How Stake Enables Scamming and Money Laundering to Create Crypto Victims
Stake.com isn't a scam in the traditional way - at least, not in the way people would immediately think. They won't rig your bets, they won't steal money, and they won't withhold your withdrawals. However, Stake is complicit in scamming in a much more insidious (and much more harmful, as it goes under the radar) way - by helping others scam, and indirectly taking a cut of the proceeds in order to provide a laundering service while significantly increasing their own revenue.
Evidence of Widespread Money Laundering
To prove the initial premise that Stake receives money from scammers and malicious actors, we can look at some examples from on-chain data gathered by Chainalysis. Note that these are just some highlights, and Stake accepts deposits from hundreds of malicious and illegal actors of various kinds on a daily basis.
- Hydra Marketplace: Stake directly received 33.08449823 BTC from Hydra Marketplace from this root address. Hydra Marketplace was a Russian dark web market that faciliated the sale of illegal drugs, falsified documents, and hacking services. Hydra Marketplace is on the OFAC sanctions list.
- Bitzlato: Stake directly received 24.47928756 BTC from Bitzlato, which was a Russian cryptocurrency exchange that the US government called a "primary conduit for dark market purchasers and sellers, as well as a safe haven for ransomware criminals," which is amusingly similar to how they would likely describe Stake.
- Hamas: Stake sent funds to this root address belonging to "Buy Cash Money and Money Transfer Company," which was later placed under OFAC sanctions as the company was revealed to be a money transfer front for Hamas, al-Qaeda, ISIS, and directly helped finance terrorist attacks for Hamas.
These are just three of hundreds of illegal and fraudulent entities that routinely use Stake for money transfers according to Chainalysis data, including the Atomic Wallet hacker group, the FTX hacker, a user from the Silk Road, tens of ransomware groups (including DMA Locker, Dharma, CryptXXX, Doppelpaymer, Trickbot, Medusa, and Phobos), bulletproof hosting services such as rootkiller, OFAC-sanctioned entities such as Yevgeniy Polyanin and Mikhail Tsarev, Doxbin, and child abuse hosters or services such as PedoHub, Teenscord, and Playground Molly.
Out of the various types of malicious actors, scammers are by far the largest in number, with hundreds of scam websites routinely using Stake, mostly crypto ponzi schemes, HYIPs, fake giveaway websites, or phishing websites.
Victims Are Worse Off When Criminals Are Protected
When money enters Stake, it goes into somewhat of a black hole. The trail goes cold, and there is no visibility to the outside world about where the funds went. When a criminal later goes to withdraw and spend the funds, any parties investigating them will only see funds coming from Stake and not the original source, so they will think nothing of it. This provides cryptocurrency criminals with a great deal of protection.
Stake can internally see where the funds went, and this information is subject to a subpoena. However, this creates a large barrier to entry for the vast majority of victims to get justice, as it requires advanced processes and a significant investment in terms of both time and money. Most victims of such scams do not have the means to file expensive lawsuits and acquire subpoenas. Thus, in most cases, the shield of Stake allows criminals to move in the shadows and evade both their victims and any real consequences, except in the most high profile of cases where governments are motivated to issue subpoenas, which happens in less than 0.1% of scam transactions Stake handles.
Stake Conveniently Profits Huge Amounts From These Scammed Funds
Stake has wagering requirements, which means sometimes you need to gamble the money you deposit before transacting it. Also, anecdotally, many scammers are avid gamblers and end up addicted to gambling after continued exposure to Stake. Thus, by creating an avenue for money laundering, Stake has an excellent funnel to convert people with large amounts of cryptocurrency into paying customers.
For Stake, getting customers to illegally deposit millions of dollars is a convenient strategy, since they are a casino. It's not like they are an exchange, in which case they would have limited upside for abetting money laundering. As a casino with a high conversion rate, they can expect to make around 20% from each gambling deposit, and up to 100%. If a big time scammer is scamming and depositing millions of dollars every month, Stake prefers to turn a blind eye, as those funds become pure cashflow for Stake.
If information about the scammer is ever requested, Stake will send it over - but they will never refund the amount the scammer lost, nor will they be asked to. This way, Stake receives a large cut of the scammed funds after carrying out laundering services for the scammer.
Conclusion
Here is a summary of Stake's modus operandi:
- Stake receives funds from hundreds of scammers and malicious actors. These are funds stolen from innocent victims. Victims send in reports constantly, and all of these addresses are tagged on Chainalysis, which all serious exchanges use, but Stake turns a blind eye to the source of these funds and does not carry out proper source of wealth checks on whale accounts.
- Scammers and malicious actors often gamble large amounts or get addicted to gambling after meeting wagering requirements. This becomes revenue for Stake that goes into Stake's pocket - sourced from victim funds.
- In the vast majority of cases, victims do not have the resources or contacts to get any justice whatsoever, so Stake makes all of the money unchecked. In rare cases, governments will request information about the accounts, but Stake never has to return any of the victim funds they knowingly accepted and turned into profit for themselves.
In conclusion, Stake is indirectly in bed with hundreds of crypto scammers and assists scammers in being more successful and more anonymous, while pocketing a significant percentage of victim funds for themselves through the casino revenue generated by willfully accepting funds from illegal sources without conducting standard checks.
The solution to this is relatively simple (and is industry standard):
- Check if deposits are from illegal sources using Chainalysis before accepting them
- Proactively work with victims to flag scammers using the platform, like Binance does, instead of waiting for the rare subpoena
- Make a good faith effort to prevent money laundering by locking accounts that seem suspicious or deposited from illegal or sanctioned platforms and file suspicious activity reports with the relevant authorities
Stake will not do this, since they are provably unethical (as demonstrated by their use of fake betting with popular influencers) and prefer to make a few hundred million extra a year instead of being honest.