Scammers have existed since the dawn of modern civilization; it is nothing new. However, in the world of cryptocurrency, the term “scam” has taken on a new meaning. Scams frequently refer to questionable startups and initial coin offerings (ICOs).
When a project seems mostly useless, and the idea behind it a little dubious, you’re most likely dealing with a scam.
Sadly, this has discouraged many people from investing in Web3 projects. That’s why we’ll be taking a look at the top biggest crypto scams, and how to avoid falling into the scam trap.
Top Biggest Crypto Scams
During the 2016-2018 crypto frenzy, 98 percent of ICOs, the hundreds of new cryptocurrencies launched through initial coin offerings, were discovered to be either scams or massive flops. Unfortunately, some of these schemes stand out, defrauding people all over the world for thousands, millions, or maybe billions of dollars.
1. South Korean Ponzi Scheme
In South Korea, a Ponzi scheme was discovered to target investors new to cryptocurrency exchanges. Over 56,000 people were duped out of their money, with most victims being in their 70s. The unlisted M-token used to entice them was guaranteed to return more than 600% ROI.
2. Bitconnect
Another of the most heinous and well-publicized crypto-scams of all time. Bitconnect defrauded investors out of approximately $4 billion in a multi-level marketing-led Ponzi scheme, luring them in with promises of an unbeatable trading algorithm that, predictably, did not exist.
Surprisingly, they were not satisfied with simply defrauding their customers once. They launched a second scam ICO, BitconnectX, just as their initial business failed.
3. XRP Stolen from Github
GitHub clients left more than $10 million USD in Ripple (XRP) unprotected. This have given cybercriminals the ability to steal XRP from over 100 ledger wallets. Investigations into how this happened are still ongoing, but more than 500,000 XRP have already been recovered so far.
4. Onecoin
Due to the BBC’s Missing Cryptoqueen podcast series, Onecoin is now considered the most meaningful crypto fraud of all time. The Onecoin scam, now revealed to be a massive Ponzi scheme, is thought to have gotten away with a whopping $25 billion.
Most strangely, Onecoin never had a cryptocurrency in the first place; the technology was always a ruse.
5. Kraken Hack
The Bitcoin exchanger Kraken experienced a flash crash, causing the currency to drop from $8,400 USD to $75 USD. The price finally settled, but it was discovered that a hacker had compromised a client’s account. The hacker stole 1200 BTC, which is currently worth more than $9 million USD.
6. Quadriga
The Quadriga cryptocurrency exchange, whose founder is famous for faking his death, was previously Canada’s most popular and reliable cryptocurrency exchange. However, it was later discovered that it had been run illegally from the start and that its founding members had prior involvement with other schemes.
7. Gigi Brothers
Eli and Assaf Gigi, the Israeli brothers, were apprehended for an accusation of a crypto phishing scam. They’re accused of stealing more than $100 million in cryptocurrency by luring investors on cryptocurrency trading forums and redirecting them to phishing sites that looked like popular cryptocurrency exchanges.
8. Bitclub Network
The most well-known cryptocurrency mining scam. This Ponzi scheme raised $722 million through clever marketing and salespeople. BCN promised shareholders that it would send them massive profits after purchasing bitcoin mining equipment.
9. Binance Hack
The Binance hack is possibly the most famous of the biggest crypto scams. In May 2019, more than $40 million USD in Bitcoin was stolen from Binance, one of the world’s most popular cryptocurrency exchanges.
This is extremely unusual for a webpage like Binance, and the hackers went even further. They not only stole over 7000 BTC but also revealed two-factor confirmation codes and API tokens, which could have compromised accounts with extremely high net worths.
10. Savedroid
Its owners locked down their company and social media before tactically posing in an airport and on the beach trying to pretend to be scammed, then returning to clarify it was not a hoax. In any case, the scam caused the value of the project’s tokens to plummet, costing investors over $50 million.
11. Taiwan Scam
In Taiwan, over 1000 investors were duped out of $51 million. Investors were offered a 335% ROI but instead received 0%. Taiwan’s government has begun to amend the Money Laundering Control Act and the Terrorism Financing Prevention Act.
12. Axie Infinity Hack
In March, hackers found an exploit on the Ronin blockchain, the Ethereum-based sidechain on which Axie Infinity runs. To make matters worse, the exploit was the result of a temporary change implemented by Sky Mavis in December that reduced security protocols.
Things were not reversed, and hackers were able to exploit the situation just months later. Sky Mavis discovered they were missing hundreds of millions of dollars when a user attempted to withdraw their funds and could not to do so due to a lack of liquidity.
13. Sofia Illegal Trading
A group of fraudulent binary options and cryptocurrency exchanges has been running in Bulgaria and the Czech Republic, with over $100 million USD in fraudulent trades spread across the platforms.
Traders on Optionstars, SafeMarkets, OptionstarsGlobal, XTraderFX, Cryptopoint, and Goldenmarkets were all lured in by low fees, resulting in a $115 million USD scam.
14. Day of Defeat
Day of Defeat’s creators described the project as a “revolutionary social experiment” that was “mathematically created to offer holders a 10,000,000X price increase.” They answered a question about their access to the pool of funds on the Day of the Defeat website, saying they “promise” not to redeem it.
They appear to have broken their promise. The project rug was pulled out in May after $1.35 million was withdrawn, causing the token’s value to plummet by more than 96 percent.
15. Mt. Gox Hack
On 19 June 2011, a fraudulent breach of the Mt. Gox cryptocurrency exchange, caused the price of BTC to drop to $0.01. A hacker allegedly used the credentials of an Mt. Gox auditor, to transfer a huge amount of Bitcoin to himself.
He then used the exchange’s software to sell them all, creating a massive “ask” order at any price. The exchange then allegedly suspended withdrawals in February 2014 after finding unusual activity in its digital wallets.
The suspension caused the price of Bitcoin to fall by 20%, and the company found that it had lost over 850,000 Bitcoins. It recovered 200,000, but the absence of 650,000 destabilized the market. Mt. Gox was eventually required to declare bankruptcy and liquidate in April 2014.
16. Canada ICO Fraud
A Canadian couple is fighting allegations that they generated more than $30 million via ICO fraud. Their FUEL token was supposed to grow in utility and price, but nothing ever happened. They then appropriated investors’ assets investors for personal use and went on a multi-million dollar betting spree.
17. Squid Game Token
A cryptocurrency based on the popular Netflix series Squid Game. Within a few weeks, Squid Game tokens rose from a few dollars to around $3,000 in value. CNBC, Forbes, Business Insider, and a slew of other outlets covered the Squid Game token, clearly captivated by its rapid rise in value.
Unfortunately, there were problems from the start. Aside from the fact that its developers did not have the legal right to use the Squid Game name as the basis for their coin, users who purchased the Squid Game token immediately noted that they could not sell it.
This was, of course, planned. Unfortunately, the designers of Squid Game Token included an anti-sell-off function in their coin. And Squid Game Token ended up looking like a scam that enriched its creators and friends while leaving well-meaning ordinary investors with empty hands.
18. Indian ICO Fraud
Amit Lakhanpal, the creator of Money Trade Coin (MTC), is accused of running a knowingly fraudulent ICO, defrauding investors for $71.6 million. Lakhanpal deceived investors by inflating the price of the MTC token, and despite the coin not being registered on any known exchanges, his scheme worked.
How to Avoid Crypto Scams
Fundamental analysis is a method of determining the intrinsic value of an asset (in this case, a cryptocurrency). You should be able to assess whether a coin is trustworthy or not by examining all related economic, financial, quantitative, and qualitative factors.
A cryptocurrency’s worth should ultimately be defined by three values:
- Functionality: Does the coin you’re looking at serving any purpose? If there is no reason for people to purchase it, the value will fall as buyers lose interest.
- Market potential: How many people require it? If the coin’s demand is insufficient, its price will fall to zero. There must be enough volume to drive demand or, at the very least, keep it stable.
- Adoption strategy: If the strategy behind a coin is bad, it will never enter the adoption phase. This strategy is what distinguishes a good coin that is successful from a good coin that no one has heard of.
It is easier than you think to avoid cryptocurrency scams. Follow the fundamental principles of fundamental analysis and learn from the mistakes of others. You can learn a lot from the biggest cryptocurrency scams.
Conclusion
Scams are not the most common in the crypto world. Yes, they exist, but it doesn’t mean that the totality of the coins is a scam. However, this kind of activity helps to reinforce the belief of some people that think all crypto is a scam.
If you’re a crypto-project owner or responsible, it’s your duty to help change this erroneous idea and bring calm to your possible investors. This can be easily made with the proper marketing strategy that implements a transparency strategy.
This approach requires a lot of experience, so if you want to truly transmit confidence to your clients, it’d be better to count on professional help. Web3-focused marketing agencies like Exonite that counts with several knowledge in this field will take your project in the right way.
