In his article on the website called Cointelegraph, Nick Bell described the most famous cryptocurrency scams known. In each fo them, investors collectively lost billions of dollars. The sad thing is, many of those scammers remain unpunished by the law.
He writes that cryptocurrencies have been there for a decade, which is not that long compared to other financial assets, but the scammers have been active in this niche for years. The scams often take the form of a financial pyramid, where they do not create anything but instead pay some of their first investors at the expense of attracting new unsuspecting investors to pretent the pyramid is actually making money at the moment and is capable of paying the dividends, and the dividends are actually the money attracted from new investors.
Apparently, only the first investors can actually make som money in this pyramid since the scammers use this as the evidence that their business is sustained and worth investing, which is certainly not the case. The truth is, even if the scammers get arrested and go to jail, the lost finances are usually next to impossible to get back.
OK, so let's look at some of the biggest scams in the history of cryptocurrencies.
OneCoin. It was recognized one of the biggest financial crypto scams. It operated in 2014-2017. THe number of its victims is around 3 million people. They collectively lost around 5 billion dollars. The financial pyramid was founded by Ruzha Ignatova from Bulgaria. The scam operated in multiple countries as a classic Ponzi scheme where participants were awarded for bringing new participants. The founder constantly claimed that OneCoin would soon become the most influencial cryptocurrency in the world by killing Bitcoin. However, OneCoin didn't even have its own blockchain while the investments were accepted only on the websites related to this scam.
It's interesting to note that shortly after OneCoin started operating worldwide, the Bulgarian authorities warned everyone that this project is not regulated by financial authorities and may cary serious financial risks. This made OneCoin leave Bulgaria. Later one, it was blocked in Italy and Germany, with its accounts frozen.
However, OneCoin kept on operating in other countries and even arranging meetings with potential and existing investors. The founder didn't show up at one of such meetings in Lisbon and disappeared. The U.S. financial authorities accused Ruzha Ignatova of scam and money laundering. She can be sentenced to 25 years in jail but she is still in hiding and only several people related to her were arrested, including here lawyer, brother, and ex-partner.
BitConnect. It used to be a big-scale financial pyramid operating in 2016-2018. The project was founded by a handful of anonymous people headed by Satao Nakamoto. The participants were instructed to by BCC tokens and store them on a dedicated platform while the trading bot was supposed to deposit profits to their accounts - 40% a month.
According to the BitConnect founders, every investor who invested $1000 and hold the investment for 36 months could count on 50 million dollars of profits. Vitalik Buterin, the founder of Ethereum, was the first one who started criticizing the scam. He told that promising 1% of profit a day is a classic Ponzi scheme. Some other experts, including the founder of Litecoin, joined in with the same criticism by that didn't prevent the scammers from participating in major crypto events to attract more and more victims.
The U.S. financial authorities stopped this scheme by recognizing it a scam and forcing it to stop their business. After that, the BCC token lost 90% of its value, causing around 3,5 billion dollars of investor losses. One of the founders got in jail bu was released in 2019 after paying a big fine.
PlusToken. This is one of the newest Ponzi schemes. It was founded in 2018 and advertised in WeChat, a Chinese social network. They promised 10%-20% ROI per month. As a result, around 4 million people joined in only to lose their money later on after buying the Plus token. Around 12 months ago, 6 of the founders were arrested by the Chinese authorities. However, the 3 billion dollars of the lost investments cannot be returned to the investors since the money is still in the hands of the remaining PlusToken founders, who are in hiding.
Summing Up
Even though all of these financial pyramids are closed, new scams emerge on a regular basis and start hunting the new and inexperienced investors. No government can protect their people from all of such scams. Which is why you should beware of them and stay away from projects promising big profits in a short amount of time.
