10 crypto Ponzi schemes used funds from new investors to pay fake “returns” to earlier investors
Crypto Ponzi schemes are crypto investment frauds that pay existing investors with funds collected from new investors. Crypto is a prime target for the masterminds of Ponzi schemes. Average investors do not fully understand the technology that crypto uses or how to evaluate a cryptocurrency as a sound investment. Unlike traditional investments where investors can dig into earnings, third-party research reports (i.e., Morningstar), audited documents and other required regulatory material, many crypto projects are unregulated and having anonymous founders is not unusual in the space. Ponzi schemes are named after Charles Ponzi. In the 1920s, Ponzi promised investors a 50% return within a few months for what he claimed was an investment in international mail coupons. Ponzi used funds from new investors to pay fake “returns” to earlier investors. This article features the 10 crypto Ponzi schemes that ravaged the digital asset market in 2022.
Onecoin is perhaps the longest-running Ponzi scheme ever witnessed in the crypto industry. Founded by the Bulgarian fraudster Ruja Ignatova, aka Cryptoqueen, Onecoin managed to lure investors in their numbers between 2014 to 2019. During this period, the Ponzi scheme was said to have defrauded investors of $5.8 billion by marketing Onecoin as a “Bitcoin Killer” and the next hottest innovation in the crypto industry.
The Dekado Coin scam, masterminded by Divyesh Darji, Ranjeet Saxena and their partners, popped up with a catchy enough tagline: Anyone who says there is nothing like earning free bitcoin is wrong. In fact, Dekado was a unique case as it managed to scam people twice.
As usual, the introductory sessions promised 40-70% monthly returns on Dekado Coin. But when a global user base, especially from India, Indonesia, the Netherlands and the African continent, came on board soon after the launch, the website went down. People could no longer access their accounts on the website Dekado.io. One of the 10 crypto Ponzi schemes that ravaged the digital asset market.
Another major crypto Ponzi scheme, Bitconnect, launched in 2016 as a Bitcoin lending solution promising monthly returns of 40%. The operators were unknown developers headed by an individual named Satao Nakamoto, which is obviously a pseudonym. Investors had to purchase BCC tokens, lock them on the platform and wait while trading bots used their locked funds to trade. One of the top crypto Ponzi schemes in 2022.
At the height of the Bitconnect fraud, Michael James and Raymond Weil launched a similar staking scheme, promising up to 50% monthly returns for holding its all-new token Regal Coin. The crypto was listed on a few exchanges, including CoinExchange.io, BTC-Alpha and Yobit.it, but its value nosedived from $70+ in October 2017 to $0.005 in 2019. According to its UK filings, Regalcoin Corporation, the company behind the coin, was dissolved in September 2019.
PlusToken is one of the latest and largest Ponzi schemes ever recorded in the crypto world. The scam conducted most of its marketing campaign via the Chinese messaging app, WeChat, by enticing investors with the prospect of generating 10-30% monthly returns on investment. PlusToken attracted over 3 million investors, a majority of which were located in China, South Korea and Japan. The entire business model of the project centered around crypto literacy and a wallet service. Ultimately, the fraudsters convinced investors to boost their earnings by buying the project’s token, PlusToken. One of the 10 crypto Ponzi schemes that ravaged the digital asset market.
In 2016, GainBitcoin emerged as an India-based cloud mining solution with the promise of generating monthly returns of 10% for 18 months. As ridiculous as this sounds, the project attracted no less than $300 million worth of investment from Indian investors. In 2017 it became clear that there was neither physical mining equipment nor any mining operations backing the elaborate scheme.
According to Kerala Police, EOW, Nishad K and his team collected a minimum of INR 15K from every investor and managed to onboard around 11 Lakh people, primarily from India. For every investment worth INR 15K, he had promised a daily return of INR 270 or 4.4x profit. Additionally, 10%-40% benefits were also promised for every successful referral. However, the messy affair of Morris Coin ended bizarrely. Nishad K announced its ICO, and a white paper was published. One of the top crypto Ponzi schemes in 2022.
Like GainBitcoin, Mining Max also used an ostensible cloud mining venture to mask the true nature of its illegal operations. The platform promised investors an avenue to capitalize on widespread crypto hype. Mining Max pitched the idea of participating in a multi-crypto mining ecosystem, which had the potential of generating high returns. However, just like every other crypto Ponzi scheme, much of the business model relied on heavy marketing campaigns geared at attracting new investments. One of the 10 crypto Ponzi schemes that ravaged the digital asset market.
Ether Trade Asia Scam
Like other scammers, Ether Trade Asia posed as a crypto trading platform, offering 3% daily returns on investments. But every time a trader wanted to withdraw their tokens, the platform did not allow it citing ‘technical glitches’. The website did not even publish any company’s physical address or an email ID for contact.
The SEC accused the operators of Forsage of raising $300mn from at least January 2020 through an unregistered securities offering. The civil charges came just weeks after the regulator charged a former employee of crypto exchange Coinbase with insider trading related to coin listings. The former Coinbase staffer said through his attorney that he was “innocent of all wrongdoing”. One of the 10 crypto Ponzi schemes that ravaged the digital asset market.
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