2023
BigWhale.Io Allegedly Promised Significant Profits but Now Claims Hack Led to Loss of Investor Assets
Securities Commissioner Travis J. Iles entered an Emergency Cease and Desist Order to stop sales of securities tied to a decentralized lending pool deployed on the Binance blockchain. BigWhale.io, the issuer of the securities, allegedly claimed to have raised $6 million from more than 2,000 investors before a hacker stole the funds. It is now threatening to mobilize assets within the Russian government to pursue extrajudicial revenge.
According to the order, BigWhale.io was encouraging the public to invest digital assets in its decentralized application. It was promising to lend these assets to vetted borrowers that would pay interest to BigWhale.io. In turn, BigWhale.io was purportedly using this revenue to pay lucrative interest to its investors – as high as 2% per day with the option to compound yield and earn a return of nearly 500% after a term of 90 days.
The order found that BigWhale.io used a multilevel marketing scheme that relied on numerous online influencers to promote its decentralized application. The multilevel marketers were allegedly promised significant compensation – earning commissions equal to 10% of the daily earnings of referred clients, as well as a portion of the daily earnings of new investors recruited by their referred clients.
Despite its alleged successes, the order found that BigWhale.io was refusing to identify its principals and the location of its offices. The order also found it was failing to disclose its capitalization and provide other information material to its securities offering. BigWhale.io allegedly explained it was not disclosing material information “in light of past challenges, including issues with the Swiss FTA and EU [European Union].”
“Concealing the identity of persons entrusted with money is an enormous red flag,” said Commissioner Iles. “Investors should generally avoid firms that dwell in the shadows, promoters that hide from daylight, and offerings carefully crafted to avoid laws designed to protect the public. In short, offerings that operate in obscurity are best avoided.”
Although BigWhale.io allegedly touted the safety of its program, a recent audit of the smart contract for the decentralized lending pool found “[t]he project appears to be using user deposits as other people’s rewards…” This type of structure is often referred to as a Ponzi scheme, whereby principal tendered by new investors is used to compensate previous investors.
Following the publication of the audit, on October 3, 2023, BigWhale.io announced it “suffered what seems to be a spoofing type or some other type of hack” that resulted in the loss of funds. It also began threatening to use assets in the Russian government to pursue extrajudicial relief against the perpetrator. Its announcement read, in part, as follows:
…we do have such resources at our disposal, to go after the ones who are behind this. (We work with assets within the Russian government directly, among other things…
…we will go above and BEYOND legal resources, and we will stop short at saying what the Russian government and its contacts are capable of…
…we are not responsible for what actions the hacker or hackers may face from agents who may or may not be working directly with us…
…and we in no way are bluffing about this…
“It may well have been inevitable,” said Enforcement Director Joe Rotunda. “All investments carry at least some degree of risk, and the level of risk associated with a particular investment typically correlates with the promised yield. Investments that promise highly lucrative returns often carry significant risks, including the risk of losing everything.”
Contact – Joe Rotunda, Enforcement Director, at jrotunda@ssb.texas.gov