What I Learned About The Blockchain While Helping To Bust An Elaborate Scam in Steemit
Tags: Scam, Cryptocurrency, Steemit, Bitcoin, Blockchain

Software is eating the world, but blockchains are kicking the asses of scammers.

If you haven’t heard about the blockchain by now, you’re likely living under a rock. Blockchain ICOs make Silicon Valley bros wet their pants and it’s like a new religion has been created overnight.

Very few people understand what a blockchain is, let alone what a blockchain can do in the real world, but the story I’m about to tell you will hopefully illustrate it.

This is a crazy story I’m about to tell you.

It involves art, multiple identity thefts, the Ukraine, the Steem blockchain, myself and Sherlock Holmes. Well, it’s not the real Sherlock Holmes, but an account in Steemit named @sherlockholmes.

Here goes:

A number of weeks ago, a Steemit user named @elena2017 painted a very detailed portrait of myself. I didn’t know this user as she was not my friend at the time in Steemit. Here’s the portrait she painted of me (as my Steemicide Hotline character). It’s quite detailed and pretty good:

art by Elena Malva

I upvoted her post which resulted in her gaining some Steem, reputation score increases and also name recognition in the community. After she painted my portrait, I began supporting and sharing more of her posts in Steemit. She began attracting more followers because her artistic talent was pretty impressive. Here’s one of my favorites of hers:

art by Elena Malva

Fast forward several weeks…..

Yesterday, a user named appropriately, @sherlockholmes, revealed his shocking findings about the account, @elena2017: it was a total fake. And he had the evidence to prove it. @elena2017 had stolen the identity of a real artist from the Ukraine named Elena Malva and had been posting her photos, paintings and drawings on Steemit for months. But how was my portrait painted, and who painted it? Who was the person holding the portrait of me? Someone painted my portrait, but who?

This is where the story gets super weird.

The scammer had contacted the real Elena (Elena Malva) and paid her $15 to create a portrait of me. The scammer had also requested that the real Elena take photos of herself holding the portrait of me. Here is a photo of the real Elena holding the portrait of me:

Elena holds painting of me

After the scammer had paid the real Elena to paint a picture of me, she posted it on Steemit and milked this thing like no tomorrow. The scammer wrote several posts that glorified me as “Steemit’s Best Blogger” and other stuff like that, which I naturally upvoted.

A quick visit to the real Elena’s Facebook page reveals the disturbing reality of being smack in the middle of an identity theft. She clearly states that she has never joined Steemit, and that someone has stolen her identity and is posting her artwork for monetary gain on Steemit:

Sherlock Holmes had also posted another update to his earlier post about Elena. It revealed that Elena Malva was not the only artist who was being impersonated. The scam ring extended to 4 other Ukrainian artists, and Sherlock was untangling the story behind each one. All of the identity theft artist accounts were tied to @annart, which is a real person. Sherlock had reached out to @annart both on Steemit and on vk.com (Russian Facebook) https://vk.com/id57240151 but unlike the artists whose identities were stolen, this person never responded back to Sherlock.

You can read @sherlockholmes’ full story here:

https://steemit.com/steemit/@sherlockholmes/case-6-busting-annart-s-ukrainian-fake-artist-ring

It was at this time I decided to do a little searching on the blockchain, just to ensure that all this information was correct. Since I had never heard of @sherlockholmes until recently, I wanted to make sure his evidence was rock solid.

How Money Flows In And Out of Steemit

It’s important to know how money flows in and out of Steemit. In order to withdraw your Steem from Steemit, you need to set up an account at one of the cryptocurrency exchanges, like Bittrex.com. Since this scammer used Bittrex, let’s go over how that works.

Every Bittrex account for Steem has a memo identification associated with it. So, each time you withdraw Steem from Steemit into your Bittrex account, you have to use your memo id. If you don’t use it, Bittrex will not know where to send your Steem, and you will lose your money.

The memo id is like your personal address in Bittrex. It’s your identification. These memo id’s show up in everyone’s account, and because Steemit runs on a blockchain, this data is available for everyone to study. This also means that everyone can see everyone’s account, as all wallets and money transactions are transparent. In fact, you can see all activity on the Steem blockchain, even deleted comments.

So, I took a look at @annart’s transactions on the Steem blockchain in order to find a memo id connected to her withdrawal to Bittrex:

@annart’s Bittrex memo:

(notice the memo id: 462ccc1af1f64901aa8)

If you’ve never seen a blockchain before, here’s your chance:

And here’s even a more in-depth look at the blockchain structure, when we click on the raw block data:

Next, I wanted to find a Bittrex memo id from the other accounts which Sherlock had accused of being run by @annart. Here’s a transaction from @elena2017 and sure enough, the memo id is exactly the same as @annart’s.

(notice the memo id: 462ccc1af1f64901aa8)

This means the money from these two Steemit accounts is going into the same Bittrex account. In fact, all the fake accounts: @elena2017, @nellyhandmade, @katrinart and @juliyahandwork use the exact same memo id, 462ccc1af1f64901aa8, as @annart does. The money from all 5 Steemit accounts is going into 1 Bittrex account.

The expression, “Follow The Money” applies very well in this case.

Sherlock went the extra mile and hunted down all the artists on legacy social media sites (Facebook, Instagram, VK.com) whose identities were thought to be stolen to confirm that they were not on Steemit. All the artists in question told him they were not on Steemit. The @annart account was the only one which never replied to him.

It became crystal clear that an elaborate scam ring involving 4 identity thefts was being run by @annart.

I did a little extra investigating and discovered that all these accounts tended to upvote each other, too. This was to be expected since getting noticed in Steemit requires upvotes and comments.

After using the blockchain to confirm Sherlock’s evidence, I began flagging the posts made by these accounts, thereby taking away any monetary rewards they had made. I tend to avoid flagging people in Steemit unless it’s absolutely necessary, as in this case of an actual identity thief.

But my voting and flagging power doesn’t last forever. After flagging more than 15–20 different posts by @elena2017 on top of a regular day’s voting for authors, my voting strength was nearly wiped out. The algorithm that controls this voting strength behavior was created intentionally to prevent abuse from individuals.

In my case, because I’ve worked very hard for over a year in Steemit and gained the trust of many in the Steemit community, I wrote a post requesting the help of other whales (whales in steemit are those who have large accounts and the ability to remove monetary rewards plus lower the reputation of others.) After the news was spread that a scammer had been busted, others swooped in and began flagging the 5 accounts.

Without the blockchain, none of this fraudulent activity would be possible to know for certain. Having access to this immutable blockchain data makes it possible for ordinary citizens to investigate suspicious activity.

This is the real reason why everyone is wetting their pants about the blockchain right now.

This has never been possible before, because money transactions have always been hidden away from ordinary citizens……until now.

But make no mistake, the blockchain does not do the work of busting up a scam ring by itself.

The blockchain is only a tool.

The blockchain is a tool for humans.

The blockchain is a tool that can be utilized or ignored.

The blockchain is only as useful as the person using it.

If the world, and all the people in it stop giving a crap about deception, identity theft, scams, and corruption, guess what? Blockchains become useless. Moreover, if all of us don’t take responsibility for ourselves and society, and always think:

“Let someone else take care of it,”

blockchains will become useless.

One of my Facebook friends remarked after reading about the Ukrainian scam ring:

“Scammer from Ukraine? This stinks because there is no system there that will deal with her. Hope your Steem Team blast her!”

I answered:

“Scams exist everywhere but since all our transactions are transparent on the blockchain, frauds can easily be caught. There is a system: it’s called a passionate community.”

A passionate virtual community means people actually giving a shit what happens to people. I never had a tool like the blockchain before and I admit that this is a brand-new powerful combination:

Giving a shit + the blockchain = radical change to make society better.

It’s quite possible that someone like Trump wouldn’t even be able to coexist in the future world of blockchains.

The best part of this story is that Sherlock and I reached out to the real Elena to let her know that her scammer is being punished will soon become a non-entity in Steemit. Furthermore, I have personally invited Elena to Steemit, and hopefully, when she joins, I’ll introduce her to the Steemit community, so people will know that she’s the real deal.