There are thieves everywhere, and the cryptocurrency world isn’t the exception to this sad rule. Some of them here are really skillful, so, they become black hats (bad hackers). But not all of them are hackers. A lot of thieves are only scammers: they go around making fake promises to keep people’s cryptos and fiat. It works like heaven, so, that’s why now we can talk about the biggest cryptocurrency scams.
Deceiving people for money is a bigger industry than you may think. According to the firm Crowe, general financial fraud costs over $5 trillion to the global economy. Inside the cryptocurrency world, the firm Crystal Blockchain calculates that around $10 billion in cryptos were stolen from 2011 to 2021.
If we should guess, we’d say that’s an understatement. Not only cryptos have been stolen in the name of cryptos, after all. Let’s meet the worst of the worst coming up next (and one of them that’s still around).
Vietnam, 2017–2018. Cryptocurrencies and Initial Coin Offerings ( ICOs) are making quite a buzz, and a lot of people want to invest and become a millionaire. This turned out to be a perfect breeding ground for the Modern Tech scammers and their once considered “biggest digital money fraud in history”. Or biggest cryptocurrency scam, as well.
They offered two tokens for sale: Pincoin and iFan. The first one was offered as an investment opportunity with monthly (and inexplicable) returns of up to 40%; while the second one promised to fuel a new social network for artists. All that the users needed to do was to “invest” a minimum of $1,000 in the mentioned tokens to earn a lot of money in a few days.
Not surprisingly, they made the payments as promised in the beginning. That’s because there were no miracle tokens, but a pyramid scheme underway. A pyramid scheme doesn’t offer any real product but instead is just waiting for new investors to pay the promised percentages to the oldest ones. When there are no more enough investors, then the pyramid falls and the admins flee away with the rest of the money.
That’s exactly what happened with Modern Tech in 2018. One shiny day, they abandoned their offices, closed all their social networks, and stopped all communications and payments to their clients. The scammers behind the scheme flew away with around $666 million. And they weren’t caught yet.
Spoiler: this was another pyramid scheme. But it wasn’t disguised as an ICO but as a cloud mining platform. In case you’re wondering, cloud mining is a system in which a company asks for money to buy cryptocurrency miners (specialized machines), and build and maintain some mining farms. When these machines start to produce cryptocurrency, the earnings are shared with the investors, usually every month.
Cloud Mining webpages are all around the Internet, offering contracts to anyone for a small investment and promising guaranteed returns for the mining. All without having to worry about the configuration and maintenance of the equipment. This might be true, but it might be fake too. BitClub Network showed that quite well, becoming one of the biggest cryptocurrency scams.
This malicious platform was born in 2014, promising the sky and beyond.
“When you join BitClub Network, you’ll start earning Bitcoin almost immediately with no expensive equipment to buy. No sky-high power bills. And no software to install. We take care of all of the details. You get the rewards. Are you ready to start mining?”
The deal was simple. The users needed to buy packs between $50 and $100,000 for daily profits of a minimum of 5% and a maximum of 12% with “daily withdrawals”. In reality, there never were any miners. Only a bunch of scammers attracting new investors to pay to the oldest ones, and keeping most of the profits. They stole over $722 million this way.
And they were caught by U.S. authorities in 2019. Matthew Brent Goettsche, one of those arrested, dared to openly state that the BitClub Network’s target was “dumb” investors. In his words, they were “building this whole model on the backs of idiots.” The original webpage is still online, so, please avoid it.
If you thought the people learned something from Modern Tech, you were wrong. By 2019, mainly in China, South Korea, and Japan, around three million people were investing in a new ICO. This one offered the PLUS token, which, presumably, would be able to make profits between 9% and 20% per month. All this by doing cryptocurrency trading, cloud mining, and gathering referrals.
You might think this seems like a fusion between Modern Tech and BitClub Network, and you wouldn’t be too wrong. However, the reason behind its tremendous success was probably the marketing model. They didn’t limit themselves to the digital world, but organized face-to-face meetings and bought physical ads to convince people.
In June that same year, the investors started to complain about problems with the withdrawals. As usual, the admins blamed hackers at first, but then the pyramid was untenable. The scammers fled with over $3 billion in huge amounts in ETH, EOS, and BTC.
Soon after, six of them were caught in Vanuatu and deported back to China. In July 2020, other 109 “masterminds” and “key members” were arrested as well. By November that year, the Chinese authorities seized around $4.2 billion in cryptocurrencies from these scammers.
Maybe this one is special in the list because it was an actual cryptocurrency. BitConnect (BCC) was even listed in CoinMarketCap, and its market capitalization surpassed 2.1 billion by January 2018. Not everybody suspected it was the cooking end for one of the biggest cryptocurrency scams.
It was born in 2016, and its main offering was a loan platform with the native token (no, it wasn’t DeFi). Supposedly, you could get up to 40% monthly profit on the funds borrowed. Likewise, you could earn up to 1% per day just for holdings (no, it wasn’t staking), plus another percentage for each referral that was included in the system (yes, it was a pyramid scheme).
American authorities discovered this quickly. The Texas State Securities Board issued an “Emergency Cease and Desist Order” against BitConnect and affiliated brands, alleging they were not registered and didn’t show any legit information. The investment amount calculated back then was $4.1 billion.
Soon after, the admins closed the loan platform. Everybody panicked (with reasons), and a massive sell-off sent the BCC price to zero in a few days [ CoinPaprika]. This year, the U.S. Securities and Exchange Commission (SEC) filed an action against five BitConnect promoters.
At least, a great meme came from it. Carlos Matos, one of its most popular promoters, started the “¡Hey, hey, hey, Bitconneeeeect!” during an event.
The biggest cryptocurrency scam: OneCoin
This is the great king (or queen) of cryptocurrency scams. Funny enough, it didn’t involve any real cryptocurrency, but only the non-existent OneCoin (ONE). This scam appeared in 2014 as an educational platform for trading. The packages offered ranged from $100 to $225,000 and they included “tokens” to “mine” OneCoin. The ONE was meant to be a “massive cryptocurrency” with a “private blockchain “, which price was always increasing.
The referrals were welcomed and celebrated, of course. Despite the claims, the ONE never existed beyond its own platform. They had in there the only available exchange method for this fake token, but they closed it without previous notice in 2017. Probably because, since 2016, OneCoin were receiving legal notices and criticism from authorities worldwide.
They tried to change and expand the brand then, and the platforms OneLife, OneAcademy, and OneWorldFundation were born. Meanwhile, Ruja Ignatova, dubbed the “CryptoQueen” and original OneCoin founder, disappeared in 2017 to never be seen again. Sebastian Greenwood and Konstantin Ignatov, the other founders, were arrested in 2018 and 2019, respectively.
The total amount of lost funds (in cryptos and fiat) is hard to establish. This scam operates worldwide, in several languages. They organized thousands of face-to-face meetings, bought physical ads, and made aggressive digital campaigns. They’re still doing it with the help of small (and probably deceived) promoters worldwide, under brand new names: Fantastic Global Team and DealShaker. So, the lost funds are still being counted.
Some estimations calculate between $4.9 billion to even $19.4 billion. In the meantime, Ruja Ignatova and her company were declared in default after failing to respond to the court in the United States. This scam has caused so much impact that Kate Winslet (yes, from Titanic) will star and produce “Fake!”, a new movie about OneCoin.
Originally published at https://blog.alfa.cash on June 21, 2021.