El Salvador President Nayib Bukele took a victory lap on Monday after the Bank of England’s British pound rapidly depreciated against the dollar. The institution has since resumed quantitative easing. Its action marks a clear pivot that many in the Bitcoin community predicted central banks would be forced into months in advance. Bukele’s Callout Bukele tagged the Bank of England with a triumphant “Told you,” over Twitter, scoring over 14,000 like and 2000 retweets from his followers. His brief comment…
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7 Major Crypto Scams Events and What We Can Learn From Them
Crypto scams have been around ever since Bitcoin came out in 2009. Crypto researchers found out that from 2011 to 2020, cyber criminals stole almost $2.5 billion online. Roughly 80% of these funds, the equivalent to $2 billion, was from digital currencies.
The growth rate of cryptocurrencies has increased over time, with most coins, such as Bitcoin, hitting an all-time high of $63,000. While intelligent minds have come up with coins and companies backed by blockchain, scammers have also upped their game to target unsuspecting investors.
Major Crypto Scams of All-Time
As much as cryptocurrencies have revolutionized transactions, they have also been a target for significant scams. Let’s look into the major crypto hacks and what we can learn from them!
OneCoin – $15 billion
In front of thousands of fans, Dr. Ruja Ignatova announced back in 2016 that she would launch a new cryptocurrency, OneCoin. She mentioned that it would work just as any crypto. For instance, it would reach global payments, involve mining, etc. The coin would have had a $120 billion supply on the network.
Even though all the information was very similar to Bitcoin, people still fell for it. More so, they thought that Ruja was perfect. She could speak several languages fluently and had a Ph.D. from Oxford University. Above all, she appeared in top magazines as a crypto expert.
As part of this crypto scam, people had to select education packages that cost between €110 and €188,000. In each package, several tokens would correlate to mining OneCoins. However, the only way to sell the tokens was through the internal exchange. Also, only users that purchased more than the starter package could buy these tokens.
As you probably have guessed, the exchange did not even exist. More so, people were trading with the company itself, which is a clear red flag. The members also only profited from inviting new users.
When the police found out, Ruja had already disappeared. Next, a two-year investigation led to several arrests. Among them were Ruja, her brother, and the lawyer behind the company.
Bitconnect – $3.45 billion
One of the most infamous crypto scams, Bitconnect appeared in 2017. It claimed that users could exchange Bitcoin for the Bitconnect Coin(BCC) on their Bitconnect platform. The developers also made sure that significant returns of 40% would trickle into their accounts over time.
Bitconnect also ran a lending program that allowed users to lend out BCC to other users on the platform. By doing this, they would get interest from the amount they lent out. It should have been a red flag for a typical Ponzi referral scheme.
Shortly after, the platform turned out to be a scam, and their investors lost most of their funds. Some of them have since filed a lawsuit against Bitconnect in a bid to recover their lost assets.
Pincoin- $870 million
In Vietnam, Modern Tech launched Pincoin and iFan, with its offices in Ho Cho Minh City. Pincoin captured 32,000 people who, instead of receiving cash as payment, got a new token called iFan. Top celebrities advertised iFan on social media. Therefore, the project did not look suspicious at all.
A few months down the line, their offices shut down. The project creators managed to get away with about $870 million. Protestors met outside their vacant offices on April 8, 2018, but they did not process cash withdrawals.
Centratech – $32 million
Centratech appeared on the market with a heavy expectation. Many thought that it would bring a Visa and Mastercard debit card service to help users convert cryptocurrencies to fiat. Also, to add to the spotlight it was already gaining, the likes of Dj Khaled and top boxer Floyd Mayweather advertised it. Just like that, the coin gained fame, and only its ICO raised $32 million.
The founders, Sohrab Sharma and Robert Farkas, did not manage to get away. Police arrested them on fraud charges. They had created fictional executives with great biographies, paid celebrities to promote it, and posted misleading marketing materials on their website.
The U.S. regulator enforced that they both pay back what they stole and at interest. Also, the regulator banned them from ever serving as company officials and participating in any security offerings of sorts.
Plexcoin- $20 million
Plexcoin was one of those deals that seem too good to be true. The company offered a 1354% return for investments per month. Surely this should have been suspicious enough to investors, but the founders took about $20 million of their money. The coin’s ICO was successful and raised over $15 million alone.
However, the U.S. Securities and Exchange Commission(SEC) caught on to this after investigating and ordered that all the money they took needed to be repaid. SEC froze their funds, and the founder, Dominic Lacroix, was arrested and later jailed.
The event marked the first that the SEC stepped in and charged an ICO through its Cyber Crime Unit.
What to Learn from the Crypto Scams
Crypto-related scammers will go to any extent to convince people that their offer is legit. Considering this, investors need to wise up and do their research properly before investing in any cryptocurrency.
Generally, it necessitates that the crypto community provides financial education and ethical investments practices to everyone. Governments also need to be vigilant and regulate cryptocurrencies to remove the bad actors from the market.
Conclusion
Scams have an effect on cryptocurrencies in general. Most people have become skeptical about investing in cryptocurrencies because they either have heard about crypto scams or gone through one themselves. They then tend to classify all cryptos under these scams, whereas genuine ICOs and cryptocurrencies exist.
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In turn, this is limiting growth and innovation in the crypto space.
The most effective way that investors will be protected is only by education. They need to know more about evaluating investments, spot scams, and learn how to manage risks. Authorities also need to realize that not all cryptocurrencies are scams, and some are here to stay. By taking their time in understanding cryptocurrencies, and the blockchain in general, they can offer knowledgeable regulation that will promote innovation.
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