Sunday, November 27, 2022

Seele Explains How Its Investors Got Tricked, Promises Investigation and Possible Compensation

Seele Explains How Its Investors Got Tricked, Promises Investigation and Possible Compensation

The team behind the Seele ICO, which recently saw investors defrauded of $2 million USD worth of ETH in an alleged Telegram group scam, says it is determined to find out what happened and will “make detailed compensation plans”. It also further clarified how a scammer managed to infiltrate its chat group by impersonating an official core team member — an important lesson for all projects with active communities.

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Seele is a multi-purpose consensus blockchain project with team members in U.K. and China. It was due to conduct an initial coin offering (ICO) with a pre-sale starting soon. However members of its official group on popular chat app Telegram received solicitations, purportedly from the group’s admins, to buy ICO tokens even before the pre-sale.

Those accounts turned out to be imposters who had registered Telegram accounts using the name of Dr. Nick Smith, Seele’s data analyst and core team member. Upon receiving the other users’ ETH, they simply disappeared.

How an Impersonator Fooled Admins, Group Members

Chief scientist Dr. Bi Wei explained to Bitsonline how it happened. Seele’s main website went live in late January, and its Telegram group rocketed to over 10,000 members in just a few days after. Admins, he said, had repeatedly posted messages saying neither the pre-sale nor ICO had begun yet, and to beware of anyone saying otherwise.

Telegram logoIn the meantime, an anonymous person created a Telegram account using Smith’s name and photo. Smith himself was in hospital recovering from surgery and not yet joined the group — but had just spoken to other members that morning, leading them to assume the new account was actually him.

Seele has published profiles, credentials and LinkedIn pages for all its team members on its home page.

The impersonator managed to convince the group administrator on duty to also grant them admin privileges. Using this trusted position in the group, they were then able to target users who seemed unaware of the token sale schedule, and deceive them.

As soon as the real admin realized what was going on, they removed the fake “Nick Smith” account and sent out notices to media outlets. Smith himself posted this video on YouTube:

The Seele team posted an update in the Telegram group and on its official website, apologizing for what happened and outlining its next steps.

It has formed an “emergency response team” to communicate with victims, and created a statement template for victims to detail exactly what happened. The team also promised to engage “lawyers, technicians and experts from all over the world” and relevant enforcement agencies to investigate and possibly retrieve stolen funds.

Should that fail, the Seele team said it will use the victim statement information to “make all the necessary refunds to all the victims who lost their funds to the scammers after the Seele token sale has concluded”.

It also posted the alleged scammer’s ETH wallet and contract addresses in the hope the community will monitor both, and watch for any funds leaving them.

Who Takes Responsibility if Investors Are Tricked by External Parties?

The incident raises interesting questions over who should take responsibility for such a fraud on an “official” but publicly-open platform that the project itself does not control.

For instance, what would happen if losses occurred via a larger network such as Twitter, where scammers run rampant with thousands of fake accounts, and seem impossible to remove? Is an impersonated project under any obligation, either moral or legal, or compensate users who sent money to total strangers without properly checking their authenticity?

In Seele’s Telegram group, users continue to place blame on administrators and question how the imposter managed to gain admin privileges in the first place.

Social Media Accounts Easy to Fake

Fake McAfee Twitter
A fake “@officialmcafee” account. Note the spelling

Impersonating others is relatively easy on chat platforms and social media — scammers regularly create fake profiles with the same/similar display name and a copied avatar. On Telegram, users can only tell a fake account if they go to a user’s profile, and already know that user’s official account name. Telegram tends to show only display names in chats, and does not have “verified” accounts a la Twitter.

Popular team chat app Slack also has its fair share of fraudsters, with project admins regularly posting warnings about chat bots posting scam links and asking for funds.

Whatever Seele decides to do, it’s a warning to all ICO investors that taking personal precautions is mandatory. Cryptocurrency transactions are irreversible, making them attractive to scammers, and online accounts are easy to fake. The only way to be reasonably safe is to pay close attention to official announcements and notices, and never send large amounts of money to online accounts unless you’re sure you know who’s behind them.

What could Seele and other groups do to prevent similar fraud attacks in the future? Let’s hear your thoughts.

Images via Seele

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