Crypto ponzi schemes - icoinic
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Andy Wong - Fundamental Analyst - Icoinic B.V.
Andy Wong
Author
Analist

Plustoken was the biggest Ponzi scheme in the cryptocurrency industry. Over $5.8 billion worth of cryptocurrencies was defrauded. Recently, Cailain News reported that 27 major suspects and 82 other key members of the scam were arrested. The news source reported that the individuals operated within and outside of China. It is not certain yet to what has happened to the funds. There are, however, reports that some of the funds got laundered, and the “owner key is already burned so technically it will not be able to commit fraud”. There are theories floating around that the big drops in 2019 were caused by the dumping of Bitcoins by the Plustoken team.

The project presented itself as a South Korea-based exchange offering high returns. Eventually, it got exposed as a scam when investors were unable to withdraw their funds.

Of the known and tracked addresses of scam included the following currencies:

  • 180,000 BTC ($2,034,000,000)
  • 6,400,000 ETH ($2,502,400,00)
  • 26,299,109 EOS ( $78,897,327)

Allegedly, 1% of the entire Bitcoin supply was involved in the scam.

Other Ponzis

Plustoken was not the only project that had scammed investors out of their money. Bitconnect was another high profile case that blew up in the face of investors. The project involved over 1.5 million people and had an estimated size of $2.6 billion. It promised up to a 40% return on investment per month. Needless to say, it was not sustainable, and as quick as it went up it went down again. The organizers of the pyramid were charged and jailed.

One of the other largest cryptocurrency pyramids schemes was done by OneCoin. OneCoin deceived around 3 million people and defrauded around $5 billion in total from 2014 to 2017. The founder Ruja Ignatova ran and still hasn’t been found. However, most of the leaders have been caught and charged with money laundering and fraud.

Becoming more legit

The arrest of the core Plustoken team is a victory for the cryptocurrency industry. By being able to identify and locate the perpetrators, a sense of trust is created among retail investors. The cryptocurrency space is becoming less of the wild west and is getting more secure by the day. Companies like Chainalysis are now able to confidently track transactions on the blockchain and link it to individuals if there is enough data. Another development that brings cryptocurrencies to a higher level, is the regulation of exchanges and the recognition by institutional investors in the assets.

DYOR

Even though Plustoken was a scam of unbelievable proportions, the investors were not entirely blameless. The project promised a 9% to 18% monthly return on investments without explaining how this was possible. The old adage; ‘If something is too good to be true’ still rings true. It is always important to do your own research and due diligence on a project before investing.

Takeaway

Cryptocurrencies are often associated with criminal activity, scams, hacks, exploits, and the sort. However, a comparison could be made with the inception of the internet. With the start of e-commerce back in 1994, fraud immediately became a problem for companies. Emerging technologies will always face hardship in the beginning. The kinks need to be ironed out before it will work as intended. Even then malicious actors will try to find exploits and loopholes in the system.  One must not forget that scams are not exclusive to technology industries. The biggest Ponzi scheme, with an estimated value of around $65 billion, by Bernie Madoff did not involve technology, just unknowing investors that wanted to make a quick buck.

Luc Correia Cabrito