Cryptocurrency has changed the world. With unparalleled decentralization, transparency, and autonomy for their users, virtual currencies powered by blockchains are already disrupting world finance – with the promise of making even bigger waves in years to come. Despite cryptocurrency’s obvious utility, however, the new technology is often dismissed and even worse, villainized. One of the most common causes for concern regarding cryptocurrency is that it has been a breeding ground for scams.
Unfortunately, concerns about scams in cryptocurrency are well-founded. Over a period of roughly a decade, cryptocurrency has seen a number of different types of scams and criminals attempt most of them every single day.
If you haven’t already seen scams in action but would like to, all you need to do is join the Discord server of an emerging cryptocurrency project. You will almost inevitably start receiving direct messages from scammers telling you that you’ve won free Bitcoin. Spoiler: You haven’t.
Amongst the countless scams that have been attempted and pulled off in cryptocurrency, there are some that stand out as the most notorious of all. This article is dedicated to discussing the 4 most notorious cryptocurrency scams of all-time..
1. OneCoin: Crypto’s Biggest Pyramid Scheme
No list of notorious crypto scams could possibly be complete without OneCoin. The saga of OneCoin has everything you could possibly ask for in a notorious scam: huge losses for its victims, nefarious criminals behind it, and multiple scam types – all rolled into one illegitimate money-grab.
OneCoin burst onto the cryptocurrency scene in 2014. The world was becoming interested in Bitcoin, but the technology itself seemed too complicated and inaccessible for most. Seizing this opportunity, OneCoin’s founder, Dr. Ruja Ignatova, marketed her “cryptocurrency” as being like Bitcoin, but better.
While declaring that OneCoin was an improvement over Bitcoin in every way, Ignatova also urged the public to seek out education for cryptocurrency – which they should purchase at OneCoin under the brand of OneAcademy. Millions of people bought into OneCoin and were then urged to encourage their friends, families, and social circles to buy in, as well.
OneCoin was an extremely successful pyramid scheme. In fact, it was so successful that it showed no signs of slowing due to its own momentum. It’s been estimated that at the height of OneCoin’s popularity, it had attracted more than 3 million members from 175 countries.
Despite Dr. Ruja Ignatova’s ability to continue luring in new victims, though, it became clear to experts, regulatory bodies, and governments that OneCoin was a pyramid scheme without any real legitimacy. In fact, OneCoin didn’t even have a blockchain; technically, it wasn’t a cryptocurrency.
Over a period of roughly two years, authorities in several countries first warned the public about OneCoin, then banned it, and finally began making legal charges and arrests.
When OneCoin fell apart, its investors were left without any way to sell their useless “virtual currency.” In the end, over $4 billion was lost. In dramatic fashion, Dr. Ruja Ignatova disappeared following arrest warrants and still hasn’t been found. Ignatova appears on the FBI’s top ten most wanted fugitives list.
2. SQUID: 2021’s Infamous Rug Pull
“Rug Pull” scams occur when individuals or teams behind cryptocurrency projects sell off all of their holdings – causing its value to plummet – before disappearing. The victims of such events are said to have had “the rug pulled out from under them.” On November 1, 2021, this is exactly what happened to everyone holding Squid Game tokens, which trade under the name “SQUID.”
The name of the cryptocurrency tells a large part of the story; the scammers behind Squid Game coin took advantage of the huge popularity of the Korean series Squid Game, which appeared on Netflix in late 2021. In reality, the cryptocurrency had no official association with the TV series – but many people simply assumed that it did.
SQUID tokens were sold under the premise that they were to be used to play some sort of a game inspired by the Squid Game series. People were sold the idea that if they bought SQUID, they could then use it to play the game to earn another token called Squid Game Marbles (MARBLES), which could then be sold.
But the game was never released. And when SQUID shot up in price based off of hype and its (presumed) association with the Squid Game series, the individuals behind it sold their SQUID holdings and took off, effectively pulling the rug on all of the people who trusted them.
SQUID’s tokens were easy to purchase, but extremely difficult to sell. This was apparently by design; materials published by SQUID’s team explained that by making it difficult to sell the coins, the price could be kept higher. This became painfully ironic for holders of SQUID on November 1st of 2021.
Fuelled by its own popularity and even helped by media attention, SQUID rose sharply from an initial price of roughly $0.01 to over $2860. The individuals running SQUID, however, held the majority of the project’s tokens. When they sold their holdings, the price plummeted. These still unknown scammers made off with over $3.3 million.
3. BitConnect: Ponzi Scheme Leading to Indictment
Ponzi schemes, named after Charles Ponzi, are fraudulent ventures in which investors are promised high returns from some ostensibly value-creating idea, but are actually paid with the money from new investors. Early in 2022, the founder of BitConnect was indicted for his involvement in cryptocurrency’s biggest Ponzi scheme.
Launched in 2016, BitConnect’s most attractive offering was its lending platform that promised investors high rates of return if they were willing to “lock up” their capital for certain periods of time. Presumably, returns were coming from Bitconnect’s “proprietary trading bot” that could beat the market with its “volatility software.”
Individuals were convinced that they could achieve high rates of return by investing in BitConnect and taking advantage of its trading bot. Behind the scenes, though, the returns on investments for early investors were actually being paid by the capital received from new investors.
In 2017, authorities began to officially question BitConnect’s legitimacy. First, the United Kingdom’s government demanded information from BitConnect that would alleviate suspicions of wrongdoing. Later, in 2018, United States regulatory bodies began condemning BitConnect. Shortly after, BitConnect halted operations.
BitConnect’s cryptocurrency, BCC, plummeted from an all-time high of over $460 to less than a dollar. In February of 2022, BitConnect’s founder – Satish Kumbhani – was indicted by the United States government on charges of wire fraud, conspiracy to commit international money laundering, operations of an unlicensed money transmitter business, and conspiracy to commit price manipulation of commodities.
Estimates place the number of money stolen from investors in the BitConnect scam at around $2.4 billion.
4. Quadriga: The Scam that Inspired a Documentary
Those who have seen the documentary titled Trust No One: The Hunt for the Crypto King” will already be well aware of Quadriga. Quadriga was not a cryptocurrency, but an exchange. In fact, it was Canada’s most used cryptocurrency exchange for some time.
In 2013, business school graduate Gerald William Cotten founded QuadrigaCX. Seemingly at the right place at the right time, Quadriga thrived as a cryptocurrency exchange with an ambitious founder. For years, there was no reason to suspect that Quadriga was anything but legitimate. Funds were sent and received without issue.
Quadriga’s success took off in the great crypto bull run of 2017 when Bitcoin’s price skyrocketed from under $1,000 to approximately $20,000. When the bear market of 2018 came with falling prices, however, Quadriga users began complaining about their inability to withdraw funds from the exchange.
In the midst of chaos as Quadriga came under fire from its own customers as well as regulatory bodies, Gerald Cotten was reported dead in India. Unfortunately for everyone, Cotten was the only individual who could access funds on Quadriga.
QuadrigaCX shut down and filed for bankruptcy in 2019. Closer scrutiny revealed that Quadriga’s practices were woefully inadequate. There was virtually no accounting and absolutely no accountability. Cotten could – and likely was – using customers’ funds to trade cryptocurrencies himself.
The circumstances of Cotten’s death brought with it drama, conflict, and distrust. The fact that he died while traveling abroad and as a relatively young man in apparently good health understandably led to suspicions of foul play. Especially with Cotten flaunting his wealth prior to his passing, many people began claiming that his death had actually been faked.
Cotten’s wife, Jennifer Robertson, was caught up in the scandal, too. Some people accused her of assisting Cotten in the faking of his death while others accused Robertson of murder.
Best estimates put the losses of Quadriga’s customers at roughly $250 million Canadian dollars. While it’s generally agreed that Cotten did, indeed, die in India, there are many people who maintain that there’s more to the story.