Cryptocurrencies are a new and exciting form of money that offers many benefits, such as decentralization, transparency, and innovation. However, they also come with many risks, such as volatility, hacking, and scams.
Scammers are always looking for ways to exploit the ignorance, greed, or fear of unsuspecting crypto investors, and they use various schemes to trick them into sending their digital assets to fraudulent addresses or platforms. In this article, we will review some of the most notorious crypto scams that have occurred in the past, and how to avoid them in the future.
Key takeaways:
- Research the project, avoid unrealistic or vague claims, and check the credibility and transparency.
- Avoid suspicious links or attachments, verify the addresses and URLs, and use secure platforms and wallets.
- Invest wisely, diversify your portfolio, and use risk management techniques.
- Stay informed and updated, learn from the experts and communities, and report any scams.
Bitconnect (2018) $2.5B lost by investors
• Bitconnect was a crypto lending platform that promised investors high returns of up to 40% per month, based on a secret trading bot that allegedly generated profits from the volatility of Bitcoin.
• The platform operated as a classic Ponzi scheme, where new investors’ funds were used to pay old investors’ returns, and the owners of the platform siphoned off millions of dollars for themselves.
• The scam collapsed in January 2018, when the platform shut down its lending and exchange services, citing legal issues, regulatory pressure, and cyberattacks. Investors lost over $2.5 billion worth of Bitconnect tokens, which became virtually worthless overnight.
OneCoin (2019) $4B lost by investors
• OneCoin was a crypto project that claimed to be the next Bitcoin, and that it had a revolutionary blockchain technology that could process millions of transactions per second.
• The project was a massive pyramid scheme, where investors were lured to buy OneCoin tokens and packages and to recruit new members, in exchange for commissions and rewards. The tokens had no real value, and the blockchain was fake.
• The scam was exposed in 2019, when the U.S. authorities arrested and charged some of the key figures behind the scheme, including the founder’s brother and lawyer. The founder, Dr. Ruja Ignatova, also known as the “Cryptoqueen”, remains at large. Investors lost over $4 billion in the scam.
PlusToken (2020) $4.2B lost by investors
• PlusToken was a crypto wallet app that offered users high returns of up to 18% per month, based on a purported arbitrage trading strategy that exploited the price differences of cryptocurrencies across various exchanges.
• The app was a sophisticated exit scam, where the operators collected over 200,000 Bitcoin, 800,000 Ethereum, and other cryptocurrencies from millions of users, and then transferred them to their own addresses and disappeared.
• The scam was busted in 2020 when the Chinese police arrested 27 suspects and seized over $4.2 billion worth of cryptocurrencies. However, some of the stolen funds are still being moved and sold on the market, creating downward pressure on the prices of cryptocurrencies.
Mirror Trading International (2020) $589M lost by investors
• Mirror Trading International was a crypto trading platform that claimed to use artificial intelligence and bots to trade Bitcoin on behalf of its members and to generate consistent profits of up to 10% per month.
• The platform was a fraudulent scheme, where the owners used fake trading reports and forged audit certificates to deceive investors, and used new deposits to pay existing withdrawals while diverting the rest to their accounts.
• The scam was uncovered in 2020 when the South African authorities raided the offices and homes of the company’s executives and froze its bank accounts. Investors lost over $589 million in the scam, making it the largest crypto scam in South Africa.
DeFi 100 (2021) $32M lost by investors
• DeFi 100 was a decentralized finance (DeFi) project that claimed to offer a range of products and services, such as yield farming, staking, lending, and swapping, on the Ethereum blockchain.
• The project was a brazen scam, where the developers rug-pulled the investors, and drained the entire liquidity pool of over $32 million worth of cryptocurrencies. The scammers also left a mocking message on the project’s website, saying “We scammed you guys and you can’t do shit about it. HA HA. All you moon bois have been scammed and you can’t do shit about it.”
• The scam was discovered in May 2021, when the investors noticed that the project’s website, social media accounts, and smart contracts were either deleted or hacked. The scammers are still at large, and the investors have little hope of recovering their funds.
How to Avoid Crypto Scams
Crypto scams are becoming more frequent and sophisticated, and they can affect anyone, regardless of their experience or knowledge. Therefore, it is important to be vigilant and cautious and to follow some basic guidelines to protect yourself from falling victim to them. Here are some tips to avoid crypto scams:
• Do your research. Before investing in any crypto project, make sure you understand its purpose, vision, team, technology, roadmap, and track record. Check the official website, whitepaper, social media accounts, and online reviews. Verify the authenticity and legitimacy of the project, and avoid those that make unrealistic or vague claims, or that lack transparency or credibility.
• Beware of phishing and social engineering. Do not click on suspicious links or attachments, or provide your personal or financial information to anyone who contacts you unsolicited. Use strong passwords and two-factor authentication for your accounts, and do not share your private keys or recovery phrases with anyone. Always double-check the addresses and URLs before sending or receiving any transactions, and use reputable and secure platforms and wallets.
• Diversify your portfolio and manage your risk. Do not invest more than you can afford to lose, and do not put all your eggs in one basket. Spread your investments across different projects, platforms, and assets, and use proper risk management techniques, such as stop-loss orders, limit orders, and hedging strategies. Do not chase after quick profits or follow the crowd, and do not let your emotions cloud your judgment.
• Educate yourself and stay updated. Crypto is a fast-moving and dynamic space, and it requires constant learning and adaptation. Keep yourself informed and updated about the latest developments, trends, and innovations in the crypto industry, and learn from the experts, mentors, and communities. Be aware of the common crypto scams and how to avoid them, and report any suspicious or fraudulent activities to the authorities.
