Over the years, there has been an increasing number of cryptocurrency scams of all types. Some are more successful than others, but some scammers have managed to make really big hits. Below, BeInCrypto brings you the biggest cryptocurrency scams in history up until 2024.
What is a cryptocurrency scam?
In order to know what a cryptocurrency scam is, you must first understand what a scam is in a traditional sense. This will be somewhat obscure, as scams depend on the difference between an intended result, the actual result, and the transparency involved in any given situation.
In general, a scam is a dishonest plan to make money. When you scam someone, you intend to create an advantage or make a profit at the expense of a victim.
This becomes somewhat obfuscated, as scams can be legal or, more specifically, not addressed by current legislation. Scams can also be transparent, requiring a level of complicity and naivety on the victim’s part.
Crypto scams have all of the aforementioned properties above. The only difference is crypto scams involve cryptocurrency and blockchain technology.
1. Fake exchanges, wallets, and projects
One of the most direct scams is a product or service meant to get people to trust it with their money. There has been no shortage of fraudulent exchanges, fake wallets, and new coins that amount to nothing across the cryptocurrency space in recent years.
Sometimes, these cons try to look like a known, legitimate company. Other times, they simply try to look professional enough to gain new users’ trust. In any event, once they secure your money, you won’t be getting it back.
The best way to stay safe from these scams is to do your homework slowly. Learn good crypto wallet security tips and best practices, and only follow known and trusted links. Listen to what the community is saying about these services, and if something just doesn’t feel right, don’t trust it.
Another common fraud along these lines is the “Free Giveaways” you tend to see on Twitter. In this case, crypto security will do little without common sense. These often emulate the account of a known entity. Like a major developer or exchange, they promise to give out massive payouts to those who “register.”
Usually, this means either sending some coin to an address or providing personal information. In either event, this is always a scam. Nobody ever gives away free money; no matter what they say, this will be no different.
2. Pyramid schemes
A pyramid scheme is any type of scam that requires a constant stream of new “investors” in order to continue. Generally, these will ask for an initial investment from the user and promise remarkable returns, probably very quickly. The reality is that early investors get their returns by bringing in newer investors. Sooner or later, new investors will run out.
Since the money is channeled upward, the original creator of the scam will end up with most of the money. They will usually disappear when it becomes clear the momentum is running out. This leaves most of the people on the bottom with notable losses.
One of the most famous examples of this is Bitconnect. Bitconnect was revealed as a Ponzi scheme years ago after taking billions from investors in exchange for useless coins. Though now defunct, to this day, Ponzi schemes that amount to the same model exist in the cryptocurrency space.
The best defense here comes from taking the time to understand an offer before investing in it. This includes being very suspicious of anything boasting unusually high returns.
3. Traditional scams
Often, the cryptocurrency scams being used today don’t differ much from the ones harming consumers for years. These come in many forms. Often in the form of phone calls, emails or texts.
They offer some promised reward for participating in a contest, threatening legal action against the consumer, or blackmail. The claims are falsehoods trying to entice or scare unprepared citizens into handing over their cryptocurrency.
While obviously, each scenario could be different, it is almost always based on lies. Official agencies will not contact you in this way, and it is much easier to lie about having sensitive information than it is actually to get it.
An offshoot of this kind of scam happens mostly through text and email and is called phishing. The message will attempt to look authentic and prompt the user to follow a link to get more information. Usually, just clicking on that link is enough to install nefarious software onto your device. This brings us to our next major category, malware.
4. Malware
Malware is generally any software designed to steal money or information from your device. This can be accomplished in many ways. One is simply installing a keylogger, or software that records everything you type and transmits it back to the attacker, inevitably revealing usernames and passwords.
Another type scans the system clipboard for cryptocurrency addresses and, if one is found, replaces it with an attacker-controlled address. It is a good idea to double and triple check addresses before sending transactions, even if you used copy and paste.
One other infamous version of malware is known as “ransomware,” because it will encrypt a user’s entire device and refuse to unlock it unless the user sends a certain amount of cryptocurrency to a specific address, usually under a time limit.
This type of malware has been used repeatedly to target businesses, including a Mexican oil firm and governments, who often do end up paying the ransom as it is generally less expensive than losing their entire computer network.
5. Pump and dump
This is to get new money coming in. This will cause a bump in price, which will then start a FOMO feedback loop. More people will now believe they have to jump on this opportunity.
As the buying reaches a fever pitch, the initial group who plotted this will sell, usually causing the pump to cease, followed by a collapse as later investors freak out and realize they’re losing money. In the end, few come out ahead except for the scammers. The obvious way to avoid this is never to panic, buy into any position, and always do your homework again.
6. Rug pulls
A rug pull is a term used to describe a situation in which a cryptocurrency project or coin suddenly collapses or disappears, causing a significant loss for investors. The term “rug pull” refers to the idea that investors’ money has been taken out from under them, like a rug being pulled out from under someone’s feet.
In a rug pull, the creators of the cryptocurrency project may abruptly abandon the project, taking the invested funds with them. This can happen for a variety of reasons, such as financial fraud, mismanagement, or simply a lack of interest in the project. According to Chainalysis, a provider of blockchain data, founders of cryptocurrency projects who have taken invested funds and disappeared without a trace have caused $2.8 billion in losses in 2021.
Rug pulls can be particularly harmful to investors because they often occur without warning, and there is often little recourse for investors who have lost their money. As a result, it is important for investors to research any cryptocurrency project carefully before investing and to be aware of the risks associated with investing in the cryptocurrency market.
A popular example of a cryptocurrency scam was allegedly conducted by the Twitter pseudonym “War on Rugs”. The War on Rugs Twitter account had gained a large following. It alerted people to possible fraudulent activity in the decentralized finance industry.
The leaders of the Fairmoon crypto project accused War on Rugs of committing fraudulent activity. Fairmoon was a carbon copy and rival of the Safemoon token. The individual responsible for the War on Rugs account was also promoting the Fairmoon project and had apparently been granted certain privileges for the account.
7. Pig-butchering
“Pig butchering” is a specific type of cryptocurrency scam that differs from traditional crypto scams in its approach and execution. The name is a metaphorical reference to the process of fattening up a pig before slaughter, which in this context translates to scammers gradually building trust with their victims before victimizing them.
The scam begins with a period of social engineering where the scammer builds a relationship with the victim. This is done through various means, such as online dating platforms, social media, or even professional networking sites.
During this period, the scammer often feigns friendship, romantic interest, or business partnerships to gain the victim’s trust. This process can take weeks or months. Once trust is established, the scammer introduces the concept of an investment opportunity, often involving cryptocurrency. They may tout high returns or exclusive access to a new crypto token.
Unlike traditional crypto scams that might use impersonal methods like phishing emails or fake websites, pig butchering scams rely on building a personal relationship and trust with the victim.
In summary, pig butchering scams are a more personalized, emotionally manipulative type of crypto scam that involves a longer con and a deeper level of trust-building with the victim.
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Warning signs
We can always fight against cryptocurrency scams because these are only deceptions towards the less knowledgeable. It is, therefore, necessary to educate oneself as much as possible about the crypto sphere. Take into account several warning signs that all these schemes usually follow.
In the first place, each and every one of them requests some “investment” and never usually warns about the risks. All investments have some degree of risk; none are exempt. Therefore, if someone mentions that your investment will be 100% risk-free and with secured payments, they will most likely intend to make some cryptocurrency scam.
Another essential factor to consider is the functioning of that platform. Where do you get your money from? Can you prove that you get it from where you say? Withdrawals are also part of it. When withdrawing your funds, if you get “technical failures,” “tax” requests or any other excuse, it is likely a scam.
You also need to look at the team that runs the system. Is it shown on the official site, and can you check that they are real people? And if they are, do they have any kind of criminal record? Research and education are key to avoiding scams. Not all that glitters is gold.
Famous cryptocurrency scams
Milton Group
One day, you may come across a classic ad on Facebook or any other social network that mysteriously promises to multiply a very small investment for you over a few days. You’ll have to ask how or request more information. The next thing you know, they’ll ask for your phone number and start flooding you with calls to convince you of that magical investment with crypto.
The company that contacts makes trades and swears that the more you invest, the more you earn. Perhaps you even dare to try out their platform with s small amount and check on-screen that indeed your investment is multiplied.
That would excite anyone, so you invest more and more… until you discover that it is impossible to withdraw the alleged profits. Nor is anything you invested. This is an extremely common cryptocurrency scam.
Here are the experiences of the victims of the infamous Milton Group, which also operates under the names Cryptobase, CryptoMB and VetoroBanc.
Behind the scenes, a group of multilingual tele-operators meet in an office in Ukraine, Albania, Georgia, or North Macedonia to follow established guidelines for defrauding as many unsuspecting people as possible. In return for their “work,” they receive juicy commissions.
It is estimated that during 2019 alone and from the Kyiv Call Center (Ukraine), the Milton Group managed to defraud some $71.5 million dollars.
Considering that the company has three years in operation and assuming that they made similar amounts in previous years, the total amounts to $214.5 million dollars. That does not include the figures the other call centers reached, so the losses cannot be calculated exactly.
The police investigation of the Milton Group case continues as searches for the perpetrators.
Mining max
Investing in machines to mine crypto sounds as tempting as it is complicated. Because of this, it sounds wonderful just to put up the money while an expert takes care of the operation and maintenance of the machines and the software so that, in the end you can earn as much as possible from the mining itself.
This procedure of investing in miners that are managed by expert companies in the field is known as cloud mining. Several platforms are dedicated to this, where each user can choose a plan at a different cost. Of course, there is always the risk that some of the alleged experts will disappear with the money or will retain the majority in their own pockets.
Such was the case with Mining Max, a company based in the United States and mining farms in South Korea. In its early days around 2016, it presented itself as a cloud mining platform for altcoins and promised monthly returns to all its investors. As the site said at the time:
“Mining Max does not sell its own coins and does not deal with coins that are not traded in the Exchange Center. Mining Max is a company that produces coins of certain blockchains with the highest value in the market at present. Mining Max is a professional mining company that provides shipment management services for mining machines owned by individual members. The Mining Max large mining farm maximizes the profit margin capacity of individual mining machines with low electrical loads”.
Subsequently, they specialized in Ethereum mining. Or so it was thought, since in December 2017, the Korean authorities discovered the fraud and exposed it. The managers of Mining Max raised about $250 million from some 18,000 investors from 54 countries, including the United States, Japan, China, and South Korea itself.
It is believed that only 80 million were invested in mining machines, while 110 million ended up in offshore bank accounts. The rest was used to pay off older investors, who in turn received money from lower levels of users, in what became a pyramid scheme.
Modern tech (Pincoin and iFan)
This company was introduced in Vietnam as the representative of two Initial Currency Offers (ICO), where Pincoin and iFan tokens would be sold. The first was offered as an investment opportunity with monthly (and unexplained) returns of up to 40%, while the second promised to fuel a new social network for artists.
By 2018, none of the promised profits were being paid. Modern Tech eliminated all their social networks and never showed up at their alleged offices. The defrauded investors could do nothing but protest against the company’s phantom address and report the case to the authorities: 666 million dollars had been lost by some 32,000 people. The perpetrators have not yet been caught.
BitClub network
This is another case of cloud mining fraud, though no doubt more serious than Mining Max. The promise, however, is very similar:
Matthew Brent Goettsche, 37, was one of those arrested in Florida. He dared to openly declare that BitClub Network’s target was “stupid” investors, who were often referred to as “sheep. In his words, they were “building this whole model on the backs of idiots.
PlusToken
It can be said that this infamous platform was the biggest cryptocurrency scam of 2019. It has Asian origins, with a strong presence in China, South Korea, and Japan, it is very similar to the Vietnamese Modern Tech. The main offer of this system was the PLUS token, which, presumably, would be able to return to investors between 9 and 20% per month.
Perhaps one of the reasons for their success was that, rather than advertising through electronic media, most of it took the form of meetings and events that allowed them to talk to potential investors face-to-face.
In this way, they could convince them both as a group and individually. They also offered their “investment” through chats and even distributed physical advertising in public places like supermarkets.
It was explained that the high percentage of profits supposedly came from crypto money trading, mining, and referrals. In reality, PlusToken was always a pyramid scheme with no product, where only new members could inject fresh money that would go directly to pay the older investors or directly to the managers.
At the end of June 2019, users started having problems withdrawing their funds, and administrators blamed the alleged miners. Soon after, they didn’t bother to make any more excuses and disappeared with about $3 billion from more than 3 million victims.
Much of what was swindled was amounts in cryptocurrencies that still haunt the network: Bitcoin, Ethereum, EOS, and OmiseGo. And the final transaction on their part brought the note of “Sorry, we have to run.”
The blockchain tracking company Chainalysis even provided evidence that points to these scammers and their large volume of OTC trading in exchanges like Huobi as the culprits in last year’s drop in price. At least six of the team members were arrested.
OneCoin
This is perhaps the queen of all cryptocurrency scams to date. It is a long-standing, global pyramid scheme with a strong presence in the Hispanic world.
As they themselves explain, OneCoin is a cryptocurrency with a private blockchain and a platform for learning about crypto. The firms OneLife, OneAcademy, and OneWorldFoundation are part of the same scheme.
Currently, several “education packages” ranging from $110 to $55,555 are offered through OneLife and OneAcademy. OneWorldFoundation is a children’s charity that accepts donations through OneCoins, PayPal, bank transfer, and credit and debit cards.
In previous years, these alleged educational packages – with material plagiarized from various sources – included tokens that could allegedly be used to “mine” one coins; however, mining does not work in this way. In addition, users were rewarded on these tokens for bringing referrals to the platform.
These “onecoins” were never listed on any exchange, and the only way to change them into fiat money was on the OneCoin Exchange, an internal market for members only. Of course, this was until 2017, when the exchange closed without warning.
In the same year, Ruja Ignatova, the leader behind the scheme, disappeared without a trace after facing several complaints in several countries since 2016. Her brother, Konstantin Ignatov, takes over, and that is when the launch of a OneCoin ICO is promised.
Fortunately, Ignatov was arrested in March 2019 in Los Angeles. [BBC] Unfortunately, Ignatova is still missing and with holds a large part of some $4 billion raised globally in many countries. However, other sources speak of up to $19.4 billion dollars missing because of this scheme.
The Onecoin scam is no longer active. Multiple documentaries have since been produced detailing the events of the scam.
BitConnect
It can be said that the case of BitConnect (BCC) was somewhat different from that of other cryptocurrency scams. It was, in fact, a decentralized cryptocurrency at the time. And all decentralized cryptocurrencies rely mostly on trust. The BCC managed to climb very high on the list of cryptocurrencies by market capitalization from its launch in 2016.
Its main offering was a lending platform at BCC. Up to 40% of profits could be made on borrowed funds. Also, up to 1% per day could be earned from holdings alone. Another percentage was included for each referral in the system.
This at a time when the crypto market was even more influential than now and full of inexperienced and enthusiastic investors. It was clearly always a pyramid scheme hidden behind a digital currency that managed to achieve overwhelming success.
The price per token peaked at $476, while its capitalization exceeded $2.1 billion by January 2018. But that would only be the beginning of the end.
Downfall of BCC
Earlier that month, the Texas State Securities Board issued a shutdown order for BitConnect. The claim was that it was only a pyramid scheme and was misleading its investors. Not many days later, on January 17, 2018, the BitConnect team (which remained anonymous) decided to close down its lending platform simply. The price of the token plummeted.
It was an “every man for himself” scenario. All of the users of who held this cryptocurrency started selling it en masse to avoid further losses. Therefore, it’s hard to know how much was actually lost due to this scheme. It wasn’t until September 10, 2018, that the last exchange that had BCC available for trading (Trade Satoshi) delisted it.
To date, all that remains of this scheme is the Internet meme initiated by Carlos Matos, one of its most popular promoters. Hey, hey, hey, Bitconneeect! That and, unfortunately, a failed class action suit against the platform’s administrators.
Tread lightly into the crypto world
This guide covers the most common forms of scams currently going around in cryptocurrency. That being said, criminals are very clever and are always looking to find new ways to dupe unsuspecting investors. The best advice is to go slow and do research, double-check, listen to the community, and not invest with emotion. Following those rules should keep most users out of any serious trouble.
Frequently asked questions
What is a pyramid scheme?
What is an ICO?
What is a pump and dump?
What are the types of malware?
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