The 5 biggest crypto scams

"Blockchain will revolutionize the world" – We’ve heard it, you’ve heard it, and it’s already a reality, in part.

While Bitcoin offers a new mode of peer-to-peer value exchange and Ethereum an innovative platform for creating decentralized services, the question is often asked as to the usefulness of creating thousands of different cryptoassets.
The success of these precursors has attracted the best minds as well as the worst, with some brilliant projects seeing the light of day on the one hand, and on the other a series of scams organized by dubious individuals who take advantage of the general euphoria, the almost non-existent regulation, and the lack of knowledge of their victims.

ICO fever: an ideal environment for scams

ICOs are cryptocurrency fundraisings.
Likely to be regulated in the more or less near future, there were three in 2015, thirty in 2016, 884 in 2017, and then already 770 at the end of May 2018.
Strong growth in terms of both numbers and amounts raised, with the equivalent of $6.1 billion in 2017, for example.
This environment is ideal for scammers: ► A 2.0 gold rush ► Astronomical returns ► Potential technologies ► Easy-to-implement projects Numerous empty projects, labeled "ICO" but whose sole purpose is to enrich their "creator" tend to appear on the market.
Copy and paste, a professional-looking website, a bit of marketing, and it’s all done.

We also see project promoters making all kinds of far-reaching promises, from "technological revolution" to "disruptive innovation", only to revise their ambitions considerably downwards, or extend their timetable more or less indefinitely.
But the worst is when the projects are nothing more than groundless scams.
Here’s a look back at the five biggest scams in the history of cryptoassets.

1. Pincoin and Ifan

Modern Tech is no match for the most daring bank heists.
In April 2018, this Vietnamese company raised $660 million on two ICOs.

Pincoin was presented as a collaborative consumption platform, based on the principles of the sharing economy.
Which is what?
We’ll never know.
A few key words and pretty diagrams were enough for a huge fund-raiser.
Ifan was a social networking project for celebrities, connecting them with their fans.
In the end, no collaborative economy on the Blockchain or showbiz social network, but simply dishonest individuals enriched on the backs of unsuspecting investors.
The owners, once the funds have been raised, have just disappeared.
More than 32,000 investors were defrauded in this way.  

2. Onecoin

Numerous investigations have been triggered into Onecoin since its inception.
In July 2017, India spoke of an "obvious ponzi pyramid scheme" and the Italian authorities sanctioned Onecoin with a €2.5 million fine two months later.

Many specialist media such as Cointelegraph have urged their readers to stay away from this project, which has no identifiable features of a decentralized cryptocurrency: no public ledger, no wallet, no mining network.
Its offices were raided in January 2018 by the Bulgarian authorities.
In 2016, $30 million had already been seized by authorities investigating Onecoin’s practices in that country.
Thailand, Croatia, Bulgaria, Finland and Norway warned investors of the very high risks involved in investing in this project.

3. Bitconnect

Bitconnect is certainly the best-known case, not least because of the many youtubers who openly praised it.
Operating on a Ponzi pyramid scheme, it was forced to cease all activity in January 2018 following a cease-and-desist order issued by the US regulator.
Users exchanged Bitcoin for Bitconnect Coin (BCC) on the Bitconnect platform, driven by incredible promises of returns on investment.
The company also offered a lending system through which users could lend each other BCC to generate an interest rate based on the number of BCC lent.
Finally, there was a referral system, common in Ponzi pyramids.
A class action lawsuit has been launched against Bitconnect in the United States, seeking to recover at least part of the lost funds, estimated at over $700,000.

4. Plexcoin

Plexcorp, the company behind the Plexcoin ICO, was again operating like a ponzi pyramid until December 2017.
The company was promising a return on investment of over 1300% per month until the SEC – Security and Exchange Commission – ordered it to cease operations.

More than $15 million was extorted by Plexcoin.
The founder was arrested, imprisoned and the funds frozen by the SEC.
The Plexcoin case is interesting because it was the first time that the SEC, through its Cyber Crime Unit, took action on a dubious ICO.

5. FTX

Until November 2022, TX was one of the best-known cryptoasset sales platforms, with the third highest trading volume in the world.
An article on the Coindesk website reported doubts about the platform’s solvency as early as October 2022, which gradually led to a loss of confidence and caused massive withdrawals by investors who had entrusted it with their assets. In November, the platform ran out of funds to honour withdrawals, and simply went bankrupt.
It was then revealed that FTX had used its customers’ assets to gamble on the markets, and had lost colossal sums which it was totally unable to repay.
This kind of activity is perfectly illegal, and FTX’s directors are currently being prosecuted for this massive fraud, despite the fact that the platform was hosted in the Bahamas, a notorious tax haven.The consequences of FTX’s bankruptcy were far-reaching, and caused a sharp decline in the entire crypto-asset market.
In the longer term, they highlight a strong need for regulation on the market, and we can only advise investors to use only regulated platforms located in trusted countries, particularly in the European Union.

Investors, beware!

If you’re interested in investing in an ICO or in a cryptoasset project in general, we strongly recommend that you ask yourself the following questions:

• Are you being promised significant and/or guaranteed financial gains?
• Is there an electronic wallet you can use to hold these assets, or do you have to leave them on the project manager’s website?
• Are you offered a sponsorship model, where your earnings depend on the number of people you recruit into the project?
• How big is the community behind the project?
  Who’s managing it, and what’s their experience?
• What is the aim of the project?
  Does it seek to meet an easily expressed need, or is it yet another Bitcoin clone?
• Most crypto-assets are open-source projects.
  Is it possible to consult the project’s computer code?
  Are there frequent contributions to the project?

The answers to all these questions should enable you to make an informed decision.
You can also attend one of Coinhouse’s free information sessions, where you can ask any questions you may have about a particular asset. But above all, don’t forget the two golden rules:

• Never invest more than you’re prepared to lose
• Always cross-check the information you are given.