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    Dennis Y.

    13 Biggest Cryptocurrency Scams: Spooky, But True Stories

    Biggest crypto Scams

    Cryptocurrency markets are still not well understood by most users and are considered the Wild West. This means that scammers feel quite comfortable there. After all, not all of them are punished. On the eve of Halloween - here is a portion of scary stories that scare crypto people more than stories about ghosts, because they are not fairy tales, but the truth.

    Cryptocurrency Scams: Statistics and Scale

    More Than 80,000 Crypto Scams are reported in the US in 2020. U.S. residents lost more than $80 million over six months because of Bitcoin fraudsters.

    The Federal Trade Commission (FTC) recorded a 10-fold increase in fraud related to investments in cryptocurrencies.

    Losing Money Reports

    According to the report, from October 2020 to March 2021, the FTC received 6,792 reports of fraudsters. The total amount of damage from their actions exceeded $80 million. A year earlier, the FTC recorded 570 claims with losses totaling $7.5 million.

    Scam Report

    Source: Chainalysis

    Blockchain Fraud

    Source: immunebytes

    How Scam Schemes Usually Work: 5 Common Types of Scam

    The organizers of fraudulent schemes usually target investors between the ages of 20 and 49.

    1. Most scams operate according to the pyramid principle (Ponzi schemes). Their essence is that money is paid to the first investors to "feed" them through new deposits from newcomers. Such schemes have become popular again on the back of the growing interest in mining, staking, and profitable DeFi farming.

    The most popular methods for finding victims are advertisements for "investment advice from experienced traders" and "cryptocurrency giveaways on behalf of celebrities". On behalf of Elon Musk alone, the attackers earned over $2 million.

    Fake Elon Musk Scam on Twitter

    Fake Elon Musk campaigns. Source: Bleeping Computer

    2. Besides that, during live streams on YouTube, fraudsters deceived users with fake celebrities' messages, speaking allegedly on behalf of Bill Gates, Steve Wozniak, Michael Dell, and Ripple CEO Brad Garlinghouse deceived users. Because of this, YouTube got a class action lawsuit in 2020.3. Also, one of the leading methods of deception is phishing. Attackers create fake companies, cryptocurrency exchanges, intermediaries, and tokes. On the surface, they look like the original sites, but their only goal is to steal users' funds. Often, well-known cryptocurrency exchange services such as Binance or Blockchain.com fall into the crosshairsOften, fraudsters use names of tokens or projects similar to well-known names. For instance: for Yearn.Finance (YFI token), scammers can come up with clones in the style of YFX, YFIX, YFIN, and the like.

    4. Another popular way to cheat is fake airdrops (giving away tokens for free). This is now a popular scheme to attract new users to normal projects as well. That is what the scammers are capitalizing on, too.

    5. Pump & Dump scam is very common when cryptocurrency prices are quickly artificially pumped up, and then coins are dumped, leaving the investors with large losses. This happens frequently in the crypto market. It often happens with low-cap tokens, but, in essence, with well-known projects (Dogecoin, Shiba Inu) you can see the signs of it as well.

    13 biggest cryptocurrency scams

    1. The predecessor of most cryptocurrency investment scams and Ponzi schemes was Trendon Shavers, aka Pirate.

    Back in 2011, when cryptocurrency was just starting out, he realized that the majority of people didn't understand it and decided to cash in on them. He claimed that he was selling Bitcoins to his clients and was collecting money from trusting clients to maintain his liquidity pool. In total, he defrauded about 10,000 people this way. He mostly spent it on cars, casinos, and other expensive purchases.

    In 2013, authorities sentenced Trendon to 1.5 years in prison for fraud. If you recalculate the damages in today's prices, it comes to $5.8 billion.

    2. OneCoin Scam

    Onecoin company is now considered the biggest crypto scam of all time. It is really a giant Ponzi scheme. It is believed to have stolen from $19 billion to $25 billion, according to various estimates. Official data is much more modest, just under $5 billion, and it is believed that about 3 million people were affected.

    The project was announced in the summer of 2016 by a super popular businesswoman Ruja Ignatova. People were also attracted by knowing, that this project was supposedly tied to educational programs.

    Ruja Ignatova Ponzi Scheme OneCoin

    Ruja Ignatova. Source: BBC

    Ruja Ignatova's personal brand played a big role. With a good education (Oxford), she glimpsed on the covers of popular magazines, making a great impression. That's how it usually works.

    Despite the fact that in 2017 the authorities shut down this scam project, its leaders were arrested, and its founder just disappeared, the scam, surprisingly enough, continues. Onecoin had no coin, all its scheme was a scam from the very beginning.

    3. Bitconnect 

    It is believed that 1.5 million people were affected. Approximately $2-$4 billion stolen by this project. This was one of the most famous ICO scams. It was promising its investors an open-source crypto that was supposed to give its depositors a 40% return. YouTube Influencers, who received bonuses through a referral program for promoting the project, helped fundamentally to promote it.

    The scheme organizers managed to convince investors that they had an outstanding trading algorithm (that may have never existed). Once it wasn't enough for them, so they launched a second fraudulent ICO, BitconnectX, just as their first project collapsed to zero.

    Finally, the Texas (U.S.) regulator recognized the project as a Ponzi Scheme in early 2018.

    4. PlusToken

    Another high-profile plan for investors, promising very high returns. This time it mainly covered the Chinese and Korean regions. The promised monthly income was up to 20%. And the nurturing and convincing of potential clients took place mostly not online, but at face-to-face meetings and offline events.

    Everything seemed attractive until the summer of 2019, when people started having problems with withdrawals. At first, the organizers of the Ponzi Scheme blamed it all on mythical miners, and then they just disappeared, taking $3 billion from defrauded investors. Rough estimates are 100,000 affected people.

    In July 2020, Chinese police arrested 27 prime suspects and 82 key members of the group. And in late 2020, a Chinese court sentenced 14 organizers of this crypto pyramid scheme. Key members of the scheme received prison terms ranging from 2 to 11 years. They also received penalties ranging from 120,000 to 6 million CNY.

    5. Pincoin + iFan

    A Vietnamese project that defrauded more than 30 thousand participants. The promised return after the first month would be 48%. And within 4 months, investors were promised full profit coverage of invested funds.

    In the end, they did not pay with fiat money, but with the iFan token. Which, as you can imagine, was a complete shell.

    The organizers of the fraud used attractive marketing techniques and PR events, as well as an attractive referral exchange commission, which helped the Ponzi scheme to grow and attract new victims.

    Estimates range from $660 million to $870 million stolen.

    6. ACChain

    This Chinese project managed to lure $80 million of investors' money during a fake ICO. After a photo of an empty room instead of the main office of this pseudo-company got on the internet, its creators lay low. With investors' money, of course.

    7. Savedroid

    Extremely controversial story. The author of the project posted a provocative post on his social network hinting that he ran away with the money. It was a publicity self-PR stunt, but after that, investors began to leave the project and even sue the company. What was the reason for lawsuits? There was a huge loss for the investors. An unwise action led to the collapse of the project's token price, due to which investors' losses exceeded, according to various estimates, $50-60 million.

    8. Thodex

    It is one of the latest exit scams. The founder of this Turkish cryptocurrency exchange platform lured investors to invest $2.2 billion of his crypto on his exchange platform with offers of free meme coin DOGE. It's still unknown where he is.

    9. The Twitter Massive Scam

    This is not a single criminal project, but a whole phenomenon of the past year. In terms of cumulative loss, it is quite impressive. Scammers hijack or imitate celebrity social media accounts so well that people literally fall in love with them. They promise to send twice as much crypto (or something like that) to whoever sends them their money. The celebrities compromised are unaware of the fraud perpetrated by their names.

    It is worth recalling at least the situation with the hacking of Twitter in July 2020, when scammers carried out a "doubling down" action on behalf of famous people. The accounts of Barack Obama, Joe Biden, Elon Musk mention above (overall, more than 130 celebrities) were hacked. The essence of the plan is that the scammers promise to return double the amount if you send BTC to their wallets. It's obviously a deceive, but users sent over $120,000 worth of Bitcoins before Twitter security eliminated the problem.


    Twitter Scams

    Source: BBC

    10. SharkTron

    Another striking example of a deceive is the SharkTron crypto pyramid, which looked like a regular DeFi platform. Users were staking TRX tokens and farming some valueless tokens, which pseudo value was maintained with investors. Later, the founder of the pyramid made an exit scam and stole more than $7 million in the equivalent of TRON.

    11. PlexCoin 

    This ICO promised new investors fabulous profits (more than 1.3 thousand percent return). Investors ended up as a victims losing $20 million. The SEC nailed and shut down the project, ordered them to pay the money back.

    12. Bitclub Network

    And this is already one of the most famous scams in the crypto mining series. Strong marketing and advertising, and customer persuasion techniques helped them attract $722 million. The legend was that the company supposedly had great mining equipment and customers would make steady profits. As proof they used footage from other mining farms. It looked like a kind of cloud mining (among which there are also a lot of scammers).

    13. Finico

    The most famous Russian crypto scam is Finico financial pyramid collected over $2 billion in Bitcoin and ERC-20 tokens from its investors. It is believed that the founders still have at least $500 million in their hands.

    Honest scam?

    And as a bonus, let's mention the scam officially declared by the developers beforehand.

    Ticktocker Andre Lewis (aka Dre) created a coin named SCAM. Its capitalization skyrocketed to $70 million in an hour.

    It's quite ironic, but only emphasizes how important it is to be aware of market threats. So, here are the 6 main things to remember.

    How to recognize and protect yourself from scam

    1. Choose only reliable platforms with licenses, verified by users. Review official lists of verified cryptocurrency exchanges (CoinGecko, CoinMarketCap, etc.)
    2. For DeFi, DEX, CEX, check for strong security audits.
    3. Check if the project has enough liquidity (especially important for DeFi) and if the data on trade volumes, liquidity, etc. is not fake.
    4. Store your tokens only in safe wallets. It's safest to use hardware devices or desktop and mobile wallets (and not all of them can be surely recommended). Online wallets are simpler to hack and most vulnerable to phishing. However, a quantity of reliable crypto exchanges are more protected than others, so their wallets can be considered conditionally reliable. In this case, you should remember the fact that all funds stored there, can be owned by its owners (not the fact that it will be, but the risk must be taken into account).
    5. Never share with anyone private information, through which outsiders can gain access to the funds in the wallet or on the exchange.
    6. Do not click on any promotional links, so you won't end up on a phishing site. Always check the domain and HTTPS in your browser, or better yet, save the genuine site in your bookmarks and use just it. To not get scammed, always check your devices for protection against malware, which can steal personal information.

    Bottom line

    As you can see, there is nothing extra tricky in Ponzi schemes fundamental, but they still have been scamming masses for decades, both in the offline society and the crypto industry.

    Be aware of the dangers of crypto trading and investment, and don't let yourself be scammed.


    Are most Cryptocurrencies scams?

    With few exceptions, the top 20 coins are projects with high capitalization and real fundamental value. Nevertheless, there are no factors that prevent the development of cryptocurrency solely for the sake of scams.

    What is the most secure cryptocurrency?

    Cryptographic algorithms protect cryptocurrencies quite reliably. For example, the SHA-256 algorithm, on which Bitcoin is built, still can't be hacked. But cryptocurrency security depends on infrastructure, network participants, third-party services, and so on. So the overall crypto security is always quite questionable.

    How many Cryptocurrencies are scams?

    The purpose and goals of many coins are really unclear. But it is impossible to unambiguously call them scams. Until it happens. That's why there are not so many 100% proved scams on CoonMarketCap and Coingecko.

    Are there a lot of Bitcoin scam?

    Yes, so be careful. People who are out of crypto have heard the word "Bitcoin" at least once in their lives. That's why it's much easier to reach them exactly through Bitcoin scam.

    Will Bitcoin ever crash again?

    Yes, the BTC price will always fall and rise. The reasons are logical: volatility and cyclical essence of the market, the interests of the big market players a.k.a. whales (getting liquidity on sharp price movements).

    Can you lose money on Bitcoin?

    Yes, it's very possible,  if you don't consider the hazards of crypto investing. Here's what you should keep in mind for keeping your funds safe and not to get scammed:

    • Don't trust scammers and suspicious projects
    • Don't trade cryptocurrency (especially with leverage) if you don't understand the rules of market.
    • Don't invest money you're not ready to lose, especially credit funds.

    The content of this article is for informational purposes only.