W hen the Bitcoin first came along, one of its biggest advantages was the use of blockchains to make the currency secure in our digital world. Bitcoin and other altcoins have changed the way the world looks at transactions – but they have also assisted some massive scams over the period of nine years.
While the smartest minds have created some groundbreaking companies backed by the power of Blockchain and cryptocurrencies, immoral minds have also jumped on the bandwagon, cheating unaware investors in complex scams.
Here are the top 5 of the biggest ICO scams in history.
The Massive Mt. Gox Disaster
You may have already heard about Mt. Gox. It is one of the most notorious crashes in the history of Bitcoin, a twisted knot of mistakes, bribery, and scam. In the early 2010s, Mt. Gox was a Bitcoin exchange based in Tokyo that managed the best part of transactions around the world.
Unfortunately, within a few short years it faced numerous huge successful hacking attacks, payment processing issues, legislative investigations, and an enormous bank run as the investors tried to withdraw their funds.
Eventually, Mt. Gox gave up. In a disturbing blow to the Crypto market, the company filed for bankruptcy and announced that it had totally lost around 850,000 Bitcoins, worth about $450 mln dollars at the time, or nearly $8 billion at today’s normal market value.
In fact, it’s hard to tell how much money was hacked because of security issues, and how much was basically stolen by Mt. Gox representatives. Millions and millions of dollars were lost to fraud, misuse, and other unlawful acts made by company agents and associates.
Bitconnect which was long accused of being a ponzi scheme terminated their operations in January a cease and desist order from two American monetary watchdogs.
The people investing there exchanged Bitcoin for Bitconnect Coin on their platform, which was launched in January 2017, and were assured sky-high returns on their investments.
Additionally, the company proposed a lending program, where users lent Bitconnect Coin (BCC) out to other users to make interest depending on how much BCC they would lent on the platform. There was also a usual, referral system in the Ponzi scheme.
Many investors have filed action lawsuit against Bitconnect to get back lost funds which was approximately amounting to $700,000 for their particular claim.
This particular ICO was halted at an early stage in Dec. 2017 after being tagged as a classic return on investment Ponzi scheme. Plexcorp was assuring investors over 1300% ROI per month before the US Securities and Exchange Commission (SEC) ordered the company to halt their operations.
Over $15 million had been raised during the Plexcoin ICO. Fortunately, the funds were frozen by the SEC and founder (Dominic Lacroix) was jailed. It was the first time the SEC interfered through its Cyber Crime Unit and charged an ICO.
Pincoin and iFan
The latest extensive ICO scam grabbed headlines in April. Two ICOs which was run by the same company operating out of Vietnam, are believed to have tricked around 32,000 investors of a combined $660 mln.
The company Modern Tech packed up its offices which were in Ho Chi Minh City last month with investor’s money. The scam is believed to be the biggest in the history of IC.
A number of investors complained outside the vacant offices in the city on April 8, after the company refused to process cash withdrawals. The city’s administration has ordered police to investigate the fraud.
Both ICOs have been classified as multi-level marketing scams. iFan was advertised a social media platform for celebrities to promote their content to fans. Meanwhile Pincoin was promising 40 percent monthly returns on investments made. The project claimed to be building an online platform encompassing an ad network, auction and investment portal and peer-to-peer marketplace built on Blockchain technology.
OneCoin has been the subject of a number of investigations over the past 18 months. Officially labeled as a ‘clear ponzi scheme’ in India in July 2017, it was fined €2.5 mln by Italian authorities two months later.
Furthermore it does not have a public ledger and its Bulgarian offices were raided in January with servers seized by authorities as international investigations and court cases continue against the company.
Scandals in countries around the world summed up the fact that OneCoin is indeed a massive scam.
In 2016, over $30 mln dollars were seized by Chinese authorities investigating the OneCoin operation in the country.
The company claimed to be officially licensed in Vietnam last year as well, but this was later refuted by the country’s government. More than five countries have warned investors of the risks involved for those choosing to invest in the company, including Thailand, Croatia, Bulgaria, Finland and Norway.
ICOs fever spawns massive scams
Since Bitcoin’s inception in 2009, people have become increasingly enamored with the idea of Blockchain technology. Over time, developers and business minds began creating their own solutions with this decentralized ledger technology.
This led to the development of Ethereum and other virtual currencies, with the former in part responsible for a boom in initial coin offerings (ICO) in 2017.
As an ICO is essentially a round of public finding and is typically launched by a tech startup which sells in-house cryptocurrency tokens to prospective investors, these investors buy tokens in the hopes that company will launch its product and the tokens will grow in value.
An ICO is not unlike an initial public offering, which is when a traditional company makes its share available for purchase to the general public. In fact, this is where the ICO moniker stems from.
Given that there are no promises that an ICO will make good on its future plans, investors take a leap of faith when they part ways with their money. This of course has led to a plethora of scams billed as ICOs, which have seen thousands of investors left out of pocket.