error" had disabled trading bot withdrawals and wiped out more than a quarter of funds, Tulip Research said.
  • Tulip said it has linked some of Arbistar's withdrawal activity to dark-net market Hydra. It called the platform's frequent crypto returns (up to 1% daily) and limited withdrawal opportunities (only on weekends) elements of a "classic Ponzi scheme."
  • Fuentes has previously denied allegations that Arbistar 2.0 is fraudulent or bankrupt.

The arrest should serve as a reminder to crypto investors of the value bitcoin’s traceable blockchain provides to investigators. While scammers can easily dupe unwitting investors with promises of high crypto returns, their use of bitcoin makes following the money easier.

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