There has been an increasing level of scams happening in the cryptocurrency world today and a lot of scams have made people doubt this trustless system. Educating and familiarising ourselves with these scams gives a great insight into avoiding cryptocurrency scams in the future.
Bitconnect is one of the biggest cryptocurrency scams that inspired the cryptocurrency investment scams being used today. Bitconnect launched the Initial Coin Offering that ushered it into operation in December 2016.
Bitconnect, using a Ponzi scheme model, promised investors a 40% return on their investment per month on any Bitcoin that was deposited in this scheme. Due to this irresistible offer, many new and old investors trooped in to participate in the Bitconnect investment giving the scam project market dominance in the early months of 2017.
This meteoric rise in participation shot Bitconnect’s native token up from a meagre $0.14 and it traded for above $400 within a few weeks.
The company continued to gain popularity despite the warnings from media and top names in the crypto industry. Vitalik Buterin, the Ethereum founder, was questioned on social media during the peak of Bitconnect’s reign, and he replied that “Yeah, if 1%/day is what they offer, then that’s a Ponzi.”
The aggressive marketing employed by their team of marketers converted many more users into this scam till the platform crashed with millions in dollars of investor’s money.
The fall came when their insane growth triggered the media’s attention and got them into several lawsuits. This triggered a lot of panic within their community on Reddit and other social media platforms.
They concluded operations and made away with investors’ money by causing a server downtime on their website and shutting down their services.
The Bitconnect scam happened when crypto knowledge was not very widespread, hence, they attributed their profit-making to the blockchain, and many investors fell for it, earning Bitconnect’s position as one of the most prominent cryptocurrency scams of all time.
Plexcoin was founded in mid-2017. The company presented a new cryptocurrency and other features. Plexwallet, Plexcard and Plexbank. Potential investors were promised a truly fairytale return. 1300% in 29days. Between July and September 2017, the Plexcoin ICO was held, raising $15,000,000 from thousands of investors.
In December 2018, the US security and exchange commission froze Plexcoin assets and filed charges against both of the founders, Dominic Lacroix and his partner, Sabrina Paradis Royer. An indigent of Canada, Lacroix was previously found guilty of a financial crime after defrauding investors in some loan business.
They claimed their token, the Plexcoin, was backed by physical assets like real estate and diamonds.
After the misappropriation of over $200 000 in investors’ money, it wasn’t long before the Security and Exchange Commission came after them.
They were later charged with multiple cases of fraud. After a thorough investigation, they confessed to living large with investors’ money. The court then asked them to pay half of the money from Plexcoin’s ICO and $1 million as a civil punishment fine.
Although the media tried to convince people to stay away from this company. One coin still managed to raise $30M from 3 million investors who were brainwashed during a series of international seminars. The controversy began in early 2017. The study revealed that one coin hardly used blockchain to raise funds. But the claims were legally denied back then.
However, it wasn’t enough to reassure the community. The mastermind behind the scam, Ruja Ignatova, disappeared in 2017 after a huge wave of investigation action and arrest by United States prosecutors. Ruja was disappointed when a US warrant was filed for her arrest, and her brother took over the scheme.
OneCoin, which started operation in late 2014 touted as a decentralized cryptocurrency, involved educating the masses about cryptocurrency and how to trade it. They included a lot of packages on their website with a token reward which can be used to mine OneCoins.
They created their exchange to trade cryptocurrency, and after a series of back and forth, they shut down in January 2017, giving flimsy excuses.
Centra Tech started as a regular project offering a crypto debit card solution. A tremendous marketing campaign supported Centra with celebs like DJ Khaled and Floyd Mayweather spreading the word across social media. Between July 2017 and October 201, Centra raised $32,000,000 from thousands of investors via an ICO. Such success drew lots of attention to the Miami-based company.
Robert Farkas, one of the co-founders of Centra Tech and other partners, disguised the public as an executive team. They claimed they managed to gain money transmitter licences in over 38 states. The con artists also fabricated partnerships with big institutional names like Mastercard, Visa et cetera.
The Security Exchange and Exchange Commission arrested those involved in 2018, including Farkas. In 2020, the United States Marshal Service sold ether cryptocurrency worth $33.4 million seized from CentraTech alongside his Rolex wristwatch, all proceeds from the scam.
Pincoin is one of the scams that has been the largest and most effective in recent years. Pincoin was introduced to the Vietnamese cryptocurrency market in January of this year and it was yet another massive investment fraud that received $870 million in funding from 32,000 users
Rather than being compensated in cash, investors were given a new cryptocurrency called iFan before the Pincoin crew vanished along with investors’ funds.
Other prominent cryptocurrency scams include ACChain, Savedriod, Defi100, and many others. Cryptocurrency scam is growing with increased cryptocurrency adoption, and educating yourself on how to secure yourself from them will go a long way in shielding you from scams in the future.