Satowallet Pulled an Exit Scam, After Months of Red Flags
Satowallet, a crypto storage service, saw reports of blocked withdrawals, and the founders have not appeared in two days.
Satowallet, a crypto storage service based in Nigeria, has apparently pulled an exit scam. The wallet was custodial, meaning the funds were controlled by the Satowallet operators, and not the customers. Thus, withdrawals were possible only on demand, making Satowallet akin to storing coins on an exchange.
The Satowallet co-founder explained away the problems with technical issues.
However, Medium has blocked the explanation, citing potential violations. This fact refutes the claims that the losses were only due to a technicality, and points to a full-on exchange exit scam.
Usually, a wallet will not control the actual assets, and a user has full freedom to move the coins using a private key. While there are tainted or faked wallets, most cannot take away or hold back funds.
Satowallet was an exchange and a storage platform launched in 2017, with offices in Abuja, Nigeria. The wallet founders claim the company originates in Abu Dhabi.
Before the team went dark, there were reports of blocked withdrawals for months. At first, Satowallet claimed funds were lost to a hacker, due to an exploit. Then, the exchange delayed withdrawals by setting up a KYC procedure that stretched for days. Then, Satowallet exchange enforced manual withdrawals.
Satowallet blamed OVH.com, the data center provider, for the loss of “nodes” and access to the wallets. But the system itself was made to hold users’ funds, without sufficient safeguards. Since August 2019, no one has made a withdrawal, before the final messages from the team a few days ago.
Wallet risks remain high, but so far only involve problems like closed code or malicious injections. But small-scale exchanges and niche services are one of the riskiest in the crypto space.
Perhaps the most damaging thing that Satowallet did was to keep its site open for deposits and trades, while blocking withdrawals. This allowed more users to be scammed, even months after the exchange and wallet were raising red flags before the final collapse.