Cryptocurrency scams: how scammers embezzle billions
Billion dollar cryptocurrency scams. Why investors trust scammers and how to recognize a scam project.
A significant increase in the rate of Bitcoin and other coins provoked new cryptocurrency scams . So, from July 2020 to July 2021, the volume of such crimes exceeded $1 billion.
In addition, there are hundreds of ICOs, fundraisers and airdrops, the creators of which disappear after receiving investments. Let’s take a look at the largest scam schemes, as well as figure out how to recognize scam projects and save money.
Play “squid” and become a victim of a cryptocurrency scam
Only a person completely cut off from the Internet has not heard about the Korean series “The Squid Game”. So a group of scammers also looked at it and decided to create a cryptocurrency based on it.
According to the organizers of the scam, the Squid token provided the owners with participation in the “survival” game. At the end of the tournament, the coins were promised to be distributed among the winners and developers.
Against the backdrop of excitement, journalists analyzed the project and called it suspicious. The arguments cited were the strange ICO rules and the presence of errors in the white paper of the token.
On November 1, 2021, the Squid cryptocurrency exchange rate increased 77 times. The price peaked at $2,854.54 per coin and then dropped to zero in a second. This was captured live by one of the bloggers from the Twitch platform.
This happened because the creators abruptly sold their assets for real money, depleting the liquidity pool. According to their statement, the reason was constant attacks from hackers. Thus, the developers appropriated at least $ 3.3 million.
Food delivery scam on the blockchain
In the fall of 2021, the shell company CryptoEats held a massive advertisement. For promo attracted show business stars and popular actors. The creators of the project used the slogan: “CryptoEats is the first step towards paying with cryptocurrency for goods in the real world.”
They announced the EATS token as a settlement tool. Bidding opened on October 17, but in a matter of minutes the project disappeared from the Internet along with the money of investors.
The creator of the “food delivery service” transferred $500,000 in Binance Coin to different wallets. The official pages were removed and the app never made it to market. Although investors are trying to return the invested funds, the chance of a positive outcome is small.
Disappearance of 69,000 BTC
Users of the Africrypt exchange from South Africa lost $4.3 billion at the end of October 2021. It all started in April when Amir Kaji, the site’s chief operating officer, announced the hack. He insisted that clients not turn to lawyers or law enforcement agencies: such actions could slow down the process of recovering assets.
However, some investors immediately asked for help from lawyers from Hanekom Attorneys. In particular, their suspicions were aroused by the requirement not to file lawsuits.
In the end, the COO and his brother went into hiding, embezzling 69,000 bitcoins. The investigation revealed that funds were transferred from customer accounts through channels that are virtually untraceable. The brothers have not yet been found, and the money has not been returned to the owners.
OneCoin Digital Pyramid
The pyramid began its activity in 2014. For three years, the organizers managed to steal funds from more than 3 million depositors. According to official estimates, the damage amounted to 4 billion euros (unofficially – up to 15 billion euros).
OneCoin worked on the principle of network marketing. Each “investor” attracted new people to the project. The scammers assured that the OneCoin coin would be accepted all over the world and would be able to displace Bitcoin. But it turned out that they did not have their own blockchain, and the token worked on a third-party network.
A large-scale conference was planned for October 2017 with contributors and the founder of the project, Ruzha Ignatova. However, the Central Bank of Thailand, the Italian regulator Consob and the German government opposed the pyramid, which banned OneCoin in the country. As a result, Mrs. Ignatova did not appear at the event and went on the run.
The “Crypto Queen” is also wanted in the US, where she faces up to 25 years in prison. Unfortunately, the location of the creators of the pyramid has not yet been established.
Details of the PlusToken cryptocurrency scam
The active phase of the scam project fell on 2018. Fraudsters used the WeChat messenger to hunt for gullible customers. Potential investors were promised up to 30% monthly and additional bonuses for recruiting.
The project was aimed at ordinary people who do not understand the realities of the crypto market. In a year, 4 million participants were drawn into the pyramid. Mostly, the citizens of China and Japan suffered. Many deceived investors ended up in Russia, Ukraine and Germany.
The organizers collected about 200 thousand bitcoins. In addition, 789 thousand ETH coins and 26 million EOS tokens were transferred to their accounts. Having appropriated these assets, they tried to hide. Although six criminals were arrested in Vanuatu in 2019, the funds could not be returned.
Most of the digital money was cashed out by scammers and “laundered” without a trace. The rest of the assets remain with the accomplices at large. Coins are still moving from wallet to wallet. The total amount of damage was $15.7 billion as of October 2021.
How to recognize a scam project
It is quite difficult to distinguish a scam project from a really promising one. However, there are methods available that will save money.
Try the product
Do not blindly believe what the manual writes on the official website. If the coin involves settlements around the world, try to pay with it. Is the token declared as a means of payment in the new mobile application? Install it and try to pay for services with cryptocurrency.
Be on the lookout
Study the news buzz about the project. In particular, pay attention to details that the organizers prefer not to talk about. In addition, listen to authoritative opinion (talk to experts in the field of ICO).
Don’t Invest What You Can’t Lose
Banal advice, but works better than others. By investing free funds, you risk only them. The short-sighted victims of the cryptocurrency scam take out bank loans or loans from friends and relatives.
How scams affect the capitalization of the cryptocurrency market
Deception in the field of digital assets in one way or another affects the final value of the main coins. Thousands of investors after participating in a scam project are disappointed and leave cryptocurrency exchanges. Then they transfer their BTC, ETH, BNB to fiat, which reduces their value.
At present, the influence of scammers on the market has decreased significantly due to the awareness of investors. High-profile lawsuits and the fight against cryptoscams at the state level are bearing fruit. However, criminals still pose risks to gullible newcomers.
Unfortunately, where there is money, sooner or later scammers appear. The main thing is not to trust beautiful words and not to invest money that you cannot afford to lose.
Now scam projects cannot boast of their scale, as in 2017, but still there are enough inexperienced investors on the market. They risk losing everything in pursuit of another “innovative” coin.