Home Bitcoin Scams News Unpacking the 5 Largest Cryptocurrency Scams

Unpacking the 5 Largest Cryptocurrency Scams

14 min read

Cryptocurrencies have revolutionized the way in which the world seems to be at transactions – however they’ve additionally facilitated some monumental scams over the previous 9 years.

The success of Bitcoin and quite a few altcoins jumpstarted an industry that is incorporating Blockchain technology in quite a few progressive methods.

Whereas the neatest minds have created some game-changing firms backed by the ability of Blockchain and cryptocurrencies, nefarious minds have additionally jumped on the bandwagon, fleecing unwitting traders in elaborate scams.

ICOs fever spawns huge scams

Since Bitcoin’s inception in 2009, individuals have grow to be more and more enamoured with the thought of Blockchain know-how. Over time, builders and enterprise minds started creating their very own options with this decentralized ledger know-how.

This led to the event of Ethereum and different digital currencies, with the previous partly answerable for a boom in initial coin offerings (ICO) in 2017.

As an ICO is actually a spherical of public discovering and is often launched by a tech startup which sells inhouse cryptocurrency tokens to potential traders, these traders purchase tokens within the hopes that firm will launch its product and the tokens will develop in worth.

An ICO will not be not like an initial public offering, which is when a conventional firm makes its share accessible for buy to most people. In reality, that is the place the ICO moniker stems from.

On condition that there are not any guarantees that an ICO will make good on its future plans, traders take a leap of religion once they half methods with their cash. This in fact has led to a plethora of scams billed as ICOs, which have seen hundreds of traders ignored of pocket.

Listed here are 5 of the most important ICO scams in historical past.

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Pincoin and iFan

The latest large-scale ICO scam grabbed headlines in April. Two ICOs, run by the identical firm working out of Vietnam, are believed to have swindled round 32,000 traders of a mixed $660 mln.

The corporate in query, Trendy Tech, packed up its workplaces in Ho Chi Minh metropolis final month, making off with traders cash. The rip-off is believed to be the most important in ICO historical past.

A lot of traders protested outdoors the vacant workplaces within the metropolis on April eight, after the corporate refused to course of money withdrawals. The town’s administration has ordered police to investigate the fraud.

Each ICOs have been labeled as multi-level marketing scams. iFan was marketed a social media platform for celebrities to advertise their content material to followers. In the meantime Pincoin was promising 40 % month-to-month returns on investments made. The mission claimed to be constructing a web-based platform encompassing an advert community, public sale and funding portal and peer-to-peer market constructed on Blockchain know-how.


OneCoin has been the topic of quite a few investigations over the previous 18 months. Formally labelled as a ‘clear ponzi scheme’ in India in July 2017, it was fined €2.5 mln by Italian authorities two months later.

Cointelegraph has previously warned readers to remain away from the operation, as OneCoin doesn’t even function a reputable decentralized cryptocurrency. Moreover it doesn’t have a public ledger and its Bulgarian workplaces were raided in January with servers seized by authorities as worldwide investigations and court docket circumstances proceed in opposition to the corporate.

Scandals in international locations world wide summed up the truth that OneCoin is certainly a large rip-off.

In 2016, over $30 mln dollars were seized by Chinese authorities investigating the OneCoin operation within the nation.

The corporate claimed to be formally licensed in Vietnam final yr as effectively, however this was later refuted by the country’s government. Greater than 5 international locations have warned traders of the dangers concerned for these selecting to put money into the corporate, together with Thailand, Croatia, Bulgaria, Finland and Norway.


Lengthy accused of being a ponzi scheme, Bitconnect discontinued operations in January within the wake of a stop and desist order from two American monetary regulators.

Customers exchanged Bitcoin for Bitconnect Coin (BCC) on the Bitconnect platform, launched in Jan. 2017, and have been promised astronomical returns on their investments.

Moreover the corporate ran a lending program, the place customers lent BCC out to different customers to make curiosity relying on how a lot BCC they’d lent on the platform. There was additionally a typical, ponzi scheme referral system.

Nonetheless, the wider cryptocurrency was hardly sympathetic when the operation shut down its lending scheme and alternate platform.

A lot of customers have since launched a class action lawsuit against Bitconnect to recoup misplaced funds – amounting to $700,000 for his or her explicit declare.


This explicit ICO was nipped in the bud in Dec. 2017 after being labelled a typical return on funding ponzi scheme. Plexcorp was promising traders over 1300 % return on funding per thirty days earlier than the US Securities and Change Fee (SEC) ordered the corporate to cease operations.

Over $15 mln had been raised throughout the Plexcoin ICO. Fortunately the entire funds have been frozen by the SEC and founder Dominic Lacroix was jailed.

Curiously, it was the primary time the SEC stepped in and charged an ICO by way of its Cyber Crime Unit. Plexcoin’s choices was additionally classed as a safety, therefore the SEC’s choice to press fees.


Having been endorsed by the likes of famous person boxer Floyd Mayweather and DJ Khaled, Centratech was thrust into the highlight for its supposed Visa and MasterCard debit card service that will permit customers to transform cryptocurrencies to fiat.

Two of the founders have since been arrested on fraud fees referring to the ICO, which raised round $32 mln, according to Ars Technica.

The SEC highlighted the acute lengths the founders, Sohrab “Sam” Sharma and Robert Farkas, went to as a way to dupe traders.

“The SEC additionally alleges that to advertise the ICO, Sharma and Farkas created fictional executives with spectacular biographies, posted false or deceptive advertising and marketing supplies to Centra’s web site, and paid celebrities to tout the ICO on social media.”

The US regulator is looking to seek permanent injunctions, and intends to drive Sharma and Farkas to return stolen funds with curiosity. The pair may also be barred from serving as firm officers or administrators, and be banned from collaborating in any securities choices.

Traders have to wisen up

As these 5 scams present, fraudsters will go to extraordinary lengths to swindle unsuspecting traders.

It highlights a necessity for traders to do their due diligence relating to funding selections.

Cointelegraph reached out to American investor and founding father of Ability Incubator Chris Dunn for touch upon the Pincoin and iFan debacle.Total, Dunn believes that the cryptocurrency neighborhood must grow to be extra discerning in the direction of new ICOs. If not, governments world wide are prone to take sterner stances in the direction of cryptocurrencies generally.

“The crypto neighborhood wants to advertise monetary schooling and moral funding practices, in any other case governments will over-regulate and stifle actual innovation. The best strategy to shield traders is thru schooling. Traders have to discover ways to consider funding alternatives, rapidly spot scams, and know how you can handle danger.”

ICOs not lower from the identical fabric

Sadly, scams like these are a blemish for cryptocurrencies generally. Whereas they function in isolation, the truth that they experience on the cryptocurrency wave smears the broader neighborhood, which is driving innovation in quite a few areas.

It supplies a spotlight level for skeptics to assault cryptocurrencies, when in actual fact these scams are something however reputable ICOs and cryptocurrencies.

What the better public and authorities have to keep away from is assuming that ICOs are all lower from the identical fabric. Undoubtedly, there are criminals seeking to benefit from the hype of a brand new know-how. Nonetheless that doesn’t take away from the sterling work of a number of the brightest minds within the IT business.

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