Within the world of cryptocurrency, despite its abundance of opportunities, it is imperative to exercise caution when approaching investments in this emerging market, as it is full of fraudulent digital currency scams.
Over the past 5 years, it has been reported that more than 20 billion USD (!) have been stolen in various cryptocurrency Ponzi schemes. This alarming statistic highlights the unfortunate reality of numerous cases where investors have experienced detrimental consequences due to the actions of malicious individuals operating within the blockchain industry.
Let’s explore ten of the biggest cases where investors found themselves receiving more than they had initially anticipated from some of the most notorious bad actors in the crypto ecosystem. You may already be familiar with some of these cases.
The world of cryptocurrency offers abundant investment opportunities. Investors in the crypto market are well aware of the potential for high returns that stem from the innovative nature of blockchain technology, particularly in sectors poised for mainstream adoption in the near future.
However, alongside these promising prospects, there is a recurring issue of crypto scams, ranging from small-scale schemes to larger-scale operations. Exploiting the famous price volatility and hype of digital assets and the complex nature of their underlying technology, fraudsters pitch vague and unrealistic crypto investment solutions to unsuspecting investors. They capitalize on the growing allure of crypto assets, the desire to discover the “next Bitcoin,” and the general lack of public education regarding the fundamentals of crypto technology. In an era where everybody wants to be a millionaire, these malicious actors have discovered a seamless pathway to siphon off billions of dollars annually.
Unlike crypto phishing scams, where individuals are tricked into revealing sensitive information like passwords or wallet’s seed phrase through deceptive tactics, in this extensive manual, we will focus and explore the backgrounds of ten notorious crypto Ponzi schemes that have afflicted the whole crypto industry and the community trust in it. Our aim is to assist members of our community in evading becoming the next target, providing valuable insights and clear guidance.
We will shed light on how the individuals behind these schemes leveraged the volatility, intricacies, and unique appeal of cryptocurrencies. Before delving into the crypto Ponzi scheme list, let’s first explore the defining characteristics that constitute a crypto Ponzi scheme.
Unveiling the Mechanics of Crypto Ponzi Schemes: How Do They Work?
A crypto Ponzi scheme is an elaborate investment scam that entices investors with the promise of high and quick returns, leveraging the allure of cryptocurrencies. In this fraudulent scheme, the perpetrators create fictitious crypto enterprises and manipulate investors with compelling narratives and false statistics. Their primary objective is to collect money from new investors and distribute it as supposed profits to earlier backers, giving the illusion of a successful investment endeavor. However, the scheme eventually collapses when new investments dwindle.
It’s important to note that the history of Ponzi schemes dates back to the 19th century, but it was the notorious activities of Charles Ponzi, an Italian fraudster in the early 1920s, that brought this type of fraud into the limelight. While Ponzi schemes have adapted to modern technology, they often exhibit common red flags:
- Promises of quick and risk-free investment returns, irrespective of market conditions.
- Complex investment models or business activities that are presented as difficult to explain.
- Withholding access to legitimate documents that validate the existence and legitimacy of the business and its investments.
Unfortunately, Ponzi scheme operators are skilled at concealing these red flags and manipulating investors’ emotions, enabling them to thrive even in today’s digital age, a century after Charles Ponzi himself.
Differentiating Ponzi Schemes from Pyramid Schemes
Although similar in some aspects, a pyramid scheme differs from a Ponzi scheme in its structure. Like a Ponzi scheme, a pyramid scheme relies on new investments to pay returns to earlier participants. However, the key distinction lies in their marketing approach. A Ponzi scheme disguises itself as a legitimate venture, claiming to generate profits through services or product sales. On the other hand, pyramid schemes do not attribute the alleged profitability to any legitimate business activity. Instead, they focus solely on the inflow of new investments without a genuine revenue-generating mechanism.
Both types of schemes exploit unsuspecting individuals, but understanding their differences can help investors recognize the warning signs and protect themselves from falling victim to such fraudulent activities.
The 10 Biggest Crypto Ponzi Schemes in Recent Years
1. Onecoin
Onecoin, led by Bulgarian fraudster Ruja Ignatova, also known as Cryptoqueen, stands as one of the longest-running Ponzi schemes in the crypto industry. Between 2014 and 2019, Onecoin deceived investors, amassing an estimated $5.8 billion. Ignatova marketed Onecoin as a potential “Bitcoin Killer” and a groundbreaking innovation within the crypto space. However, it was nothing more than an elaborate scam.
2. Dekado Coin
Dekado Coin, orchestrated by Divyesh Darji, Ranjeet Saxena, and their partners, managed to scam investors on two occasions. The scheme promised significant monthly returns on Dekado Coin investments, attracting a substantial user base from countries like India, Indonesia, the Netherlands, and Africa. However, after the launch, the website suddenly went offline, leaving investors unable to access their accounts. Dekado Coin became one of the prominent crypto Ponzi schemes that caused substantial financial losses.
3. Bitconnect
Launched in 2016, Bitconnect gained significant attention as a Bitcoin lending solution, assuring investors monthly returns of up to 40%. The project was led by anonymous developers, with an individual named Satao Nakamoto serving as the figurehead, using an obvious pseudonym. Investors had to purchase BCC tokens and lock them on the platform, with trading bots supposedly using the locked funds for trading. However, the scheme eventually collapsed, resulting in severe losses for participants.
4. Regalcoin
During the height of the Bitconnect fraud, Michael James and Raymond Weil introduced Regalcoin, a similar staking scheme. Regalcoin enticed investors by promising monthly returns of up to 50% for holding their newly introduced token. While the crypto was listed on a few exchanges, its value plummeted from over $70 in October 2017 to a mere $0.005 in 2019. Company filings indicated that Regalcoin Corporation dissolved in September 2019, leaving investors devastated.
5. PlusToken
PlusToken stands as one of the largest and most recent Ponzi schemes in the crypto world. The scam primarily targeted Chinese investors, leveraging the popular messaging app WeChat for marketing purposes. PlusToken enticed investors with promises of monthly returns ranging from 10% to 30%. The project revolved around crypto literacy and offered a wallet service. Ultimately, the fraudsters convinced investors to purchase the project’s token, PlusToken, resulting in colossal financial losses.
6. GainBitcoin
In 2016, GainBitcoin emerged as a cloud mining solution based in India, attracting investors with promises of 10% monthly returns for 18 months. Despite its outlandish claims, GainBitcoin managed to accumulate over $300 million in investments from Indian participants. However, investigations later revealed that the project had no physical mining equipment or mining operations, exposing it as an elaborate Ponzi scheme.
7. Morris Coin
Morris Coin targeted Indian investors, with Nishad K and his team promising daily returns and referral benefits. Investors were lured into depositing a minimum of INR 15,000, with the promise of a daily return of INR 270 or a 4.4x profit. The scheme attracted approximately 1.1 million individuals, primarily from India. However, the Morris Coin affair took a bizarre turn when an ICO was announced, and a white paper was published, further fueling suspicions of fraudulent activities.
8. Mining Max
Similar to GainBitcoin, Mining Max disguised its illicit operations behind a cloud mining venture. It capitalized on the widespread crypto hype, presenting investors with the opportunity to participate in a multi-crypto mining ecosystem that promised high returns. The success of Mining Max relied heavily on aggressive marketing campaigns aimed at attracting new investments, aligning with the characteristics of other crypto Ponzi schemes.
9. Ether Trade Asia Scam
Ether Trade Asia operated as a crypto trading platform, offering investors a daily return of 3% on their investments. However, when users attempted to withdraw their tokens, the platform constantly cited “technical glitches” as the reason for the inability to process withdrawals. The lack of transparency, including the absence of a physical address or contact information, raised further suspicions regarding the legitimacy of Ether Trade Asia.
10. Forsage
Forsage faced civil charges from the Securities and Exchange Commission (SEC) for conducting an unregistered securities offering that raised a staggering $300 million. The SEC’s actions against Forsage followed the charging of a former Coinbase employee with insider trading. These charges demonstrate ongoing efforts to combat fraudulent activities within the crypto industry.
In the realm of cryptocurrency, now that you have gotten yourself acquainted with the full crypto Ponzi scheme list, Ponzi schemes pose a significant threat to unsuspecting investors. These elaborate investment frauds exploit the allure of crypto’s innovative technology and the potential for substantial profits. Scammers take advantage of the lack of crypto education among many individuals around the world.
As astutely pointed out by a spokesperson from Lionsgate Network, “From our research of top crypto Ponzi schemes, it’s clear that fraudsters prey on investors’ lack of crypto education, crypto’s allure as a new technology, as well as its reputation for wild – and potentially highly profitable – price fluctuations.”
This statement emphasizes the need for caution and due diligence when engaging in any crypto investment opportunity, regardless of the perceived reputation of the company promoting it.
How to Reduce Your Vulnerability to Crypto Ponzi Schemes
To navigate the crypto landscape safely and avoid Ponzi schemes, it is essential to adopt the following practices:
- Educate Yourself: Take the time to understand the fundamentals of cryptocurrencies, blockchain technology, and sound investment principles. Stay informed about the latest industry trends, potential risks, and regulatory developments. By enhancing your knowledge, you become better equipped to identify suspicious investment offers.
- Conduct Thorough Research: Before investing in any crypto project, conduct comprehensive research on the company behind it. Scrutinize their background, team members, previous ventures, and regulatory compliance. Seek information from credible sources such as independent reviews, expert analysis, and official documentation.
- Verify Legitimacy: Look for transparency and legitimacy in the company’s operations. Examine their white paper, legal documents, and audited financial statements, if available. Be cautious of any discrepancies or omissions of critical information. Legitimate projects will provide transparent and easily verifiable information.
- Seek Professional Advice: Consider consulting with financial advisors or crypto experts who possess in-depth knowledge of the industry. These professionals can provide valuable insights and help evaluate investment opportunities objectively. Their guidance can assist in identifying potential scams and fraudulent schemes.
- Exercise Caution: Be skeptical of investment opportunities that promise extraordinary returns with minimal risk. Ponzi schemes often rely on the allure of quick and effortless wealth but are actually straight forward digital currency scams.
- Avoid succumbing to emotional manipulation or pressure tactics employed by fraudsters. Remember, legitimate investments carry inherent risks and do not guarantee extraordinary returns.
We hope that as you read this, it is because you prioritize educating yourself for prevention rather than recovery. However, if the latter is the case, please make sure to report crypto scam cases known to you to the authorities in your region and file a complaint at lionsgate.network as soon as possible. Cryptocurrency scam recovery is possible.
By adhering to these recommended practices, investors can significantly reduce their vulnerability to crypto Ponzi schemes and protect their hard-earned funds and ultimately, staying informed, conducting thorough research, and seeking professional advice will empower you to make informed investment decisions in the crypto space.
