In this article we explain how the warning signs for the closure of one of the oldest crypto exchanges, Trade Satoshi, were all there, and how they are likely passing off an exit scam as just another closure.

Spotting a Scam Exchange: Trade Satoshi

 

After being plagued with problems and allegations of wrongdoing for years, one of cryptocurrency’s oldest altcoin exchanges, Trade Satoshi, is finally shutting down. The company made the announcement via its Twitter page, which was immediately flooded with comments by customers complaining about not being able to withdraw their coins. Additionally, some customers recently discovered that their 2-FA authentication codes were no longer working, and others were hit with surprise KYC documentation requests. Some customers are now locked out of their account altogether.

Within 24 hours of the announcement, the exchange went into maintenance mode, meaning it was no longer accessibly by anybody.

Though it has since come back online for now, the potential that this could happen again worrying as Trade Satoshi is only giving its users until March 1st in order to withdraw their coins, which is something of an impossibility if the exchange is closed for maintenance or refusing to open withdrawals for processing. The BTC price in terms of USDT tells the tale of coins that either do not exist or cannot be moved, currently hovering at about $3920 a coin, though previously dipping into the $1000 range.

This type of market-unbound price action suggests that users are panic selling their BTC as it cannot be moved off the exchange, though it is uncertain whether Tether itself (or any other coins) could also be moved off the exchange. Trade Satoshi hosted over 120 different pairings at the time of their announcements, though usually the withdrawal feature for about 30 of them was down at any given time. At the time of the writing of this article, it was known that at least BTC could not be withdrawn, as evidenced by a plethora of complaints in their Twitter feed.

An Exchange for the Little Guy

Trade Satoshi was launched in late 2015 with little fanfare, marketing itself as an “educational exchange” which novice traders could use to dip their toes into the world of cryptocurrency trading. It managed to gain a certain degree of popularity and respect through the years by listing several smaller, independent coins that could not gain listings on other exchanges.

For several years, the barrier to entry on Trade Satoshi was relatively low compared to bigger operations. Whereas most exchanges might have charged 3 BTC or more for a listing, Trade Satoshi only charged 1 BTC, or sometimes even its equivalent in the coin being listed. Though it never really had tremendous volume, it offered unique trading opportunities that couldn’t be found elsewhere, which made it the champion of scores of obscure altcoins.

Not much is known about Trade Satoshi’s founder, CEO, and possibly lone employee, Francesco Alibrandi. Though various exchange review websites use the same copy pasta info about him being a “well-known bitcoin trader,” “cryptocurrency guru,” or “crypto business person,” when they do feature a picture next to him, it is not his picture but rather a developer from the Litecoin team with which he has no relation. He is believed to live in the metropolitan area of Sydney, Australia, and lives a very private life, out of the limelight.

What is known about Alibrandi is that he was a shareholder of the now-defunct Cryptopia exchange, and also hired Cryptopia’s exchange developer to help design the interface of their exchange.  What is also known about him is that after the dissolution of the U.K. registered version of his company, Tradesatoshi Ltd, the company opened again in Hong Kong in 2018, probably encouraged by the government’s even looser standards for incorporating businesses. As the listed address in Hong Kong for Tradesatoshi Ltd is simply a mailbox service and they do not have a physical headquarters, there is no way to get in touch with Alibrandi, meaning customers are stranded and have little recourse outside of strong legal action.

Very Insider Trading

Throughout most of its 4+ years in operation, Trade Satoshi was plagued with problems and reports that it was withholding its customers’ funds, locking them out of their accounts, or banning their IP addresses from accessing the exchange altogether. It was also known to randomly announce coin delistings for no apparent reason and up their withdrawal minimums and fees to absurd amounts for coins about to be delisted.

In one bizarre story, developers for a coin called Safex (SFT) reported to crypto publication Altcoin Buzz that they traced large amounts of coins flowing from the Safex hot wallet for the now-defunct Cryptopia exchange directly into the Safex hot wallet for Trade Satoshi. Shortly thereafter, Cryptonia decided to delist Safex with no prior warning, a move explained by Safex advisor Richard Bate as having the following rationale:

“Over 18 months ago, Safex was delisted from Cryptopia, apparently due to an “aggressive community member”. The former CTO of Cryptopia, Adam Clark, decided on the spot in Discord to delist Safex because someone (apparently aggressive) asked when the wallets would come out of maintenance.

This seemed like a very unproportional response to a lone member who didn’t represent the entire community. So we did some digging.

Reviewing the known wallets of Safex on Cryptopia, we noticed big trades directly between the hot-wallets of Cryptopia and TradeSatoshi. (The unusual part here is that you don’t deposit to the main wallets on either exchange, you deposit to a personal address so they know how much you’ve deposited.

Our running theory was that someone internally on both sides was attempting to do arbitration trades and managed to lose a lot of Safex in the process.

This was further confirmed later when they didn’t have the Safex to cover the withdrawals of those who had funds left on their Cryptopia account. We saw regular withdrawals from TS [TradeSatoshi] straight to the Cryptopia hot-wallet which co-inside with the timing of when certain members suddenly got their funds back…

A few months later, we learn that the CTO, Adam Clark, had been “let go” of Cryptopia. My guess is that something was discovered that was bad enough to force one of the founding directors of the company out.

A few months later after that, we find that Adam started working for Trade Satoshi as a Senior Developer.” – Richard Bate, Safex advisor

In April 2019, Trade Satoshi announced they were also delisting Safex, but sped up the delisting date by a month in May, to the consternation of Safex holders. By June, Coinmarketcap.com was warning its visitors that Safex deposits to the exchange were being withheld:

Though Adam Clark’s LinkedIn profile says he stopped working for Trade Satoshi in November 2018, he has now been connected to 2 exchanges that ceased operation under mysterious circumstances within a year of each other.

Using KYC as an Excuse to Steal Coins from Customers

Despite its problems, the exchange retained a decent amount of trust and support from the crypto trading community — up until March 2019, that is. It was around this time that Trade Satoshi, an exchange which had previously allowed smaller customers (of which more were) to make withdrawals free of Know Your Customer (KYC) requirements, suddenly decided to spring KYC requirements on everybody.

“On March 09, my account sudden log-out. When I re-login, it demands KYC. I couldn’t access my assets and all I have is KYC request. I contacted the support, all is excuse is KYC activated whenever an account detected abnormal activities. I am thinking, been using TradeSatoshi for yrs, perhaps from the start, my activities are always same as regular routine. Nothing has changed since unless I am away for days.

People, be careful if you have significant any in TradeSatoshi, withdrawal it now before you facing same nightmare I had. TradeSatoshi is stepping into Bittrex bullshit stunt the pull yrs ago to scam users money help offset their lost. Even if you KYC it, there wouldn’t be guarantee you will get your funds back because your account record been wipe clean.” – Reddit user CreativeK2018

Dozens of complaints about the practice sprang up across multiple social media sites with traders panicked as they found themselves locked out of their funds and faced with a decision as to whether or not they trusted the exchange with personally-revealing KYC documentation. What’s worse was that several users who did choose to comply with the KYC request found that their KYC info was rejected, as the name or birth date on the document submitted frequently didn’t match what was originally entered upon signing up for the exchange.

Perhaps the worst part is that a user’s information on the exchange could not be edited to match what was on the document, as these fields had been grayed out and were no longer alterable. All in all, it looked like Trade Satoshi was simply using KYC as an excuse to steal the coins of their customers, and almost their entire user base was in an outrage.

Previous to their March announcement, Trade Satoshi had no such KYC requirement for users withdrawing under $2000 worth of crypto per day – as is standard for many exchanges – but now they were simply locked out of their funds altogether, not able to trade, withdraw, or in many cases even write support tickets and ask for help. The situation was aptly described by Bitcointalk forum user DiHunter:

“I feel sorry for the users of those coins which will be traded only on Traidsatoshi. The lack of professionalism of their staff leads to the fact that the wallets on this exchange are staying at maintenance too often and for too long, and the deposits and withdrawals regularly take unacceptable time…

Everyone can check the list of wallets at tradesatoshi and find out, that a significant part of them are on maintenance, often for a very long time…

All these blocked users had the first-level verification from Tradesatoshi. And they could trade with a withdrawal limit of up to $2000 equivalent. So all their deposits were legal. But now they are freezed.

Let them withdraw their funds prior blocking. Then they can freely decide, if they want to deal with such an exchange.” – Bitcointalk user DiHunter

Unfortunately, most Trade Satoshi customers were never given this opportunity, their coins forever lost due to a completely unethical introduction of terms.

The reputation of the exchange was permanently battered, and afterward it was a rare day when they ended up processing over 50 BTC worth of transactions, which rendered them one of the smallest of 200+ exchanges tracked by Coinmarketcap.com.

Conclusion: Lessons Learned

With such an extensive and well-documented history of unprofessional and duplicitous behavior, it should have been easy to see that Trade Satoshi was not on the up-and-up, and would probably end up pulling an exit scam someday. However shady its practices had become, it managed to maintain a core customer base until the bitter end, which mainly consisted of those holding coins that simply couldn’t be traded elsewhere.

Unfortunately, they are now out of not only their obscure altcoin holdings but BTC and USDT holdings as well, leaving only with lessons learned about understanding risk/reward ratios and the importance of performing due diligence when researching an exchange to entrust with your cryptocurrency. Certainly all the signs of a scam exchange had been there for quite some time, with a combination of greed and naiveté to blame for the losses of its users, in addition to the fraudulent actions of its administrator(s).