July 16, 2024
top 5 biggest crypto scams
Policy & Regulation

Top 5 Biggest Crypto Scams in History

The meteoric rise of cryptocurrencies has heralded a new era of finance, promising decentralization and security. Yet, within this dynamic realm, the crypto landscape has been marred by colossal scams that shook investor trust and highlighted vulnerabilities. Here, we unveil the intricate details of the top five biggest crypto scams in history, illuminating the shadowy underbelly of digital currency.

1.      OneCoin: The Illusion of Innovation

OneCoin was a fraudulent cryptocurrency project that claimed to have a blockchain-based digital currency, but in reality, it was a Ponzi scheme that used a network of recruiters to lure investors. The project was founded by Bulgarian entrepreneur Ruja Ignatova, who disappeared in 2017 with an estimated $25 billion in investors’ funds. OneCoin was described by The Times as “one of the biggest scams in history.” U.S. prosecutors have alleged the scheme brought in approximately $4 billion worldwide. In China, law enforcement recovered 1.7 billion yuan (US$267.5 million) while prosecuting 98 people. Ignatova’s brother, Konstantin Ignatov, pleaded guilty to charges of money laundering and fraud in 2019. In September 2023, Karl Greenwood, one of the co-founders of OneCoin with Ruja Ignatova, was sentenced to 20 years in prison by a U.S. court.

2.      BitConnect: The Mirage of Profits

BitConnect was another Ponzi scheme that promised high returns to investors who lent their Bitcoin to the platform. It claimed to use a trading bot that generated profits from Bitcoin volatility, but in fact, it paid out old investors with new investors’ money. The scheme collapsed in 2018, leaving investors with losses of around $4 billion. BitConnect was shut down by the FBI in 2017, and the exchange’s alleged operator, Alexander Vinnik, was arrested in Greece and later extradited to the U.S. to face charges for various crimes. BitConnect’s founder, Satish Kumbhani, was indicted by a U.S. grand jury in 2022 for orchestrating the global Ponzi scheme.

3.      PlusToken: The Mobile Wallet Deception

PlusToken was a mobile wallet app that offered users high interest rates for storing their crypto assets. The app claimed to use a smart contract and an A.I. trading system to generate profits, but it was actually a pyramid scheme that used new deposits to pay out old withdrawals. The scammers behind PlusToken ran away with over $3 billion worth of crypto in 2019, making it one of the largest crypto heists ever. Following the bankruptcy, the Securities Commission of the Bahamas froze the assets of one of PlusToken’s subsidiaries.

4.      FTX: The Catastrophic Downfall

Crypto exchange FTX collapsed in 2023 after its founder, Sam Bankman-Fried, was found guilty of fraud and conspiracy. He was accused of stealing billions of dollars from FTX customers and lenders to pay debts at his other firm, Alameda Research. FTX also faced a class-action lawsuit from its U.S. investors, who claimed they were lured by false promises and celebrity endorsements. FTX filed for bankruptcy and reported that $415 million worth of crypto was hacked from its platforms. Bankman-Fried resigned as FTX CEO and was replaced by John J. Ray III. The collapse of FTX has had a wide impact on cryptocurrency markets, with comparisons made to the Enron scandal and the Madoff investment scandal. It was described by federal prosecutors as “one of the biggest financial frauds in American history.”

5.      Mt. Gox: The Collapse of a Giant

Mt. Gox was once the largest Bitcoin exchange in the world, handling over 70% of all Bitcoin transactions. However, in 2014, the exchange announced that it had lost 850,000 Bitcoins, worth about $450 million at the time, due to a hacking attack. The incident triggered a massive sell-off and a crash in the Bitcoin price. It also revealed that Mt. Gox had been operating with insufficient reserves and poor security measures. The exchange filed for bankruptcy, and its former CEO, Mark Karpeles, was arrested and charged with embezzlement and fraud. A $16 billion claim was filed over the Mt. Gox debacle, which could scupper the trustee’s plans to repay creditors.

These historic crypto scams serve as stark reminders of the risks inherent in this burgeoning financial frontier. They underscore the necessity for robust regulatory measures and investor vigilance to safeguard against future catastrophes within the realm of digital currency. As the crypto market evolves, stringent oversight and education remain pivotal to mitigating the adverse impact of fraudulent schemes and preserving investor confidence in this evolving financial landscape.

Image by Freepik

Disclosure Statement: Miami Crypto does not take any external funding, or support to bring crypto news to the readers. We do not have any conflicts of interest while writing news stories on Miami Crypto.

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