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The Crypto Con: An Examination of the 10 Biggest Crypto Scams and How to Stay Protected



In the exciting and rapidly evolving world of cryptocurrencies, opportunities for growth and innovation abound. However, as with any lucrative field, it also attracts its fair share of unscrupulous individuals and organizations looking to take advantage of unsuspecting investors. The purpose of this article is to shed light on some of the biggest scams in the history of cryptocurrency, not to instill fear, but to educate and equip readers with the knowledge to navigate this landscape safely.


The realm of digital currencies, while offering immense possibilities, requires a heightened level of caution and awareness. As we delve into the details of the top 10 biggest crypto scams, we aim to provide you with a clear understanding of their mechanisms, enabling you to identify potential red flags in your crypto journey. Remember, knowledge is your best defense in the crypto space. Let's embark on this journey of learning and vigilance together.

Top 10 Biggest Crypto Scams


1. BitConnect

BitConnect was an open-source cryptocurrency launched in 2016, which was closely tied to a high-yield investment program, widely recognized as a Ponzi scheme. The platform was developed by Satish Kumbhani and was operational until 2018. BitConnect Coin (BCC) was the platform's native cryptocurrency, and the scheme revolved around trading Bitcoin for BCC.


The platform promised high returns to its investors through a lending program. Investors were encouraged to exchange their Bitcoin for BCC and were promised daily interest payments calculated by a so-called "trading bot". The liquidity of BCC was supposed to fund users' ability to exchange their earnings for Bitcoin.


However, the scheme began to unravel when the government of the United Kingdom issued BitConnect a notice in November 2017, giving it two months to prove its legitimacy. In January 2018, Texas State Securities Board issued a cease and desist order to the company, labeling it a Ponzi scheme and citing failings in user earnings transparency and misleading statements.


On January 17, 2018, BitConnect shut down its operations, and the value of BCC crashed by 92% immediately after. BitConnect announced it would refund its loans, but the internal exchange price and liquidity collapsed, resulting in a nearly complete loss of value.


The founder, Satish Kumbhani, was sued by the U.S. Securities and Exchange Commission in September 2021, alleging that BitConnect defrauded U.S. investors a total of $2 billion. The United States Department of Justice also initiated criminal charges against Kumbhani in February 2022, including money laundering and fraud.


The BitConnect scam serves as a stark reminder of the potential pitfalls in the cryptocurrency space. It underscores the importance of due diligence and the need for regulatory oversight in the rapidly evolving world of cryptocurrencies.


2. OneCoin OneCoin is a notorious cryptocurrency scam that was orchestrated by offshore companies OneCoin Ltd, based in Bulgaria and registered in Dubai, and OneLife Network Ltd, registered in Belize. These companies were both founded by Ruja Ignatova in collaboration with Sebastian Greenwood. OneCoin is often classified as a Ponzi scheme due to its organizational structure that involved paying early investors using money obtained from newer ones. It was also a pyramid scheme as it involved the recruitment of investors without providing any actual product.


The company conducted a database entry scam, simulating transactions that were not registered by an actual blockchain, and there was no mining behind the apparent cryptocurrency release and circulation. OneCoin was described by The Times as "one of the biggest scams in history". US prosecutors have alleged that the scheme brought in approximately $4 billion worldwide. In China, law enforcement recovered 1.7 billion yuan (US$267.5 million) while prosecuting 98 people.


Ignatova disappeared in 2017 near the time a secret US warrant was filed for her arrest and her brother, Konstantin Ignatov, took her position. Most of the leaders have now disappeared or been arrested, though Ignatova has escaped arrest. Greenwood was arrested in 2018, as was Konstantin Ignatov in March 2019. In November 2019, Ignatov pleaded guilty to charges of money laundering and fraud. The total maximum sentence for the charges is 90 years in prison.


OneCoin was launched in late 2014. It was not a decentralized cryptocurrency but rather a centralized currency hosted on OneCoin Ltd's servers. According to OneCoin, its main business was selling educational material for cryptocurrency trading: investors could buy "educational packages" costing anywhere from 100 euros to 118,000 euros. However, much of the content in those packages was plagiarized from various free sources, including Wikipedia. Investors also received "tokens" that could be assigned to mine OneCoins. Mining was said to be taking place at two sites in Bulgaria and one in Hong Kong.


3. Centra Tech Centra Tech was a Miami-based company co-founded by Sohrab Sharma, Robert Farkas, and Raymond Trapani. The company claimed to offer cryptocurrency-related financial products, including a purported debit card, the "Centra Card," that supposedly allowed users to make purchases using cryptocurrency at establishments accepting Visa or Mastercard payment cards.


From July 30, 2017, through October 5, 2017, the founders solicited investors to purchase unregistered securities, in the form of digital tokens issued by Centra Tech, through a so-called "initial coin offering" or "ICO." They used material misrepresentations and omissions to solicit investors, including claims of partnerships with Bancorp, Visa, and Mastercard, and the existence of money transmitter licenses in 38 states. They also fabricated executive team members to dupe investors.


The fraudulent misrepresentations and omissions helped secure investments worth more than $25 million. At certain times in 2018, as the fraud scheme was ongoing, those funds were worth more than $60 million. However, the claims made by the founders were false. The supposed CEO and another supposed member of Centra Tech's executive team were fictional people, and Centra Tech had no such partnerships with Bancorp, Visa, or Mastercard, and did not have such licenses in a number of those states.


In 2018, the FBI seized 100,000 Ether units, consisting of digital funds raised from victims who purchased digital tokens issued by Centra Tech. The United States Marshals Service sold the seized Ether units for approximately $33.4 million.


Sohrab Sharma was sentenced to eight years in prison in connection with his leading role in the scheme. He was also sentenced to three years of supervised release and ordered to pay a fine of $20,000. He was further ordered to forfeit $36,088,960. The forfeited funds and other forfeited fraud proceeds will be available for potential use in a remission program that the Department of Justice intends to create to compensate victims of the Centra Tech fraud.



4. Pincoin and Ifan Pincoin and Ifan were two Initial Coin Offering (ICO) projects that turned out to be scams, orchestrated by a company in Vietnam called Modern Tech, based out of Ho Chi Minh City. The company claimed to be from Singapore and India, but these were false pretenses used to gain the trust of investors.


Pincoin was the first project launched by Modern Tech, promising constant returns to investors. It was followed by Ifan, which was presented as a social network token for artists. Both projects were able to attract a significant number of investors due to their seemingly innovative ideas and the promise of high returns.


However, the reality was far from what was promised. The company managed to scam over 32,000 people, accumulating over $660 million before disappearing. This makes it one of the largest scams in ICO history. The scam was so significant that it led to protests by investors in Vietnam.


The Pincoin and Ifan scams serve as a stark reminder of the potential risks involved in investing in ICOs and the importance of conducting thorough due diligence before investing large sums of money. It also highlights the need for regulatory oversight in the cryptocurrency space to protect investors from such fraudulent schemes.



5. PlusToken PlusToken was a Ponzi scheme that operated worldwide, primarily attracting investors from China and South Korea. The scheme began in April 2018, offering monthly payments to users of its cryptocurrency wallet. There was also a token associated with it called Plus.


The total amount of cryptocurrency taken by PlusToken was estimated to be worth between $2 and $2.9 billion, based on 2019 prices. The selling of cryptocurrencies from PlusToken was speculated to have been the cause of price drops in Bitcoin.


In June 2019, six Chinese nationals associated with the scheme were arrested in Vanuatu and deported so they could face trial in China. In July 2020, China's Ministry of Public Security announced that 27 "major criminal suspects" and 82 "key" members of PlusToken had been arrested.


In November 2020, a court in Jiangsu sentenced ringleaders behind the scheme to between two and eleven years in prison. The PlusToken scam is a stark reminder of the potential risks involved in cryptocurrency investments and the importance of conducting thorough due diligence before investing.



6. Plexcoin Plexcoin was a cryptocurrency project launched by Dominic Lacroix, a Canadian entrepreneur. The project was marketed as an Initial Coin Offering (ICO) that promised a 1,354% profit in less than 29 days. This high return on investment attracted many investors who were looking to capitalize on the booming cryptocurrency market.


However, the U.S. Securities and Exchange Commission (SEC) identified Plexcoin as a scam and halted its ICO. The SEC filed a complaint against Lacroix and PlexCorps, the company behind Plexcoin, alleging that they sold securities claiming investments in PlexCoin would yield a high profit in a short period.


The SEC's action against Plexcoin marked the first time it had intervened in an ICO for fraud. Lacroix and PlexCorps were charged with violating anti-fraud provisions, and the SEC sought to freeze their assets.


Despite the legal actions, the Plexcoin scam managed to raise up to $15 million from thousands of investors. The case serves as a stark reminder of the potential risks associated with investing in ICOs and the importance of conducting thorough due diligence before investing.



7. MiningMax MiningMax was a cryptocurrency mining company that was revealed to be a Ponzi scheme. The operation was based in the United States but was primarily targeting investors in South Korea. The company promised high returns to investors who purchased their mining products.


However, the company's operations were not as they seemed. MiningMax was not actually mining any cryptocurrencies. Instead, they were using the funds from new investors to pay off the older ones, a classic sign of a Ponzi scheme.


The scam was able to raise an estimated $250 million from investors before it was exposed. More than 20 executives and top investors of MiningMax were arrested for their involvement in the scam, which affected around 18,000 people.


The MiningMax scam serves as a stark reminder of the potential risks involved in cryptocurrency investments. It underscores the importance of conducting thorough research and due diligence before investing in such ventures.



8. Bitcard Bitcard was a cryptocurrency platform that lured investors with the promise of high returns on their investment. The platform was later exposed as a scam, and any cryptocurrency sent to them was lost forever.


The scam was primarily exposed by users on platforms like Reddit, where they shared their experiences and warned others about the potential risks of investing in Bitcard. The platform was also flagged by various online scam detection websites, further confirming its fraudulent nature.


Despite these warnings, many investors were drawn in by the promise of high returns and ended up losing their investments. The Bitcard scam serves as a stark reminder of the potential risks associated with cryptocurrency investments and the importance of conducting thorough due diligence before investing.



9. AriseBank AriseBank was a Dallas-based company that claimed to be the world's first "decentralized bank". The company, co-founded by Jared Rice Sr. and Stanley Ford, used social media, a celebrity endorsement, and other wide dissemination tactics to raise what it claimed to be $600 million of its $1 billion goal in just two months.


AriseBank and its co-founders allegedly offered and sold unregistered investments in their purported "AriseCoin" cryptocurrency. They falsely stated that they had purchased an FDIC-insured bank, which enabled them to offer customers FDIC-insured accounts. They also claimed to offer customers the ability to obtain an AriseBank-branded VISA card to spend any of the 700-plus cryptocurrencies. However, these claims were false, and AriseBank also failed to disclose the criminal background of key executives.


The Securities and Exchange Commission (SEC) intervened, obtaining a court order to halt the fraudulent initial coin offering (ICO). The SEC sought emergency relief to prevent investors from being victimized by what they alleged to be an outright scam. The court approved an emergency asset freeze over AriseBank, Rice, and Ford and appointed a receiver over AriseBank, including over its digital assets.


In August 2021, AriseBank CEO Jared Rice, Sr. was sentenced to five years for his role in the $4 million crypto scheme. The SEC's action against AriseBank marked a significant step in the Commission's efforts to regulate the emerging digital securities marketplace and protect investors from fraudulent schemes.


10. My Big Coin My Big Coin was a cryptocurrency scam orchestrated by Randall Crater, the founder of the now-defunct Nevada-based digital assets company My Big Coin Pay Inc. The company was accused of defrauding investors of more than $6 million.


The scam involved the sale of a fraudulent digital currency, which Crater marketed as a virtual payment service. Crater and his associates falsely claimed that the coin was backed by $300 million in gold, oil, and other assets, thereby luring investors into the scheme.


In January 2018, the Commodity Futures Trading Commission (CFTC) charged Randall Crater, Mark Gillespie, and My Big Coin Pay, Inc. with commodity fraud and misappropriation in an ongoing virtual currency scam. The case was unsealed, revealing the fraudulent activities of the company and its founders.


In July 2022, Randall Crater was convicted of his fraudulent activities, and in January 2023, he was sentenced to more than eight years in prison. The My Big Coin scam serves as a stark reminder of the potential risks involved in cryptocurrency investments and the importance of conducting thorough due diligence before investing.


Understanding Crypto Scams


Cryptocurrency scams have become increasingly prevalent as digital currencies gain popularity. These scams are designed to trick investors into parting with their money under the guise of a promising investment opportunity. Understanding the common characteristics and execution methods of these scams can help potential investors avoid falling victim to them.


Common Characteristics of Crypto Scams

Crypto scams often share several common characteristics. Firstly, they typically promise high returns with little to no risk. This is a significant red flag as all investments carry some level of risk, and a guarantee of high returns is often unrealistic.


Secondly, they often involve unregistered sellers. Legitimate cryptocurrency platforms and investment opportunities are usually registered with the appropriate regulatory bodies. If a company or individual is not registered, it's a potential sign of a scam.


Thirdly, crypto scams often use complex jargon and technical language to confuse potential investors. This can make the investment seem more legitimate and sophisticated than it actually is.


Lastly, many crypto scams involve pressure tactics. Scammers may try to rush you into making an investment, claiming that the opportunity is limited and urging you to act quickly.


How Crypto Scams are Executed


Crypto scams are typically executed in a few key ways. One common method is through phishing scams, where scammers trick individuals into providing sensitive information, such as wallet addresses and private keys, by posing as a legitimate entity.


Another common method is through Ponzi or pyramid schemes. In these scams, the returns for older investors are paid by the funds of new investors. Once the flow of new investors slows down, the scheme collapses.


Fake ICOs (Initial Coin Offerings) are another common scam. Scammers create a fake ICO, hype it up with marketing tactics, and then disappear once they've collected enough money.


Finally, pump and dump schemes are also common in the crypto world. In these scams, a small group of investors will inflate the price of a coin by spreading misleading or outright false news to attract new buyers. Once the price has been pumped up, these investors will sell off their coins, causing the price to crash and leaving the new investors with significant losses.


By understanding these common characteristics and methods, individuals can better protect themselves against potential crypto scams. Always remember to conduct thorough research and due diligence before making any investment decisions.

How to Avoid Falling into Crypto Scams

Navigating the world of cryptocurrencies can be complex and challenging, especially with the presence of scams that aim to exploit unsuspecting investors. However, by taking certain precautions, you can protect yourself and your investments from falling into these traps.


Do Your Own Research


The first and most crucial step is to conduct thorough research. Before investing in any cryptocurrency or platform, take the time to understand what you are investing in. Read the whitepaper, understand the use case, and research the team behind the project. Look for reviews and feedback from other users and experts in the field.


Understand the Role of Regulatory Bodies

Regulatory bodies play a crucial role in protecting investors from scams and fraudulent activities. Ensure that any platform or service you use complies with the regulations set by these bodies. In the U.S., for example, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are key regulatory bodies. If a platform is not registered with these or similar bodies, it could be a red flag.


Recognize Red Flags Be aware of the common red flags associated with crypto scams. These include guaranteed returns, aggressive marketing tactics, and a lack of transparency. If a deal seems too good to be true, it probably is. Be wary of platforms that promise high returns with no risk or those that use high-pressure sales tactics. A legitimate investment opportunity should provide clear information about the potential risks and rewards.


Secure Storage of Cryptocurrencies


Finally, ensure that your cryptocurrencies are stored securely. Many scams involve hacking into investors' wallets or tricking them into revealing their private keys. Use hardware wallets or other secure forms of storage, and never share your private keys with anyone.


In conclusion, while the world of cryptocurrencies offers many exciting opportunities, it also carries significant risks. By doing your own research, understanding the role of regulatory bodies, recognizing red flags, and securing your cryptocurrencies, you can navigate this space more safely and avoid falling victim to scams.

Conclusion


As we navigate the exciting yet complex world of cryptocurrencies, it is crucial to remain vigilant and educated. The unfortunate reality is that scams exist in this space, and they often prey on those who are uninformed or overly eager to make a quick profit. However, by understanding the common characteristics of these scams and how they operate, we can significantly reduce the risk of falling victim to them.


The importance of conducting thorough research cannot be overstated. Before investing in any cryptocurrency or platform, take the time to understand what you are investing in. Look into the team behind the project, read user reviews, and ensure that the platform complies with regulations set by the appropriate regulatory bodies.


Recognizing red flags is another crucial skill. Be wary of guaranteed returns, aggressive marketing tactics, and a lack of transparency. Remember, if a deal seems too good to be true, it probably is.


Finally, ensure that your cryptocurrencies are stored securely. Many scams involve hacking into investors' wallets or tricking them into revealing their private keys. By using secure forms of storage and keeping your private keys confidential, you can protect your investments.


The world of cryptocurrencies offers many exciting opportunities, but it also requires caution. As you continue your journey in this space, keep learning, stay vigilant, and always exercise due diligence. The more informed you are, the better equipped you'll be to spot potential scams and protect your investments.

We hope you found this article helpful in your cryptocurrency journey. We aim to provide valuable content and insights to support you every step of the way. If you appreciate our work and wish to support us, consider trading on KuCoin, one of the leading cryptocurrency exchanges. Sign up using our link to receive a 20% discount on trading fees. Your support helps us continue delivering quality content for everyone interested in cryptocurrencies. Here's to your success in the vibrant world of digital assets!


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