Fraudsters and cheaters are always seeking for new ways to make easy money, and once cryptocurrency appeared on the horizon, they brought about golden opportunities for both investors and scammers. In this guide, we will observe the most notorious cryptocurrency scams 2019, discuss the signs of a scam, and why that happens.
What is a scam?
This is not a new notion – scams have appeared long ago, but in the world of cryptocurrency, this notion has acquired a new meaning.
Within the cryptocurrency community, the word scam is often applied to dubious startups and initial coin offerings (ICOs). When the project seems to lack any practical usefulness, and the business idea behind it is suspicious, such ICOs are often referred to as scams.
So, a project scam is a fraudulent investment project, which either became bankrupt in the course of existence or was conceived as a fraud from the very beginning. Thus, there are two types of scam projects: the ones that brought investors some profit, and then stopped existing; and ones that gathered investors’ money and simply disappeared.
Why do scams happen?
There are several reasons for scams to happen:
- The project was just a Ponzi scheme. It exists at the expense of new investors. When there are no investors anymore, the project collapses (turns into a scam).
- Fake project (pure scam). Their task is to collect a huge amount of money from investors and then simply close. Founders will withdraw all funds from the project account and evaporate.
- Hacker attack. Hackers can compromise accounts, wallets, email, and more. Stolen funds are withdrawn to fraudulent accounts and wallets and then dissolved in the darknet. In many cases, it’s not founders’ fault, but the project turns into a scam.
- The project failed. Some projects do not survive during the stage of implementation. They might successfully go through the closed pre-sale of tokens, pre-ICO, ICO. And that’s it. If investors have some coins left, this cryptocurrency might be worth something. Sometimes, coins of failed projects do not represent any value at all.
- Panic of investors. It’s a rare occasion, but sometimes there are situations that force everyone to get rid of acquired tokens at once. Therefore, the cryptocurrency falls sharply in price, which makes the project leave the scene.
- Lack of cooperation. Some startups and projects are created via the collaboration of several companies. When the interests of partners don’t coincide, problems begin. And most often, those are investors who suffer.
- Technical error. This is also a rare cause of scams, but things happen. When something breaks and goes wrong in the blockchain, investors lose their money. In worst cases, projects with serious technical faults close.
Here’s an interesting video on how to recognize an ICO scam:
Top-10 cryptocurrency scam list 2019
Let’s observe the projects that were the most disappointing for investors in 2019. As we’ve mentioned, the cryptocurrency scam format might be different, and we will cover various notorious cases.
10. The scandal with Kraken flash crash
Kraken, a noteworthy Bitcoin exchanging stage, encountered a flash crash that made the cost of the digital money abruptly fall from $8,400 to $75.
Not long after, the cost settled again and many didn’t even notice it. It was essentially thought of like a glitch in the framework. In any case, an investigation from CipherTrace proposes that the accident was brought about by a hack.
As indicated by CipherTrace’s examination, the hacker compromised the account of a client with a lot of digital currency and took 1200 BTC, which was worth more than $10 million at the time.
9. Israeli fraudsters
As indicated by CipherTrace, two siblings from Israel were captured on June 21 for an alleged phishing trick that went on for a long time.
In this time, the Gigi brothers, Eli, 31, and Assaf, 21, are claimed to have taken over $100 million in digital money.
The crypto scammers are claimed to have baited investors from crypto trading forums, for example, Reddit onto sites that mimicked prominent crypto exchanges.
8. XRP worth $10 mln stolen from GitHub
Programmers had the option to snatch around $10 million worth of XRP from GateHub clients in June this year. Gatehub made a preliminary statement on June 6, uncovering that the cybercriminals had the option to steal money from 100 XRP Ledger wallets.
While the organization is as yet researching how it could have occurred, all the wallet holders were reached and more than 500,000 XRP (worth $200,000) has been recovered so far.
7. $18.7 mln Stolen in a South Korean Ponzi Scheme
Specialists from South Korea have applied AI components to reveal a multimillion-dollar Ponzi plot that swindled more than 56,000 financial specialists. The investors were mostly new to crypto exchanges, with the larger part being in their 70s. The unlisted M-token was guaranteed to bring 600%, which is the thing that baited users in.
This case demonstrated the handiness of AI for crypto agents. The calculations were prepared to recognize watchwords identified with unreasonable guarantees and individuals’ motivating force plans, which are run of the mill of staggered showcasing. This innovation has the potential for a more extensive application.
6. $27 mln “typosquatting” trick in Europe
This year, news covers featured the following heading: “Six captured in UK and Netherlands over $27 million “typosquatting” trick. The six people took Bitcoin tokens of about 4,000 people.
The individuals who were associated with a Bitcoin trick worth $27 million were captured in June, as indicated by a Europol official statement. Following a multi month-long joint examination, specialists all the while captured five men and one woman at their homes in southwest England and the Dutch urban communities of Amsterdam and Rotterdam.
The robbery influenced more than 4,000 exploited people, who were spread out in 12 distinct nations.
Europol said the examination revolved around “typosquatting”, a strategy which involves making a fake digital currency exchange to access users’ Bitcoin wallets. The examination was completed as a joint activity by the UK South West Regional Cyber Crime Unit (SW RCCU), the UK’s National Crime Agency (NCA), and the Dutch police.
5. $30 mln stolen in a Canadian ICO Fraud
K.P. Hobbs and L.A. Cheng, a couple from Canada, are confronting a claim from the B.C. Common Forfeiture Office in Canada being accused of raising $30 million through an ICO fraud.
They propelled one of the most notorious cryptocurrency scam coins, FUEL token, and they persuaded investors that it would be utilized for future items and develop in utility and price. The activity finished with the appropriation of investors’ assets for individual use, including luxury expenses, for example, obtaining of a townhouse in Coal Harbor, the acquisition of two Range Rover SUVs, and a multi-million dollar gambling spree.
4. $40 mln Stolen in Binance hack
Our crypto scam list wouldn’t be full without mentioning this notorious case. Binance, one of the world’s biggest digital money exchanges, had BTC worth $40 million stolen in May.
While it is exceptional to see a platform like Binance get hacked, the cybercriminals managed not only to take 7,000 BTC but also revealed two-factor confirmation codes and API tokens. Binance likewise uncovered that the programmers had the option to compromise “exceptionally high net-worth accounts”.
In spite of the programmers pulling off $40 million worth of BTC, the effect wasn’t extraordinary for Binance since it was just 2% of the trade’s general property.
In an announcement on their site, Binance expressed: “The programmers had the persistence to pause, and execute well-organized activities through numerous apparently autonomous records at the most ideal time. The exchange is organized in a manner that passed our existing security checks. Tragically we were not ready to obstruct this withdrawal before it was executed.”
3. $51 mln stolen in a Taiwanese Ponzi Scheme
In Taipei, seven men were accused of cheating more than 1,000 investors of $51 mln. Clients endowed their assets to them hoping to get 335% in yearly returns. Soon the returns ceased, and the investors ended up losing money.
This case will no doubt lead to the detainment of these men. Also, it has made the Taiwanese Cabinet acquaint corrections with the Money Laundering Control Act and the Terrorism Financing Prevention Act, so as to control direct crypto activities.
2. $71.6 mln Scammed in an Indian ICO Fraud
The start of 2019 denoted the fourth capture in the Mumbai trick case, which saw the burglary of $71.6 million. Amit Lakhanpal, the proprietor of MTC (Money Trade Coin) is associated with running a fake ICO. Indeed, it had never been recorded on any known exchange, yet this didn’t discourage investors from sharing their money – the promised profits were too alluring.
Amit Lakhanpal is associated with misleadingly inflating the cost of his tokens to pull in investors, which made them lose millions. The bitcoin scammer likewise made investors believe that the royal family of Dubai had supported his project.
1. $114 mln Scammed in Sofia-Based Illegal Trading Operation
The biggest crypto trading scam 2019 cost investors over $100 mln! The police of a few European countries, particularly, Germany and Austria, have revealed a criminal group operating fake binary options and crypto exchanges in Bulgaria and the Czech Republic. Clients of Optionstars, XTraderFX, Cryptopoint, SafeMarkets, OptionstarsGlobal, and Goldenmarkets were tricked in by alluring rates and inevitably lost $114 million.
These cybercriminals controlled various offshoot organizations, including a contact center and program suppliers. The police struck 21 organizations and 4 homes in Sofia before they found all the elements of the crime. In the result, the supposed mastermind behind the trick was captured, and six-figure entireties, alongside terabytes of information, were sequestrated.
Although blockchain is a relatively safe technology, cybercriminals manage to find breaches and loopholes to break into the websites and compromise users’ digital wallets and funds. It goes without mentioning that the laws protecting investors of ICO are far from perfect, so it’s easy for founders to commit a serious financial crime and get away with it. Many cryptocurrency scams thrived because people trusted teams coming out of nowhere and promising fantastic profits.
Whenever you plan to invest your hard-earned bucks in some cryptocurrency, make your own research and ensure you’re dealing with fair guys. And don’t forget the golden rule: never invest what you cannot afford to lose! Cryptocurrency investing and trading is always connected with high risks.