Since ICO appeared in the life of the crypto industry, there are also appeared those who want to take advantage of it for bad reasons. This is why the primary, public placement of tokens has acquired such fame — in 2020 it’s unlikely to be able to attract at least one reasonable investor to such an event. This is because during the crypto boom of 2017-2018 at the ICO, didn’t come out only lazy person, and didn’t earn money to promote his project. However, there were cases when funds were raised and the project had no development. The reasons for this varied: initially exorbitant ambitions that didn’t stand in a logical line of thinking; lack of funds raised; differences in the team of developers of the project. However, much more often the funds were simply appropriated by the company management. In simple words — it was a scam project, which originally sought to attract funds, rather than to develop a product. In this article, we will tell you about the largest scams-projects since the crypto industry existed.
PlusToken– is a cryptocurrency wallet with a decentralized solution launched in 2018 in South Korea. Wallet representatives said their brainchild is a decentralised, international cryptographic project that has no parallel in the cryptographic industry. PlusToken really had no competitors, except not in the fact that the developers talked about it, but in the amount of stolen funds of their clients. The project team appropriated about $3 billion.
PlusToken Wallet is considered to be the largest scam project that worked for the Ponzi scheme. During its existence, the service managed to accept 200,000 BTC, 789,000 ETH, and 26 million EOS for deposit. PlusToken offered its customers the following conditions: the client receives 8% to 16% per month for the invested funds — this should have already alerted PlusToken users, but it didn’t happen, as in the first pairs everyone received so-called “dividends.” By 2019, the company planned to attract 10 million users, with 3 million available. Such development prospects only encouraged users to invest in PlusToken.
However, in March 2019, the police of Hunan South Province became interested in the project because there were complaints about PlusToken as the wallet looked like a financial pyramid. From that moment on, the entire development team escaped, taking all the customers’ funds with them. The stolen digital assets are still moving to the present day, but it hasn’t yet been possible to bring the developers of wallets to justice.
BTC Global– is an investment company which appeared on the market in 2015 and was based in South Africa. The company offered its clients interest-bearing deposits, each of the cryptocurrencies had its own remuneration: for BTC — 0.6% per day, for LTC — 0.8% per day, for DASH — 1% per day. Again, the promised interest is quite solid, which allowed the company to attract over 30 thousand users. The amount that the company’s management appropriated and disappeared — $50 mln.
During the first 3 years, the company correctly paid interest every week, sometimes there were delays, but eventually, the money was credited to the client’s account. Although this is also a controversial issue. The interest was credited to the account, which was opened in BTC Global, which means that you could “draw” anything there. In February 2018, Stephen Twain, General Manager of Asset Management of the project, stopped communicating. Later, users of BTC Global suggested that Stephen Twain is a fictional person, in order to take all the “righteous anger” on himself. After he disappeared, payments ceased and hundreds of complaints of fraud by the company began to be received by the South African police. The incident didn’t end with anything: the funds weren’t returned and the perpetrators weren’t punished.
Modern Tech -is a Vietnamese company that represented two companies in the ICO: Ifan and Pincoin, which will be discussed later. Ifan, according to the representatives, is the most advanced social network where normal people can communicate with celebrities by buying their content for internal tokens. Pincoin -is an investment company, which offered up to 40% of monthly rewards for open deposits. Modern Tech announced, that with the participation in ICO of these two projects, investors will receive more than 570% per annum, and for each client involved promised 8% of the open deposit.
The investigation of the companies started in April 2018, after dividends started to be paid in the companies’ domestic tokens rather than in fiat currencies. After that, clients who had been deceived by the company began to contact the Vietnamese police. The most determined of them decided to hold a protest in front of the Modern Tech office, but they were disappointed — the landlord of the building said that the company’s representatives had moved out a month ago, just before the token dividends began to be paid. According to the latest figures, the company has appropriated about $660 million.
OneCoin — is perhaps the most sensational story in our review. The project was called the “Bitcoin killer” and the organizers of the whole event promised to create a world around OneCoin. What happened in practice? Network or MLM marketing, which involves the distribution of a company product. But unlike the examples of network marketing known to us, there were “cosmic” sums of investments, and even 2 years after the beginning of the lawsuits against OneCoin there were those who believed in the “world around OneCoin.”
The project was launched in 2014, with Bulgarian native Ruja Ignatova as the main figure. It’s interesting that before OneCoin, Ruja had already participated in similar network marketing called BidCoin, but no one was embarrassed by this. Ignatova gathered crowds of followers, speaking to them only in silk attire and with a throw of red lipstick on her lips. A cult was created around her personality, which later led to this: according to recent data, Ruja Ignatova has appropriated about EUR 15 billion, which is an absolute record among crypto scam projects.
In 2016, the Bulgarian authorities drew attention to OneCoin and advised residents to refrain from investing in such projects. In 2017, law enforcement agencies in Europe launched a series of investigations into the pyramid.
The main product of OneCoin were so-called “training packages,” which contained far from new information for traders and OneCoin tokens. The cost of one package ranged depending on its content: from EUR 150 to EUR 200 thousand. It was also promised to open an exchange xcoin, where you can sell OneCoin, however even in 2020, the exchange doesn’t exist. There is also an interesting point about the OneCoin blockchain: in 2016, Bjorn Birke (a well-known blockchain developer) was approached by representatives of the pyramid and asked to develop a blockchain for OneCoin. Everything would have been fine, but the project had already existed for two years, and the so-called blockchain was a simple SQL database.
In October 2017 Ruja didn’t visit Lisbon, where the OneCoin event was planned. Followers of the project were very surprised, and law enforcement agencies activated for a reason — where is Ruja Ignatova is unknown, and the judicial friction with representatives of the project continues to the present day.
PayCoin– is the cryptocurrency of GAW Miners, which provided cloud mining services. The company, like the cryptocurrency, appeared in 2014, its founder — Omer Joshua Garza. Cloud mining is not a bad idea, so the company managed to attract customers, because no one wants to buy expensive equipment for mining if there is an alternative. There were no claims to the company, except one — the remuneration for the mining was paid by PayCoin.
As it turned out after verification by state regulators, GAW Miners didn’t have any mining capabilities, and PayCoin was trying to pump and dump with any methods, in order to pay the remuneration to customers somehow. Investors weren’t satisfied with this state of affairs and long legal proceedings started, during which Joshua Garza confessed his guilt in the theft of $54 million and was sentenced to 3 years in prison, with subsequent compensation to the affected investors.
GainBitcoin — is an Indian investment company founded in 2016 by brothers Amit and Vivekumar Bharadwaj. The idea of the project sounded like “free crypto trading and cloud mining.” However, in fact, GainBitcoin proved to be another pyramid, promised the clients 10% monthly on open deposit.
The founders of the pyramid were ruined by the fact that they opened under the jurisdiction of India, where the attitude towards cryptocurrency from the state has always been tense, and in 2018 introduced a law that completely prohibits cryptocurrency activity in the country. As a result, India’s state regulator conducted an inspection of GainBitcoin, which resulted in the discovery of the pyramid. In the same year of 2018, the Bharadwaj brothers were brought to court for stealing $300 million. The media didn’t indicate the outcome of this trial.
Centra Tech– is a multi-blockchain debit card development platform. According to the project representatives, they cooperate with the payment giants Visa and Mastercard. In 2017, an ICO was held, during which $32 million was raised. The project may have had a future, but by the end of 2017 Levi & Korsinsky accused Centra Tech of unfair dealing with investors.
The claim was that the project had never cooperated with Visa and Mastercard, and the CTR project tokens were classified as securities. In 2018, the project was taken up by the SEC, and all the abovementioned violations were revealed in the process. The aggravating factor was an aggressive marketing company: Centra Tech was advertised in various resources, famous boxer Floyd Maveiser and producer DJ Khaled also participated in the promotion of the company. Only in 2020, the founder of the project Robert Farax confessed guilt in the appropriation of $32 million. The final court decision is still pending.
PlexCoin — is “a new cryptocurrency generation that will compete with bitcoin,” that’s what its founder Dominic Lacroix said about PlexCoin. Before the ICO, Dominique promised an annual revenue of 1400% from the purchased tokens. Referring to the opinion of fictional experts, he managed to attract $ 15 million.
1400% for the year — is quite an interesting promise from a little-known project, so its activity was interested in the Financial Markets Authority of Quebec. Through a court of law, the department managed to freeze sales of PlexCoin, but as it turned out later, Lacroix ignored this ban, continuing to sell tokens. In December 2017, Dominic was sentenced for two months in custody and his clients’ funds were frozen. The fate of the investment is unknown.
This is not the whole list of the scam projects, they are only the largest ones. At the peak of ICO’s popularity, government regulators ignored the projects that appropriated $1-2 million, and there were hundreds, if not thousands of them. It’s impossible to calculate the exact amount that was appropriated by the attackers but rest assured that the amount is certainly impressive.
Through the fault of these people, ICO will no longer be a haven for startups, due to the dubious reputation of the entire event. After all, the crypto industry could see a lot of new projects that tried to raise funds but couldn’t, due to the efforts of their predecessors.
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