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BitClout Has Reaped $160M for Tokens Pegged to Celebs. Is It All a Scam?

BitClout Has Reaped $160M for Tokens Pegged to Celebs. Is It All a Scam?

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Decrypt | 2021/04/02

Amid a white-hot craze for NFTs, a firm called BitClout is pitching itself as a "crypto celebrity network." The site offers consumers the opportunity to purchase tokens tied to the identities of 15,000 influential Twitter accounts, including the likes of Elon Musk and Katy Perry—albeit without their permission.

 

In the space of a week, BitClout has reportedly earned $160 million and attracted the interest of prominent investors and cultural figures. But already, crypto security firms are pointing to suspicious transactions patterns, and warning the site has all the appearances of a scam.

 

If BitClout is indeed a swindle, it would underscore how a new generation of crypto technology—this time NFTs—has given rise to new breeds of scammers.

 

Risk assessment

Bids for an NFT of Jack Dorsey’s first tweet recently reached $2.5 million. Such prices have touched off a race to tokenize Twitter artifacts of all sorts. In the case of BitClout, the site has downloaded 15,000 of the most popular Twitter profiles and then assigned thousands of cryptocurrency tokens to each of them. The price of the tokens are loosely pegged to a given profile’s relative popularity—meaning that investing in the tokens is like investing in the social ranking of a given celebrity.

 

Meanwhile, an influencer who tweets about the site can claim a portion of the tokens associated with their identity. Elon Musk is theoretically entitled to $2.96 million worth of BitClout’s Elon Musk tokens, while lesser lights can redeem several thousand dollars.

 

Minor celebrities who have tweeted about BitClout include Neil Strauss, author of a controversial pick-up artist book:

BitClout appears to be an attempt to co-opt Twitter’s social media feed, operating in the same way Steemit provides a crypto version of Reddit and Voice.com maps Facebook onto a blockchain.

 

For those seeking to participate in BitClout’s marketplace, a necessary first step is to buy BitClout tokens with Bitcoin. And that has already given rise to a big red flag about the site: Namely, Blockchain explorer tools show that the funds ended up at just one address before getting transported across the cryptoverse.

 

Rich Sanders, who runs blockchain investigation firm CipherBlade, confirmed to Decrypt that almost all of the funds on the site are going to three exchanges—88.41% to Amber Group, 11.17% to Kraken, and 0.42% to Coinbase—and that the funds have since moved to other exchanges and wallets.

 

And one of the only non-exchange addresses that BitClout paid directly received money from Hydra, a darknet market. In other words: “They paid someone sketchy,” said Sanders.

Flow of transactions from BitClout’s wallet.

 

Signs point to the address being owned by a suspect individual from Nigeria, whom BitClout may have paid to drum up the Twitter bots to promote the project on social media, said Sanders. “Because social media shills = more proceeds.” Decrypt reached out to a Twitter account bearing BitClout’s name but received no reply.

 

Meanwhile, London-based Coinfirm, which specializes in tracing suspect crypto transactions, has also raised alarms about BitClout. In an interview with Decrypt, Coinfirm executives described the site as “Bitconnect 2.0”—a reference to a notorious Ponzi scheme site whose tokens reached a value of nearly $400 during the crypto mania of 2017. Today, those tokens are worthless.

 

Where’s my money?

Although you can supposedly buy BitClout tokens with BTC, you can’t take your BitClout tokens out of the BitClout network. You can only send BitClout tokens to other BitClout users or use them to buy creator coins; there’s no way to redeem any of this for cash or Bitcoin.

 

Updating a profile picture, posting a status or messaging a chatbot is impossible without first buying the coins. And when Decrypt wired about $20 in Bitcoin to the platform, the site didn’t allow us to use our money to buy BitClout tokens. (Update: Bitclout now permits users to create a profile and obtain a minuscule amount of its tokens by sharing their phone number).

 

Nor is there any way to verify that such transactions would take place on a blockchain. While there is an explorer, the network fee is zero and there’s no obvious way to create a node or mine coins. The anonymous team hasn’t published the code for the project.


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