Cryptocurrencies are seen by some as real opportunities due to their « decentralized » nature, independent of financial institutions (such as banks) and their high profitability (through private consensus and specific stock markets). For others, it’s more of a risky investment exposing inexperienced users to all kinds of scams.
Bitcoin, Ripple, Ethereum, Litcoin, Dash … the list of cryptocurrencies traded on the internet and social media today is endless. However, digital asset fraud cases recorded over the past decade are also hundreds and cost billions of dollars. A quick reminder of the 7 biggest crypto scams in history to educate potential investors.
OneCoin is a pyramid-based crypto scam created by Dr. Ignatova (Bulgarian) was initiated. The crypto scam hiding behind an MLM (Multi Level Marketing) ended with the disappearance of more than 3.5 billion euros.
In 2014, the OneCoin cryptocurrency was officially billed as « The Future Bitcoin Killer » to enrich all investors without first knowing how digital currencies work. At the time, Bitcoin was in decline due to the multiple attacks on crypto exchange platforms. So now was the right time to bring his heir to the top of the altcoins, OneCoin.
The system was essentially based on a well-coordinated marketing campaign aimed at creating a network of buyers and sellers whose profits would be paid by introducing new members. However, OneCoin was not a cryptocurrency and had no value as it was not based on a blockchain system.
After the sudden disappearance of Dr. Ignatova, OneCoin investors found that they had lost billions of dollars in this pseudocrypto.
BitConnect (or BCC) was born in 2016 and is considered a high-profit platform with a profit of up to 480% per year. It’s a (excellent) Ponzi program that has reached millions of investors.
The BitConnect system is easy to understand: investors had to put bitcoins into the platform’s account and then receive other BCC tokens. These tokens were blocked for a predefined period of time and received a daily interest rate of 1%, which could be 480% per year. The scheme is therefore simple and tempting, but there is a « catch », the price of the BCC can be manipulated by the platform, resulting in huge profits when it is not.
Like all Ponzi programs, BCC has always managed to keep interest rates up as long as investors continue to place BTC on the platform. However, the crypto influencers discovered the scam and alerted the community.
In the end, BCC had to release the blocked contracts and return the funds placed in BCC, of course with an insignificant value per token.
Similar to Bitconnect, Token Plus is a scam based on a Ponzi program that promises attractive capital gains on its investment platform.
Token Plus was launched in China in 2018 and attracted a lot of investors (especially Koreans) with its robotic trading program that nobody knew about and how it actually worked. Therefore, to participate it was enough to wager money and wait for the machine to generate profits for a return of 10% per month.
In order to maintain the gallery and avoid suspicion of the project that did not contain documentation or official partners, Token Plus used a concise communication policy on social networks (false ads, exchanges with investors, etc.). The team therefore promised that the funds donated would not only be used to participate in the program, but also to help build a full crypto ecosystem that includes wallets, crypto exchanges and more.
In just a few months, Plus Token executives managed to raise over $ 3 billion, and they didn’t give investors time to understand the scam in order to go away. Token Plus investigations still find and punish those responsible today.
Centra Tech is a Florida-based cryptocurrency company that has developed a scam over a supposedly revolutionary project. According to its leaders, it could transform the world of digital payments by introducing a universal debit card.
As usual with crypto project promoters, the team leaders organized an Initial Coin Offering (ICO), a call to invest in future assets with high potential. From that perspective, the fundraiser ended up being $ 25 million thanks to well-established communications. Very technical and promising terms were used: « The world’s first multi-blockchain crypto debit card » or « Smart Insurance Wallet » « .
Centra Tech offered investors the option of using a cryptocurrency withdrawal and spending card that can be used directly at ATMs that accept VISA and Mastercard. In truth, the team behind Centra Tech aimed at « decentralized » currency enthusiasts to collect and use their digital holdings like currencies without the bank intervening. Centra Tech has even recruited renowned ambassadors like boxing champ Floyd Mayweather and DJ Khaled to promote the program on social media.
When exiting, the Centra Tech ICO 2017 turned out to be a fraud. After close monitoring by the FBI, the case resulted in a withdrawal of funds, putting an end to the hopes of the organizers. In addition, the three co-founders of Centra-Tech were sued.
Quadriga CX was a crypto platform that went bankrupt following the alleged death of its young founder, resulting in the loss of keys for wallets valued at more than $ 160 million. Investigations by Canadian authorities, including the Ontario Securities Commission, found that the platform was a Ponzi program from the outset, with new funds used to fund member investments.
The Quadrica Cx case gained momentum after the disappearance of Gerald Cotten, the company’s CEO, in 2018. Before that, the crypto exchanges seemed to be working normally thanks to the large influx of new customers lending their funds to the pyramid scheme. .
The platform offered all the functionality of a standard crypto exchange site with menus and settings for buying and selling as well as currency conversions after registration. Quadriga Cx can be traded with other cryptos like Bitcoin, Ethereum, Litecoin, Bitcoin Cash etc. However, the exchange was only recorded in the internal network and not on the basis of a blockchain.
An official report from the commission said: “What happened at Quadriga was an old-fashioned scam wrapped in modern technology. The Ponzi scheme, unauthorized trading in client funds, and misappropriation of assets are nothing new.
Pincoin and Ifan are fake cryptocurrencies that were sold in Vietnam as part of an ICO (Initial Coin Offering) in 2018. Implemented by a local company called Modern Tech, the company attracted nearly 32,000 investors and grossed $ 660,000 million. It later turned out to be an exit scam.
ICOs are the traditional instruments for promoting new assets in the huge crypto market. When the Ifan hit the market, many technical and financial commitments were made, including a 48% per month interest rate on all investments after a four month lockdown.
As we often see in all Ponzi programs, the system worked fine as long as investors flowed in. After a while the passion subsided and the project managers couldn’t save all of the members’ interests. Investors in Pincoin and Ifan were given cryptocurrencies instead of cash, leading to complaints and ultimately the collapse of the fraudulent architecture.
Plexcoin is an exit crypto scam that lost $ 8 million in investments. The cryptocurrency was launched by three Canadians in 2017 and follows the standard path of ICOs to arouse victims’ curiosity. They were blinded by stratospheric returns on capital that peaked at 1,354% in a month. After Bitcoin’s bull run (which hit $ 20,000), the wealth generated by crypto investments was no longer a myth, and all offers were welcome. PlexCoin therefore took advantage of this.
In the fall of 2017, the company PlexCorps decided to start an ICO for Plexcoin, a crypto platform that promises extensive features such as digital wallets, payment cards and more. The scam looked promising as few people bothered to review the company’s documentation and fundamentals at the time. A simple presentation with a large introductory dossier on the project was enough to convince (but without an address, without a reference and without a name).
By the end of the ICO, $ 15 million had been raised and the machine started paying investors. However, the Security and Exchange Commission (SEC), the federal agency for financial markets, suspected the company and decided to freeze executives’ assets. After numerous legal interventions to clarify the legal functioning of PlexCoin, the SEC closed the case and referred Dominic Lacroix to court, which ordered him to restore the bitcoins in his possession.